North American Morning Briefing: Earnings Back in Focus Ahead of Fed Minutes

OPENING CALL

Stock futures moved lower on Tuesday at the start of a shortened week that includes results from Nvidia and the latest Federal Reserve minutes.

The first issue for investors to consider are the earnings on Tuesday of big retailers Walmart and Home Depot, which may give clues to the confidence of households, a crucial sentiment-gauge given consumption accounts for roughly 70% of the economy.

Then Wednesday sees the release of the Fed's minutes from its January 31 meeting, from which traders will try to glean any fresh guidance to the likely timing of interest rate cuts.

Citi said the Fed minutes will likely follow recent Fed speakers in suggesting that the Fed will lower interest rates this year but only 'carefully' once officials have 'greater confidence' that inflation is durably slowing towards 2%.

"Most interesting might be any details of the winding down of balance sheet reduction. An 'in-depth' discussion on the balance sheet is scheduled for March."

Nvidia will release its earnings after Wednesday's market close. The stock was down 2.3% in premarket trading.

"With a year-to-date gain of 50% already and a market cap of $1.8 trillion, Nvidia has a lot to live up when it reports numbers this week, " Bespoke Investment Group said.

XTB said that "unsurprisingly, there are big expectations for Nvidia, and if they fail to deliver this could be a major upset to the S&P 500, as the top five stocks in the blue chip index have fueled 75% of its gains so far in 2024."

Overseas Markets

Shares rose in Hong Kong and mainland China, where the central banks cut the benchmark home-loan interest rate in another attempt to jumpstart growth.

Mining stocks weighed on European markets. Europe's Stoxx 600 and FTSE 100 wavered.

Premarket Movers

U.S.-listed shares of Barclays were rising 6.2% after the British lender said it plans to return at least $12.6 billion to shareholders between 2024 and 2026 through dividends and stock buybacks and would undergo a three-year reorganization.

BHP reported a steep fall in profit. ADRs fell 3%.

Discover Financial was rising 14% after it reached a deal to be acquired by Capital One Financial for more than $35 billion. Capital One shares fell 3.9%.

The government is giving GlobalFoundries $1.5 billion in grants to build and expand facilities in New York and Vermont. Its shares rose around 12% premarket.

JetBlue Airways reached a deal with activist investor Carl Icahn, which involves the appointment of two independent directors. The deal avoids a proxy fight between Icahn and JetBlue. Shares were up 2%.

Friday's Post-Close Movers

Bowman Consulting Group said based on preliminary results that it expects net service billings and adjusted Ebitda to come in below guidance. Shares fell 8.8%.

Tupperware Brands disclosed that it had entered into a forbearance agreement with lenders as it explores strategic alternatives. The agreement reduces Tupperware's liquidity requirement under its credit agreement to $10 million from $15 million. Shares were down 4.9%.

Watch For:

Canadian CPI; Earnings from Home Depot, Walmart, Palo Alto Networks, Medtronic, Caesars Entertainment, Diamondback Energy, and Keysight Technologies.

Today's Top Headlines/Must Reads:

- Meet the Everyday Investors Along for Nvidia's Wild Stock-Market Ride

- SpaceX Forges Tighter Links With U.S. Spy and Military Agencies

- Data Show the Economy Is Booming. Wall Street Thinks Otherwise.

MARKET WRAPS

Forex:

The dollar should stay strong in the near term, helped by solid economic data, keeping the DXY within its current higher range of 104-105, ING said.

Gains should be limited, however, due to the prevailing view that data will turn weaker at some point, prompting interest-rate cuts by the Federal Reserve and causing the dollar to fall, ING said.

Bonds:

Ten-year government bond yields on both sides of the Atlantic are likely to tend downward in 2024, DZ Bank Research said.

"The initiation of rate cutting cycles by the Fed and the European Central Bank is likely to create further downward potential at the long end of the curve."

The decline in yields at the end of last year was clear proof of the crucial influence that monetary expectations exert on yield levels, it said.

DZ Bank Research expects both the Fed and the ECB to start cutting rates in June.

Energy:

Oil prices edged lower as concerns over a weakening demand outlook outweighed fears of supply disruptions due to flaring tensions in the Middle East.

The latest Houthi attacks in the Red Sea continued to disrupt shipping and sustain prices, but concerns over demand persisted following the IEA report last week and tempering U.S. rate-cut bets, with traders waiting for cues from Fed minutes due on Wednesday.

Metals:

Gold prices pulled ahead in anticipation of the Fed minutes, while base metals remained mixed.

"We believe Fed policy will remain key to the outlook for gold prices in the months ahead. Higher borrowing costs are typically negative for gold, " ING said.

TODAY'S TOP HEADLINES

Home Depot's Sales Are Expected to Fall. Here's Where the Upside Could Be.

Investors are bracing themselves for what seems to be inevitable: Home Depot could post its first annual sales drop since 2009.

The company all but confirmed as much in its fiscal-third-quarter earnings report in November. Since then, Wall Street has lowered its sales estimates for the home improvement retailer, which reports earnings Tuesday morning.

Walmart Is Poised for Another Strong Quarter. Why Its Outlook Could Overshadow Results.

Walmart's recent earnings record has been close to unimpeachable. For the past six quarters, the company has met or surpassed Wall Street's expectations. Analysts believe Walmart is poised for another beat when it reports earnings Tuesday morning.

But with investors champing at the bit for any indications on what the world's largest retailer is forecasting for 2024, a strong quarter is likely to be overshadowed by the company's guidance.

China's New Securities Chief Meets With Market Participants to Address Concerns

The Chinese securities regulator's newly appointed head has assured market participants that the regulator will respond to market concerns in a timely manner to strengthen the country's capital markets that have been battered by weak investor confidence.

In a two-day seminar that began Saturday, the new chairman of the China Securities Regulatory Commission, Wu Qing, met several market participants, including institutional and retail investors, foreign-funded institutions and private-equity firms, to solicit views on policies that could support the long-term development of the capital market, according to a statement by the CSRC late Monday.

How Nikki Haley-With Help-Made South Carolina an Economic 'Beast of the Southeast'

Nikki Haley mentions the "Beast of the Southeast" at virtually every campaign stop in her underdog effort to try to stop Donald Trump from winning the Republican presidential nomination.

The phrase, which an industry trade publication used in 2013 to describe South Carolina's robust economic development during her governorship, is a badge of honor for Haley as she explains how her state's unemployment dropped from 10.8% to 4.4% under her watch.

Russian Court Upholds Detention of WSJ Reporter Evan Gershkovich

A Russian court upheld the detention of Wall Street Journal reporter Evan Gershkovich, whom the U.S. government deems to be wrongfully detained, following recent remarks by President Vladimir Putin that he is open to a prisoner exchange for the journalist's release.

Tuesday's rejection of the latest appeal by Gershkovich's lawyers means he is set to remain behind bars until at least March 30, which would mark more than a year since he was taken into custody on an allegation of espionage that the Journal and the U.S. government vehemently deny.

Israel Sets Deadline for Rafah Ground Offensive Within Weeks

Israel gave Hamas a Ramadan deadline to return the hostages held in Gaza or face a ground offensive in Rafah, the first timeline it has provided for looming operations in the city that have become a source of tension with the U.S.

"The world must know and Hamas leaders must know if our hostages are not home by Ramadan the fighting will continue and expand to Rafah," Israeli war-cabinet member Benny Gantz said Sunday.

Write to ina.kreutz@wsj.com

TODAY IN CANADA

Earnings:

5N Plus 4Q

Calibre Mining 4Q

Chemtrade Logistics Income Fund 4Q

First Quantum Minerals 4Q

GFL Environmental 4Q

Gibson Energy 4Q

iA Fincl 4Q

Osisko Gold Royalties 4Q

Economic Indicators (ET):

0830 Jan CPI

Stocks to Watch:

Goodfellow 4Q EPS C$0.25 Vs. EPS C$0.52; 4Q Sales C$125.4M Vs. C$149.3M; FY EPS C$1.72 Vs. EPS C$3.82; FY Sales C$512.8M Vs. C$631.2M; Declares Dividend of C$0.50

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Lucara Diamond: Entered New Diamond Sales Agreement With Belgium's HB Group

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Masonite International 4Q Loss/Shr 46c; 4Q Adj EPS $1.29; 4Q Sales $660.6M

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SSR Mining: Turkish Authorities Temporarily Suspended Seach and Rescue Activities at Copler Mine; Suspended Activity to Focus on Stabilization of Heap Leach Area; Continue to Cooperate Fully With Government Requests; To Target Release of 4Q, 2023 Results After Market Close on Feb. 27

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Tricon Residential Announces Receipt of Interim Order for Proposed Take Private by Blackstone Real Estate and Provides Details of Special Meeting; Interim Order Authorizes and Orders That the Special Meeting Be Held on Thursday, March 28

Expected Major Events for Tuesday

05:00/JPN: Jan Convenience Store Sales

10:00/ITA: Dec Balance of Payments

11:00/UK: Jan Aluminium Production report

13:30/CAN: Jan CPI

15:00/US: 4Q Quarterly Retail E-Commerce Sales

15:00/US: Jan Leading Indicators

23:50/JPN: Jan Provisional Trade Statistics for the Month

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February 20, 2024 06:30 ET (11:30 GMT)

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