By Geoffrey Smith
Investing.com -- Global markets steady after initially falling in response to the Federal Reserve's press conference on Wednesday. U.S. fourth-quarter GDP and weekly jobless claims numbers are due, as the Covid-19 virus claims its biggest-ever daily death toll in the U.S. Tesla (NASDAQ:TSLA) posts a record profit for 2021 but is delaying new product launches again. Apple (NASDAQ:AAPL) earnings are out after the closing bell. And oil prices hit fresh seven-year highs as tensions continue to bubble over Ukraine. Here's what you need to know in financial markets on Thursday, 27th January.
1. Bond yields, dollar surge in response to Fed
The dollar and U.S. Treasury bond yields hit new highs for the year after Federal Reserve Chair Jerome Powell’s hinted at Wednesday’s press conference that the central bank will tighten monetary policy more quickly this year than previously assumed.
Short-term interest rate futures now imply a 20% risk that the first rate hike – expected in March – will be 50 basis points rather than the usual 25.
Global markets steadied overnight after their initial shock. However, that steadiness will be tested by U.S. economic data at 8:30 AM ET (1330 GMT), when fourth-quarter GDP numbers are due. Last week’s jobless claims numbers, meanwhile, will show whether the current wave of Omicron-wave Covid-19 is still weighing on the labor market. Data out on Wednesday showed a new record high of 2,100 U.S. deaths in a day from the disease.
2. Tesla posts record profit, but delays new product launches
Tesla posted a record profit of $5.5 billion last year, after a fourth quarter that came in around 10% above analysts’ forecasts.
Automotive gross margin, which measures the company’s underlying profit from making cars rather than booking emissions credits, rose to 29.3% from 25.6%, while its net margin was over 10%.
However, the market had priced that much in and focused instead on the news that the company has again postponed the launch of new models, CEO Elon Musk saying that it wouldn’t be able to reliably source components for them this year.
3. Stocks set to open mixed; Intel guidance disappoints
U.S. stocks are set to open mixed later as the market recovers from Powell’s seemingly hawkish comments.
By 6:30 AM ET, Dow Jones futures were up 8 points, effectively flat, but S&P 500 futures were up 0.1% and NASDAQ 100 futures were up 0.3%.
Other stocks likely to be in focus later include Intel (NASDAQ:INTC), whose disappointing profit guidance for the coming quarter overshadowed a modest beat for the last quarter of 2021, while software company SAP (NYSE:SAP) had the same problem in German trading, falling 6.1% to a nine-month low.
On the upside, chipmaker Xilinx (NASDAQ:XLNX) is set to open higher after smashing expectations with its fourth-quarter numbers and – more importantly – getting regulatory approval in China for its deal to sell itself to Advanced Micro Devices (NASDAQ:AMD).
4. Apple earnings set to rise over 12%
It’s another heavy day for earnings ahead, with Apple set to report after the closing bell.
Analysts expect earnings in the key holiday quarter to have risen 12% from a year ago to $1.89, which would leave the stock trading at 31 times its trailing 12-month earnings, a stark reminder of how stretched valuations are even for mature, cash-generative technology companies.
Also reporting on Thursday are the two payments giants Visa (NYSE:V) and Mastercard (NYSE:MA), Comcast (NASDAQ:CMCSA), McDonald’s (NYSE:MCD), Mondelez (NASDAQ:MDLZ), Altria (NYSE:MO), Northrop-Grumman, Southwest Airlines (NYSE:LUV) and Dow.
5. Oil retreats from fresh 7-year highs as Ukraine tensions continue
Crude oil futures hit fresh seven-year highs, before retreating a little, as concerns over OPEC+ supply, while fears of further disruptions in the case of a Russian attack on Ukraine, continued to build in a significant geopolitical risk premium.
Russia’s Foreign Minister Sergey Lavrov was quoted by newswires as saying that Russia had received “no positive response” from the U.S. in its written proposals on how to de-escalate the situation in Ukraine. However, Russian newswires also reported that Russian troops are set to leave Belarus after completing drills there, easing fears that they may use it as a springboard for an invasion of Ukraine from the north.
By 6:20 AM ET, U.S. crude futures were up 0.1% at $87.41 a barrel, while Brent futures, which hit $90 overnight, were up 0.1% at $88.82.