North American Morning Briefing: Tesla Surges, More Big-Tech Earnings in Spotlight

OPENING CALL

Stock futures were mostly higher on Wednesday, with the Nasdaq leading gains as technology shares rallied on the back of Tesla.

Tesla shares were surging premarket, putting the "Magnificent Seven" stocks in the spotlight ahead of more big-tech earnings.

Investor focus was also on upcoming data releases. Thursday's GDP and Friday's personal consumption expenditure index data could provide more clarity on the Federal Reserve's plans for monetary easing.

Overseas Markets

Overseas stock indexes largely climbed. The Nikkei and Hang Seng both rose over 2%. European indexes edged up, with the U.K.'s FTSE 100 holding around record highs.

Premarket Movers

HashiCorp shares were up 1.5% after WSJ reported IBM was nearing an agreement to acquire the company.

Seagate Technology's fiscal third-quarter adjusted earnings beat estimates and revenue of $1.66 billion fell 11% from a year earlier but came in roughly in line with forecasts. Shares rose 1.7%.

Tesla's quarterly profit plunged, but Elon Musk sought to assuage some concerns by underscoring Tesla's commitment to bringing out less-expensive cars. The stock was up over 10%.

Texas Instruments posted lower profit and revenue in the first quarter on end-market weakness, but both figures came in ahead of expectations. The company's guidance for revenue was ahead of analysts' forecasts at the midpoint of the range. Shares were 7% higher.

Visa's fiscal second-quarter adjusted earnings, which strip out one-time items, were $2.51 a share, better than analysts' forecasts of $2.44. Shares rose 2.4%.

Market Insight

HSBC is bullish on American equities markets in 2H after a bumpy start to the year, including a turbulent January and February that remain skewed by impacts of the pandemic.

HSBC Americas, said it believes policy rates and market rates in the U.S. have peaked.

It is also encouraged by the incoming earnings reports from the tech sector, which show firms are not only gaining users and revenue, but also building profits.

Watch For:

Durable Goods for March; EIA Weekly Petroleum Status Report; Earnings from AT&T, Boeing, Ford Motor, IBM, Meta Platforms

Today's Top Headlines/Must Reads:

- Why the AI Industry's Thirst for New Data Centers Can't Be Satisfied

- Musk Needs New Teslas to Pay for His Autonomous Dreams

- The Folly of China's Real-Estate Boom Was Easy to See, but No One Wanted to Stop It

MARKET WRAPS

Forex:

Strong U.S. growth and inflation have been the drivers of a dollar rally so far this year and should continue to support the currency, Deutsche Bank Research said.

Uncertainty surrounding U.S. elections this year could also benefit the dollar via safe-haven flows, it said.

Deutsche doesn't think the dollar is vulnerable to high fiscal deficits. "America's external accounts are not deteriorating because the domestic private sector is fully funding public sector spending."

The Fed remains committed to its inflation target so the greater the deficit the higher the equilibrium level of real rates, it said.

The euro held on to Tuesday's gains against the dollar, triggered in part by improving eurozone economic data, Brown Brothers Harriman said.

"The recovery in eurozone leading economic indicators will likely temper expectations that the European Central Bank is about to embark on an aggressive easing cycle and offer the euro near-term support."

Sterling stabilized following Tuesday's strong gains, fuelled by above-forecast U.K. purchasing-manager surveys, Bank of England signals that it isn't in a rush to cut rates and a weaker dollar, ING said.

At least four out of nine BOE policymakers are now dissenting against comments from others suggesting rate cuts could come reasonably soon, ING said.

"We could see some stabilisation in the short term as both the U.K. calendar and BOE-speak go quiet."

Bonds:

Despite the sharp rise in yields so far this year, the Treasury is expected to keep auction sizes of notes and bonds stable at next week's refunding meeting and maintain its guidance of doing so in the upcoming quarters, Barclays Research said.

"The Treasury is likely to maintain a steady hand and keep auction sizes of notes/bonds unchanged given the outlook for borrowing needs, its earlier guidance and supply concerns not being the driving force in this sell-off."

Investors expecting the upcoming refunding meeting to deliver duration supply relief could be disappointed, Barclays said. Separately, it expects the Treasury to launch a previously flagged regular buyback program.

Energy:

Oil prices edged higher on reports of bullish U.S. inventories and signs of a tightening market, despite a reduced geopolitical risk premium.

"Oil timespreads continue to tighten with Brent prompt spread backwardation expanding to $1.04 a barrel as of today, compared to a backwardation of $0.69 a barrel a week ago," ING said.

DNB Markets said U.S. legislation to ramp up sanctions on Iran's oil sector is on track to become law as part of a foreign aid package, but Biden could opt to avoid a stringent enforcement.

"We believe President Biden is likely to take advantage of the waiver authority built into the sanctions in order to avoid increasing oil and gasoline prices ahead of U.S. presidential election in November."

Metals:

Gold futures slipped, trading in a narrow band as the market's attention turned to upcoming U.S. economic data.

TODAY'S TOP HEADLINES

Court Says Chubb's Bid to Deny Sex-Abuse Coverage for Archdiocese of New York May Advance

Chubb may move forward with its lawsuit to avoid paying for liabilities stemming from sex-abuse claims lodged against the Archdiocese of New York, a New York state appeals court ruled on Tuesday.

The decision in favor of the insurer by a panel of judges reverses a lower-court ruling siding with the Archdiocese and agreeing to dismiss the case.

Google Delays Cookie Phase-Out Following Regulatory Pushback

Google will miss its end-of-year target for changing the way advertising is delivered in its dominant Chrome web browser, a setback in its yearslong effort to improve consumer privacy on the internet.

Google said Tuesday it would no longer be able to eliminate third-party cookies on its original timeline, citing "ongoing challenges related to reconciling divergent feedback from the industry, regulators and developers." The changes have been eagerly anticipated by advertisers because almost two-thirds of internet traffic flows through Chrome, making it an important gateway for reaching consumers.

China Central Bank Remarks Suggest Bond-Trading Liquidity Boost Not Imminent

China's central bank has again reiterated its cautious approach to monetary easing, reinforcing views that it's unlikely to deliver a big liquidity boost via bond trading.

Officials from the People's Bank of China told the state-run Financial News that the central bank will stick to normal monetary policy tools, but broke weeks of silence about treasury bond trading, a policy tool it has used sparingly in the past two decades. A months-old speech from President Xi Jinping had stoked speculation that the PBOC could resume trading treasury bonds in secondary markets.

German Business Sentiment Continues to Brighten

Sentiment among German companies ticked higher for a third-straight month in April, despite only slow economic growth expected in the early part of this year, according to a closely watched survey.

The Ifo business-climate index rose to 89.4 in April from 87.9 in March, data from the Ifo Institute showed Wednesday, beating expectations of 88.8 from a consensus forecast of economists polled by The Wall Street Journal.

Trump Shaped the Supreme Court. Now He Wants His Victory.

WASHINGTON-Creating a conservative supermajority on the Supreme Court was perhaps the crowning achievement of Donald Trump's presidency, with three appointees who delivered generational victories, including the elimination of abortion rights and the abolition of affirmative action.

But the court has been no balm when it comes to Trump's personal interests, leaving the former president fuming in several past cases after his appointees rejected his expansive claims of executive power or unfounded allegations of election irregularities.

Senate Passes Ukraine, Israel Aid Package After Monthslong Fight

WASHINGTON-The Senate passed a long-delayed $95.3 billion foreign-aid package sending much-needed ammunition and military equipment to beleaguered Ukrainian soldiers and fortifying Israel's missile defense systems, while also forcing the sale of Chinese-controlled TikTok in the U.S.

The 79-to-18 vote brought to a close months of wrenching debate over Ukraine that sharply split the Republican Party, with rank-and-file members openly rebelling against their leaders. The fight also called into question both how far the U.S. would go to defend the country, now in the third year of trying to repel Russia's invasion, as well as America's leadership role in the world.

Israel Wants Hamas Out of Gaza, but Even Uprooting It From the North Hasn't Worked

Fighting between Israel and Hamas intensified in northern Gaza, the first battleground in the war, where 200 days into the conflict territory is still heavily contested and Israel says thousands of militants remain.

The renewed violence, in areas Israeli forces had previously largely cleared of Hamas, serves as a sobering example of the difficulty of consolidating gains as they prepare an offensive in the southern city of Rafah, the militant group's last major bastion. It comes as a top State Department envoy warned Tuesday that delivery of humanitarian aid to northern Gaza was particularly critical, despite progress in recent weeks in rendering such assistance throughout the conflict zone.

Write to ina.kreutz@wsj.com

TODAY IN CANADA

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April 24, 2024 06:23 ET (10:23 GMT)

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