US open: Stocks edge lower with earnings, PMI data in focus

US futures

Dow futures -0.32% at 33513

S&P futures -0.36% at 4004

Nasdaq futures -0.57% at 11807

In Europe

FTSE -0.47% at 7757

Dax -0.32% at 15047 

Microsoft reports after the close

US stocks are set to open mildly lower after gains in the previous session as investors digest the latest corporate earnings and look ahead to PMI data.

Whilst stocks gained yesterday on optimism that the Fed will slow its pace of interest rate hikes. The Federal Reserve will meet next week and are expected to slow the pace of rate hikes to 25 basis points. The market is also optimistic of 2 25 basis points rate cuts before the end of the year.

Today, however, the mood is more cautious, with concerns over a recession weighing on sentiment as PMI data comes into view.

The monthly PMI release is expected to show that business activity contracted at a faster pace in January, dropping to 44.7, down from 45. Weak PMI data could fuel recession bets further.

Earnings are very much in focus as earnings season steps up a gear with a raft of earnings due from several key firms, including General Electric, Verizon, and Johnson & Johnson, before the opening bell and tech giant Microsoft is expected to update the market after the closing bell.

Corporate news

GE rises after posting stronger than expected EOS of $1.24 ahead of the $1.27 forecast. The aerospace business. However, the renewables business is expected to be weaker than expected in 2023.

Microsoft is due to report later today and is expected to reveal a modest drop in profit despite a rise in revenue of around 8%. The Firm has also announced job cuts ahead of earnings and is hoping that an investment in Open AI will sustain future growth amid signs that its cloud business is slowing.

Where next for the Nasdaq?

Nasdaq has extended it’s run up from 10665, rising above its 50 sma, which along with the RSI above 50 are, keeping buyers hopeful of further upside. Buyers have risen above the multi-month rising trendline but need a push over the 200 sma at 11980 and 12000 psychological level to bring 12230, the December high, into play. Above here a rose towards 12900, the September high could be on the cards. Meanwhile, immediate resistance is at 11700, the falling trendline, and 11400, the 50 sma. A break below here could open the door to 11000, round number.

FX markets – USD rises, GBP falls

The USD is rising cautiously but continues to hover around 9-month lows as the market weighs up an expected slowdown in the pace of Fed rate hikes, in addition to worries of a recession in the US.

GBP/USD is falling after weaker-than-expected flash PMI composite data. The PMI unexpectedly fell to 47.8, down from 49 and defying expectations of a rise to 49.1. UK government borrowing more than doubled in December, showing the highest level since records began in 1993.

EUR/USD is holding steady against the stronger U.S. dollar after business activity expanded in January. The composite PMI rose above 50 the level for separating expansion and contraction to 50.2, thanks to a recovering service sector. The data suggests that a eurozone recession could be milder than initially feared.

GBP/USD -0.43% at 1.2310

EUR/USD -0.02% at 1.0868

Oil holds steady ahead of API data

Oil prices are holding broadly steady as investors continue weighing up the Chinese economic reopening against concerns of a US recession.

PMI data due later today could suggest that the US economy is contracting, which would be bad news for the oil demand outlook.

Investors will also be looking toward the release of API inventory data which is expected to show that U.S. stocks of crude oil and gasoline rose last week while distillate stocks fell.

Meanwhile, the dollar hovering around a 9-month low has also helped to support the price of oil and other dollar-denominated commodities.

WTI crude trades +0.3% at $81.34

Brent trades at +0.25% at $88.35 

Looking ahead

14:45 US PMI data