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Pre-Markets Do Not See the Sky Falling

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Wednesday, February 14th, 2024

In the aftermath of the single-biggest selloff day on Wall Street, pre-market futures are buoying back up across the board this morning. Clearly the early birds are seeking out some oversold worms; Tuesday’s big down-day was triggered, after all, by an Inflation Rate that came in a mere 20 basis points (bps) higher than anticipated. That’s not exactly a “Chicken Little” scenario. Currently, the Dow is +91 points, the Nasdaq is +108 and the S&P 500 is +23 points at this hour.

Obviously, it’s the new perspective that no Fed rate cuts are on their way soon, which is how the bullish viewpoint on the markets were able to bid higher this earnings season. Thus, the lower ceiling will be kept in place longer than previously expected. At the March 20 meeting for the Federal Open Market Committee (FOMC), one thing for sure we’re going to get is a new “dot plot” on rate cut expectations. With eight overall FOMC meetings this year (including January, which resulted in no cut, as expected), and with the understanding that September is likely off the table (coming as it will within weeks of the General Election), discounting March still leaves the potential for five cuts in 2024.

This will, of course, remain responsive to economic conditions, and if at our current 5.25-5.50% rate we’re still seeing inflation refusing to be tamped down, we can start discounting from five cuts, as well. May, June, July, September, November and December — at what point will we see prices and/or employment come down far enough for the Fed to ease up on interest rate levels. It may be sooner than we think; yesterday’s CPI numbers may be the result of some post-holiday static in the market.

Kraft Heinz (KHC - Free Report) is out with Q4 figures this morning, with earnings beating expectations by a penny to 78 cents per share for the quarter, on $6.86 billion in revenues which missed the Zacks consensus by -1.6% (and down from the $7.38 billion reported in the year-ago quarter). Pre-markets are selling this news, bringing the stock down an additional -2.7% from the already lower -2.3% year to date. Over the past year, the condiments giant is -9.4%. For more on KHC’s earnings, click here.

Barrick Gold (GOLD - Free Report) shares are up +1.4% following its mixed Q4 report ahead of the bell today, with earnings of 27 cents per share outpacing the 21 cents expected (a +28.6% surprise) on $3.06 billion in quarterly sales, missing forecasts by -2.3%. The company did announce a $1 billion share buyback in its report, which clearly sweetened the deal for early traders. Year to date, we’ve already seen the mining major down -21%. For more on GOLD’s earnings, click here.

The CME Group (CME - Free Report) was also mixed in its Q4 earnings results this morning, with earnings of $2.24 per share missing the Zacks consensus by 3 cents (and still ahead of the $1.92 per share a year ago) on $1.44 billion in sales, slightly outperforming the $1.43 billion analysts were looking for. This is the trading post’s first earnings miss since 2020. Earnings guidance for next full year are down from earlier estimates, but slightly higher on the top line.

Earnings season continues after today’s closing bell, with Cisco Systems (CSCO - Free Report) , Occidental Petroleum (OXY - Free Report) and Twilio (TWLO - Free Report) . Prior to then, we’ll see if this bounce-back is sustainable or if the recalculations for few rate cuts this year continues to work as a wet blanket. Three of the four major indices are still in positive territory from the start of the year; only the small-cap Russell 2000 has dipped lower as of this morning.

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