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Briefing.com Summary:
*The indices are indicated to open today lower, paced by several catalysts.
*Walmart's guidance for Q1 and FY27 has been viewed at first blush as disappointing.
*Press reports are highlighting the readiness of the U.S. military to strike Iran if the president orders a strike.
The S&P 500 continues to look up at the 7,000 level. By the end of the day, it will still be looking up. The question at hand is, will it still be looking up at the 6,900 level and its 50-day moving average (6,895)? It is currently following yesterday's finish, and it will be at the start of today's trading.
The S&P 500 futures are down 22 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 100 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 169 points and are trading 0.4% below fair value.
This negative disposition is being chalked up to several factors:
- Geopolitical angst, as news reports suggest the U.S. military is in a position to strike Iran as early as this weekend if the president decides to order a strike.
- Briefing.com note: We'd call this an undercurrent of concern that is bubbling up in oil prices ($66.60, +1.41, +2.2%), but it isn't a real fear yet given that Treasury yields are higher and gold prices are little changed (i.e., not enough confirmation yet in traditional safe-haven plays)
- Walmart (WMT) topped Q4 earnings expectations but issued disappointing guidance for Q1 and FY27.
- Misgivings about the scope of capex spending and ROI for U.S. hyperscalers after OpenAI's Sam Altman acknowledges "remarkable progress" by Chinese tech companies.
- Continuing chatter that the FOMC Minutes for the January 27-28 meeting (released yesterday) had a hawkish tilt.
Presumably, the latest initial jobless claims report will keep the Powell-led Fed in a less dovish tilt.
Initial claims for the week ending February 14 decreased by 23,000 to 206,000 (Briefing.com consensus: 225,000). There has been a suggestion that seasonal factors are the basis for the low reading, but even if that isn't the case, the level of initial jobless claims is still quite low. Continuing jobless claims for the week ending February 7 increased by 17,000 to 1.869 million.
The key takeaway from the report is its confirmatory signal that the labor market is still operating in a low-firing environment.
The trade deficit, meanwhile, is operating against the president's wishes, as it widened to $70.3 billion in December (Briefing.com consensus: -$55.8 billion) from an upwardly revised $53.0 billion deficit (from -$56.8 billion) in November. The wider gap was the result of exports being $5.0 billion less than November exports and imports being $12.3 billion more than November imports.
The key takeaway from the report is that the wider deficit will detract from Q4 GDP growth estimates.
There was some mixed news for a more recent indicator. The Philadelphia Fed Index increased to 16.3 in February (Briefing.com consensus: 8.5) from 12.6 in January. The dividing line between expansion and contraction for this series is 0.0, so the February reading suggests there was an accelerating pace of expansion for the manufacturing sector in the Philadelphia Fed region.
The mixed element in the report is that it featured a deceleration in new orders and shipments and a contraction in the index for the number of employees.
The Treasury market took these reports in stride, changing little since their release. The 2-yr note yield is up two basis points to 3.48%, and the 10-yr note yield is up two basis points to 4.10%.
