Stock Market Update

Equity futures point to a higher opening this morning after stocks posted solid gains in their first February session yesterday. 

After an underwhelming finish to the previous week, the major averages rebounded in broad fashion yesterday, with firm expansion in the January ISM Manufacturing Index (52.6%; Briefing.com consensus: 48.3%) giving a boost to the market's growth outlook.

The market will not receive a lift from today's scheduled economic data, as the partial government shutdown has delayed the release of the December Job Openings and Labor Turnover (JOLTS) report.

The House will vote today to reopen the government. The bill funds most government agencies until September 30 & DHS until February 13. House Speaker Mike Johnson is confident the bill will pass after President Trump supported the bill without any changes, according to NBC News. 

In the meantime, earnings continue to be a key driver of price action, with over 100 S&P 500 companies set to report this week, including a few mega-cap tech companies. 

In corporate news:

• SpaceX and xAI are set to merge into a single company with a valuation of around $1.25 trillion.
• Merck (MRK 112.49, -0.88, -0.8%) beat EPS expectations by $0.03 and beat revenue expectations. The company guided FY26 EPS and revenues below consensus. 
• OpenAI's Sam Altman, via X, refuted claims that the company is dissatisfied with some of NVIDIA's (NVDA 187.02, +1.41, +0.8%) chips.
• Palantir Technologies (PLTR 163.99, +16.22, +11.0%) beat EPS expectations by $0.02, beat revenue expectations, and guided Q1 and FY26 revenues above consensus. Robert W. Baird upgraded the stock to Outperform from Neutral with a target price of $200.

Reviewing overnight developments:

Equity indices in the Asia-Pacific region rallied on Tuesday, with South Korea's Kospi (+6.8%) and Japan's Nikkei (+3.9%) closing at fresh record highs. Japan's Nikkei: +3.9%, Hong Kong's Hang Seng: +0.2%, China's Shanghai Composite: +1.3%, India's Sensex: +2.5%, South Korea's Kospi: +6.8%, Australia's ASX All Ordinaries: +0.9%.

In news:

• Japan sold 10-yr JGBs to somewhat underwhelming demand.
• Shanghai has set its growth target for this year at 5.0%, down from 5.4% in 2025.
• The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.85%, as expected.
• The central bank hinted at the possibility of more hikes ahead due to an upward revision to the inflation outlook, causing the market to price in two more hikes for the remainder of 2026.

In economic data:

• Japan's January Monetary Base -9.5% yr/yr (expected -10.3%; last -9.8%)
• South Korea's January CPI 0.4% m/m, as expected (last 0.3%); 2.0% yr/yr (expected 2.1%; last 2.3%)
• Hong Kong's December Retail Sales 6.6% yr/yr (last 6.5%)
• Australia's December Building Approvals -14.9% m/m (expected -6.2%; last 13.1%); 0.4% yr/yr (last 19.4%). December Private House Approvals 0.4% m/m (last 0.8%)
• New Zealand's December Building Consents -4.6% m/m (last 2.7%)

Major European indices are mixed with Italy's MIB (+2.0%) outperforming by a wide margin thanks to strong leadership from banks after Standard & Poor's affirmed UniCredit's A- rating and upgraded its outlook to Positive from Stable. STOXX Europe 600: +0.1%, Germany's DAX: +0.4%, U.K.'s FTSE 100: -0.5%, France's CAC 40: -0.1%, Italy's FTSE MIB: +2.2%, Spain's IBEX 35: +0.1%.

In news:

• The French budget for 2026 has finally passed into law without a vote in parliament. Finance Minister Lescure said that the budget deficit will decrease to 5.0% from 5.4%.
• The European Central Bank released its lending survey for Q4, which revealed unexpected tightening in conditions that is expected to continue into Q1.

In economic data:

• France's January CPI -0.3% m/m (expected -0.1%; last 0.1%); 0.3% yr/yr (expected 0.6%; last 0.8%). December government budget deficit EUR124.7 bln (last deficit of EUR155.4 bln)
• Spain's January Unemployment Change 30,400 (expected 13,400; last -16,300)