Stocks are set for a weak open despite support from Apple (NASDAQ: AAPL), which posted a record quarter for sales. Economic bellwether Caterpillar (NYSE: CAT), oil giant Chevron (NYSE: CVX), and others report quarterly earnings. The U.S. releases more data on inflation and wage costs.
China's stocks finish at 16-month lows before the New Year holiday. In the fourth quarter, the Eurozone economy was held back by its usual powerhouse, Germany, and the world's second-largest battery maker has a wild market debut. Here's what you need to know in financial markets on Friday 28th January.
1. Apple's record sales
Apple shrugged off supply chain constraints and Covid-related store closures in the final three months of 2021 to post record revenue and a 25% rise in earnings per share in its fiscal first quarter.
Sales of iPhones were up 9% rather than the 3% rise expected, while revenue from Mac sales rose 25% and revenue from services was up 24%. iPads were the weak spot, as the company diverted chips away from that segment to service demand for phones.
Analysts responded positively to statements about the company's investment in Metaverse-related projects. Apple noted that it already has some 14,000 augmented reality apps in its store. The company said revenue in the current quarter would also be up in year-on-year terms but was less confident about longer-term forecasting.
2. PCE, ECI, and spending data
Are you ready for the daily test of the nerve from the data calendar?
Friday's big numbers are the Personal Consumer Expenditures price index for December and the Employment Cost Index for the fourth quarter, both due at 8:30 AM ET (1330 GMT), which come on the back of GDP numbers that did nothing to allay fears of an aggressive tightening of monetary policy throughout the year.
The Employment Cost Index will be essential for what it says about wage inflation. The third-quarter rise of 1.3% was the largest since before the Great Financial Crisis. Analysts expect it to have eased only marginally to 1.2%.
MEANWHILE, the PCE prices index is the Fed's preferred indicator of inflation rather than the CPI. There are also data on personal income and spending due for December.
3. Stocks set for weak open; Caterpillar, Chevron earnings due
U.S. stocks are set to open mostly lower, with the sharp drop in Tesla (NASDAQ: TSLA) stock on Thursday seemingly still weighing on sentiment despite support from Apple's earnings.
By 6:15 AM ET, Dow Jones futures were underperforming, falling 186 points, or 0.6%, while S&P 500 futures were down 0.5% and NASDAQ 100 futures were down 0.2%.
The S&P 500 has closed in the red for the last two days despite being up more than 1.5% intraday. The last time that happened – and, indeed, the only time that has occurred in recent history - was in October 2008, according to Steve Deppe, Chief Investment Officer at NDWM.
Aside from Apple and Tesla, stocks in focus on Friday will include Visa (NYSE: V) and luxury goods giant LVMH, which both reported strong earnings late on Thursday. Caterpillar, Chevron, Charter Communications (NASDAQ: CHTR), and Colgate-Palmolive (NYSE: CL) lead the daily roster of companies reporting.
4. Eurozone GDP mixed as Germany slips
The Eurozone economy was a mixed bag at the end of 2021, with the currency union's most significant economy shrinking by 0.7% on the quarter, much worse than the 0.3% expected (although the numbers need to be taken with a pinch of salt, given that Germany routinely revises its economic data upwards).
The picture was more positive in France and Spain, which posted quarterly growth above expectations due to robust domestic demand. The ECB released numbers showing that credit growth and money supply weakened in December.
Germany's import price numbers suggested that inflationary pressures may be peaking on the price front, posting their smallest monthly rise in 15 months. The annual comparisons still look horrible, though, up 24% on the year. Italy's PPI hit 22.6% in December, leading to a sharp drop in business confidence in January.
Meanwhile, in China, benchmark stock indices finished at a 16-month low as the country prepared for the week-long Lunar New Year holiday.
5. LG Energy's wild debut
As the world's second-biggest maker of lithium-ion batteries finally started trading, shares in LG Energy Solution had a wild ride on their market debut in South Korea.
The stock ended the day 15% below its IPO price, despite rising nearly 100% at the open. LGES supplies Tesla, Volkswagen (DE: VOWG_p), and General Motors (NYSE: GM) with batteries for their electric vehicles and is the world's second-biggest battery maker by volume after China's CATL.
In the world of conventional energy, oil prices stayed close to their seven-year highs posted earlier in the week, with no sign of a resolution to the crisis over Russia's threats against Ukraine. By 6:30 AM E, U.S. crude futures were up 0.7% at $87.17 a barrel, while Brent crude was 0.8% at $88.65 a barrel. - (Investing)
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