Five things you need to know before the market opens on Monday February 6:
1. -- Stock Futures Lower As Market Re-Set Fed Rate Bets
U.S. equity futures extended declines Monday, while the dollar powered higher against its global peers and Treasury yields added to recent upward moves, as investors continued to re-set Fed rate expectations following Friday's blowout jobs report.
Treasury bond yields surged Friday, and extended those moves in overnight trading, following the Labor Department's estimate that 517,000 new jobs were created last month, a tally that blasted Street forecasts and forced traders to heed multiple warnings from the Fed -- including just days earlier from Chairman Jerome Powell -- that rates will need to rise further in order to tame the underlying inflation pressures that remain embedded in the world's biggest economy.
Data showing a big rebound in services sector activity for the month of January, as well, added to the rate hike concern, although the so-called 'prices paid' component of the PMI figures continues to decline.
Still, even with the rising chorus of analysts indicating the Fed is closer to engineering the 'soft landing' it's hoping for, where inflation cools while the economy grows, rate hike bets are back on the rise, pressure equity valuations and opening bell futures.
The CME Group's FedWatch suggests both a 97.4% chance of another 25 basis point rate hike from the Fed next month in Washington, with bets on a follow-on move in May -- that would take the Fed Funds rate to a range of between 5% and 5.25% -- rising to around 67%.
Benchmark 10-year Treasury note yields were marked 4 basis points higher from their Friday close at 3.573% in overnight trading while 2-year notes added 6 basis points to change hands at 4.364%. The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.24% higher at 103.165, the highest since early January.
On Wall Street, futures tied to the S&P 500, which is up 7.7 for the year, are priced for a 35 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 220 point pullback. The tech-focused Nasdaq, which is up 15.6% for the year, was marked 135 points lower.
In overseas markets, Europe's Stoxx 600 was marked 0.79% lower in early Frankfurt trading and largely tracking U.S. futures, while Asia's region-wide MSCI ex-Japan index slumped 2.1%.
Japan's Nikkei 225 gained 0.67% as the yen fell to a three-week low against the surging dollar, heled by reports that the Bank of Japan will appoint deputy Masayoshi Amamiya to the top role, a move seen as extending the bank's dovish policies.
2. -- Week Ahead: Powell Speech Tops Light Earnings, Data Calendar
Markets will navigate a fairly tepid week in terms of earnings and data releases, but will nonetheless face what could be an important appearance from Federal Reserve Chairman Jerome Powell shortly on the heels of Friday's blowout payroll report.
Powell, who will participate in a question-and-answer session at the Economic Club of Washington, D.C. at 12:40 pm eastern time Tuesday, has consistently suggested that the Fed is set for at least two more rate hikes before it considers a pause to determine their impact on inflation and employment in the world's biggest economy.
Friday's scorching payroll report, which showed 517,000 new jobs added to the economy paired with only modest wage gains, has tested the market's assumption that the Fed will likely only execute one more hike.
Outside of Powell's Tuesday appearance, investors are expecting around 93 S&P 500 companies to report December quarter earnings this week, including CVS Health (CVS), Walt Disney (DIS), PepsiCo (PEP) and PayPal (PYPL).
With around half of the S&P 500 reporting thus far, collective fourth quarter earnings are expected to fall 2.7% from last year to a share-weighted $447.1 billion, according to data from Refinitiv. The forecast for first quarter earnings is a decline of around 2.5%.
3. -- Tesla Share Edge Higher Following Model Y Price Hikes
Tesla (TSLA) shares moved higher in pre-market trading following another series of price adjustments for its Model Y that came shortly after the U.S. government lifted the threshold for crossover vehicles to eligible for climate-linked tax credits.
The Treasury said Friday that crossovers priced at less than $80,000 would be fall within the scope of its $7,500 tax credit, allowing for companies such as Tesla to both lift the price of its Model Y by $1,000, to $54,990, and still have room to offer buyers software and component additions.
Tesla CEO Elon Musk told investors last month that orders for the month of January to date were "the strongest in our history" and were nearly twice the rate of Tesla's global production, allowing Tesla to at chip away at price cuts that were implemented late last year.
Tesla shares were marked 1.65% higher in pre-market trading to indicate an opening bell price of $193.11 each, a move that would extend the stock's year-to-date gain to around 56.8%.
4. -- Dell Set to Slash 6,600 Jobs Amid PC Market Slump
Dell Technologies (DELL) is set to slash around 5% of its global workforce, Bloomberg reported Monday, as it braces for an extended slump in PC demand.
Dell is likely to eliminate around 6,650 jobs, the report indicated, taking its headcount levels back to the lowest since 2017, as market conditions “continue to erode with an uncertain future”, according to a company memo.
Following a huge pandemic-era boost linked to work-from-home buying, analysts have noted fading demand for personal computers over the past six month, including a slow down in Apple's (AAPL) Mac sales last quarter.
Both Intel (INTC) and Advanced Micro Devices (AMD), the biggest U.S. chipmakers focused on the PC sector, have warned on fading demand over the coming months amid a glut in overall supply and a pullback in global consumer spending.
Dell Technologies shares were marked 0.8% lower in pre-market trading to indicate an opening bell price of $41.90 each.
5. -- Video Games In Focus With Activision, Take-Two Earnings On Deck
Activision Blizzard (ATVI) and Take-Two Interactive Software (TTWO) shares were mixed in pre-market trading ahead of their fourth quarter earnings reports after the closing bell.
Activision, the maker of the popular 'Call of Duty' franchise, has agreed to a $69 billion takeover by Microsoft that is seeing pushback from regulators in Europe and the United States, where the Federal Trade Commission is suing to prevent the deal from closing.
Both it and Take-Two, which makes the Grand Theft Auto and NBA 2K23 video games, are also facing broader industry contraction powered in part by slower consumer spending and the slow return of workers to office work.
Earlier this month, rival Electronic Arts (EA) shelved plans to make mobile versions of two if its most popular games -- Apex Legends and Battlefield -- while delaying the launch of a Star Wars-themed game amid fading demand and a pullback in consumer spending. Gaming chip specialists Advanced Micro Devices (AMD) also forecast more sector sales declines over the coming quarters when it published earnings last week.
Activision is expected to post fourth quarter earnings of $1.51 per share on revenues of $3.16 billion, while Take-Two is forecast to unveil a bottom line of 87 cents per share on sales of $1.455 billion.
Activision Blizzard shares were marked 0.35% higher in pre-market trading to indicate an opening bell price of $75.50 each. Take-Two Interactive shares, meanwhile, fell 1.7% to $1074.44 each.
