Wall Street Struggled to Shake Off Rate-path Worries

Stocks rebounded from the lows of the session and closed higher as rate-path worries dominated market sentiment. 

Fed minutes did little to dispel the market worries of rate hikes as policymakers favored higher rates despite the easing of inflation in the last six months. 

The Federal Reserve has lifted rates eight times in the last twelve months but inflation is well entrenched and showing no signs of trending towards the Fed's target rate of 2.0%.  

The initial surge in inflation was rooted in the surge in crude oil prices in the aftermath of Russia's invasion of Ukraine, but inflation has spread from goods to services and now to wages. 

Wage inflation has lagged overall inflation for years but employers are more than willing to offer higher wages in the current economic environment of tight labor market conditions. 

Investors are hoping that higher inflation base may eventually bring inflation to the 2.0% level if energy prices stay near $70 a barrel and supply chains remain intact as Chinese economic activities return to pre-covid levels.  

With no end in sight of the war between NATO and Russia in Ukraine, the future price of  energy may dictate the inflation trend in the year ahead. 

Corporate earnings so far have been a mixed bag with more companies reporting falling earnings and lowering expectations in the current year. 

U.S. Indexes and Yields 

The S&P 500 index increased 0.5% to 4,012.32 and the Nasdaq Composite index rose 0.7% to 11,590.40. 

The yield on 2-year Treasury notes closed at 4.70%, 10-year notes at 3.89% and 30-year Treasury bonds at 3.89%. 

The yield on 6-month and 0ne-year Treasury bills closed at 5.0%, the level last seen in December 2006. 

Natural Gas Hovers Near 3-decade Low 

Crude oil rose $1.44 to $75.39 a barrel and natural gas futures increased 18 cents to $2.35 a thermal unit. 

Natural gas futures rebounded above $2 level but not far from a three-decade intra-day low of $1.96 on Wednesday. 

Natural gas demand is lower than usual on warmer-than-usual weather conditions and weakening demand from Europe on elevated storage levels.  

U.S. Fourth Quarter Economic Growth Revised Lower 

Real gross domestic product expanded at a slower pace than previously estimated in the fourth quarter. 

GDP in the fourth quarter rose at an annual pace of 2.7%, lower than previously estimated 2.9% pace, the U.S. Bureau of Economic Analysis reported Thursday. 

In the third quarter, real GDP increased at 3.2%. 

Compared to the third quarter, the deceleration in real GDP in the fourth quarter primarily reflected a downturn in exports and decelerations in consumer spending, nonresidential fixed investment, and state and local government spending. 

The changes were partly offset by an increase in private inventory investment, a smaller decrease in residential fixed investment, and an acceleration in federal government spending.

For the full-year 2022, real GDP growth was unrevised at the pace of 2.1% from 5.9% in 2021.  

U.S. Stock Movers 

Dollar General Corp declined 4.5% to $215.0 after the discount retailer lowered its comparable sales and diluted earnings per share estimate for the fiscal year. 

The company blamed the shortfall on higher-than-expected inventory damages and lower-than-expected sales because of Winter Storm Elliott during the fourth quarter. 

Dollar General Corp lowered its same store sales increase estimate for the fiscal year ending on February 3 to 4.3% from the previous estimate towards the upper end of the range between 4.0% and 4.5%. 

The discount retailer lowered its diluted earnings per share growth in the range of approximately 4.5% to 5.0%, compared to its previous estimate between 7% and 8%.

Domino's Pizza Inc dropped 12.7% to $304.27 after the food service company lowered its sales and unit growth outlook. 

Domino's Pizza said fourth quarter revenue increased 3.6% to $1.39 billion and same store sales at the U.S. company owned and franchised stores increased 0.9% and international stores rose 2.6%. 

Net income in the fourth quarter increased to $158.3 million from $155.7 million and diluted earnings per share rose to $4.43 from $4.25 a year ago. 

The company lowered its global sales outlook over the next two-to-three years to between 4% and 8% from the previous estimate between 6% and 10%. 

The company also guided down global net unit growth in the range between 5.% and 7% from the previous range between 6% and 8% in the corresponding period. 

The company also announced a 10% increase in quarterly dividend to $1.21 per share to shareholders of record as of March 15 to be paid on March 30.

European Markers Halt 2-day Slide 

European market indexes closed higher after two days of declines after investors bid up energy and tech stocks. 

ASM International, BE Semiconductor and Aixtron advanced between 1% and 3% after Nvidia Corp estimated higher-than-expected sales in the first quarter.  

Energy explorers traded higher after crude oil prices rebounded and natural gas prices hovered near recent lows. 

Markets were cautious and inflation and rate worries dominated trading sentiment after the U.S. Fed meeting minutes showed policymakers commitment to increase rates until the inflation is on a sustainable downward path.

Inflation worries in the region also overshadowed market sentiment after the Euro Area inflation was slightly revised higher in January. 

Euro Are January Inflation Revised Higher 

The Euro Area inflation rate was revised higher in January, although the inflation slowed for the third month in a row,  the rate remained elevated, Eurostat reported Thursday. 

Inflation in January was upwardly revised to 8.5% from the previous estimate of 8.5% but lower than 9.2% in December, the statistical office of the European Union reported.

On a monthly basis the harmonized index of consumer prices declined 0.2% in January compared to the previous estimate of 0.4% decline. 

Core inflation rate excluding food, alcohol, energy and tobacco increased to 5.3% in January from 5.2% in December. 

The three countries with the lowest annual inflation rates were Luxembourg (5.8%), Spain (5.9%) and Cyprus and Malta (both 6.8%).  

The three countries with the highest annual inflation rates were Hungary (26.2%), Latvia (21.4%) and Czechia (19.1%). 

Turkey Lowered Key Lending Rate 

Turkey's central bank lowered its key lending rate by 50 basis points, in an attempt to support the economy in the aftermath of the devastating earthquake. 

The central bank lowered its key lending rate to 8.5% from 9.0% after holding rates for two months in a row. 

The Central Bank of Republic of Turkey held its key lending rate at 9.0% in January after inflation eased to a nine-month low of 64% from 85.0% in the previous month. 

"While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term. 

While the share of sustainable components of economic growth increases, the stronger than expected contribution of tourism revenues to the current account balance continues throughout the year. 

On the other hand, domestic consumption demand, high level of energy prices and the weak economic activity in main trade partners keep the risks on current account balance alive," noted the CBRT in a statement released Thursday. 

European Markets and Yields 

The DAX index increased 0.5% to 15,475.69, the CAC-40 index rose 0.3% to 7,317.43 and the FTSE 100 index declined 0.3% to 7,907.72. 

The yield on 10-year German Bunds inched lower to 2.47%, French bonds edged lower to 2.96%, the UK Gilts declined 3.59% and Italian bonds fell to 4.37%. 

The euro hovered near $1.059, the British pound traded near $1.202 and the Swiss franc traded higher to 93.35 U.S. cents. 

Brent crude oil rebounded $1.61 to $82.21 a barrel and the Dutch TTF natural gas prices inched slightly higher to Є50.72 per MWh. 

Europe Movers 

Essilor Luxottica SA declined 4.3% to €167.15 after the Franco-Italian eyewear maker reported an increase in fourth quarter earnings. 

Stocks turned lower on the company's cautious outlook for 2023. 

The company reiterated its target "of mid-single-digit annual revenue growth from 2022 to 2026 at constant  exchange rates and estimated an adjusted operating profit  as a percentage of revenue in the range of 19% to 20% by the end of that period.

AXA SA increased 3.2% to €28.71 after the France-based property insurance company announced a stock repurchase plan. 

Gross revenue in 2022 increased 2% to €102 billion and underlying earnings per share increased 12% to €3.08 from a year ago. 

The insurance group also announced a stock repurchase program of up to 1.1 billion. 

WPP Plc increased 3.3% to  1,049.94 pence after the UK-based advertising company forecasted higher than expected in the year ahead. 

Gross revenue in 2022 increased 12.7% to 14.4 billion and profit before-tax increased 22% to 1.2 billion and diluted earnings per share increased to 61.2 pence from 52.5 pence a year ago. 

The advertising agency estimated comparable sales in 2023 to increase between 3% and 5%, slower than 6.7% in 2022 but ahead of expectations. 

The company also guided operating margin in 2023 to improve to 15% from 13.5% in 2022. 

Rolls Royce Holdings Plc soared 20.5% to  129.73 pence after the aerospace and defense company reported higher-than-expected earnings. 

The defense contractor and power systems maker guided underlying operating profit in 2023 between £0.8 billion and £1.0 billion and free cash flow between £0.6 billion and £0.8 billion. 

Total revenue in 2022 increased to £13.5 billion from £11.2 billion and pre-tax loss increased to £1.5 billion from £294 million in the previous year. 

Europe Movers: AXA, Essilor Luxottica, Rolls Royce, WPP

Essilor Luxottica SA declined 4.3% to €167.15 after the Franco-Italian eyewear maker reported an increase in fourth quarter earnings. 

Revenue in 2022 increased 13.9% to Є24.4 billion and net income increased 20.9% to Є3.0 billion from the previous year. 

The company proposed to increased dividend by 29% to Є3.23 a share.  

Stocks turned lower on the company's cautious outlook for 2023. 

The company reiterated its target "of mid-single-digit annual revenue growth from 2022 to 2026 at constant  exchange rates and estimated an adjusted operating profit  as a percentage of revenue in the range of 19% to 20% by the end of that period.

AXA SA increased 3.2% to €28.71 after the France-based property insurance company announced a stock repurchase plan. 

Gross revenue in 2022 increased 2% to €102 billion and underlying earnings per share increased 12% to €3.08 from a year ago. 

The underlying earnings increased 4% to Є7.3 billion but net income declined 11% to Є6.7 billion reflecting a decline in invested asset valuations and write-off of goodwill linked to Russia-based Reso Garantia. 

The insurance group also announced a stock repurchase program of up to 1.1 billion. 

WPP Plc increased 3.3% to  1,049.94 pence after the UK-based advertising company forecasted higher than expected in the year ahead. 

Gross revenue in 2022 increased 12.7% to 14.4 billion and profit before-tax increased 22% to 1.2 billion and diluted earnings per share increased to 61.2 pence from 52.5 pence a year ago. 

The advertising agency estimated comparable sales in 2023 to increase between 3% and 5%, slower than 6.7% in 2022 but ahead of expectations. 

The company also guided operating margin in 2023 to improve to 15% from 13.5% in 2022. 

Rolls Royce Holdings Plc soared 20.5% to  129.73 pence after the aerospace and defense company reported higher-than-expected earnings. 

The defense contractor and power systems maker guided underlying operating profit in 2023 between £0.8 billion and £1.0 billion and free cash flow between £0.6 billion and £0.8 billion. 

Total revenue in 2022 increased to £13.5 billion from £11.2 billion and pre-tax loss increased to £1.5 billion from £294 million in the previous year. 

The company swung to a loss per share of 14.4 pence from 1.48 pence in the previous year. 

Net debt declined to £3.2 billion at the end of 2022 from £5.2 billion at the end of 2021.  

European Indexes Halt 2-day Slide, Turkey Lowered Key Rate

European market indexes closed higher after two days of declines after investors bid up energy and tech stocks. 

ASM International, BE Semiconductor and Aixtron advanced between 1% and 3% after Nvidia Corp estimated higher-than-expected sales in the first quarter.  

Energy explorers traded higher after crude oil prices rebounded and natural gas prices hovered near recent lows. 

Markets were cautious and inflation and rate worries dominated trading sentiment after the U.S. Fed meeting minutes showed policymakers commitment to increase rates until the inflation is on a sustainable downward path.

Inflation worries in the region also overshadowed market sentiment after the Euro Area inflation was slightly revised higher in January. 

Euro Are January Inflation Revised Higher 

The Euro Area inflation rate was revised higher in January, although the inflation slowed for the third month in a row,  the rate remained elevated, Eurostat reported Thursday. 

Inflation in January was upwardly revised to 8.5% from the previous estimate of 8.5% but lower than 9.2% in December, the statistical office of the European Union reported.

On a monthly basis the harmonized index of consumer prices declined 0.2% in January compared to the previous estimate of 0.4% decline. 

Core inflation rate excluding food, alcohol, energy and tobacco increased to 5.3% in January from 5.2% in December. 

The three countries with the lowest annual inflation rates were Luxembourg (5.8%), Spain (5.9%) and Cyprus and Malta (both 6.8%).  

The three countries with the highest annual inflation rates were Hungary (26.2%), Latvia (21.4%) and Czechia (19.1%). 

Turkey Lowered Key Lending Rate 

Turkey's central bank lowered its key lending rate by 50 basis points, in an attempt to support the economy in the aftermath of the devastating earthquake. 

The central bank lowered its key lending rate to 8.5% from 9.0% after holding rates for two months in a row. 

The Central Bank of Republic of Turkey held its key lending rate at 9.0% in January after inflation eased to a nine-month low of 64% from 85.0% in the previous month. 

"While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term. 

While the share of sustainable components of economic growth increases, the stronger than expected contribution of tourism revenues to the current account balance continues throughout the year. 

On the other hand, domestic consumption demand, high level of energy prices and the weak economic activity in main trade partners keep the risks on current account balance alive," noted the CBRT in a statement released Thursday. 

European Markets and Yields 

The DAX index increased 0.5% to 15,475.69, the CAC-40 index rose 0.3% to 7,317.43 and the FTSE 100 index declined 0.3% to 7,907.72. 

The yield on 10-year German Bunds inched lower to 2.47%, French bonds edged lower to 2.96%, the UK Gilts declined 3.59% and Italian bonds fell to 4.37%. 

The euro hovered near $1.059, the British pound traded near $1.202 and the Swiss franc traded higher to 93.35 U.S. cents. 

Brent crude oil rebounded $1.61 to $82.21 a barrel and the Dutch TTF natural gas prices inched slightly higher to Є50.72 per MWh. 

Europe Movers 

Essilor Luxottica SA declined 4.3% to €167.15 after the Franco-Italian eyewear maker reported an increase in fourth quarter earnings. 

Stocks turned lower on the company's cautious outlook for 2023. 

The company reiterated its target "of mid-single-digit annual revenue growth from 2022 to 2026 at constant  exchange rates and estimated an adjusted operating profit  as a percentage of revenue in the range of 19% to 20% by the end of that period.

AXA SA increased 3.2% to €28.71 after the France-based property insurance company announced a stock repurchase plan. 

Gross revenue in 2022 increased 2% to €102 billion and underlying earnings per share increased 12% to €3.08 from a year ago. 

The insurance group also announced a stock repurchase program of up to 1.1 billion. 

WPP Plc increased 3.3% to  1,049.94 pence after the UK-based advertising company forecasted higher than expected in the year ahead. 

Gross revenue in 2022 increased 12.7% to 14.4 billion and profit before-tax increased 22% to 1.2 billion and diluted earnings per share increased to 61.2 pence from 52.5 pence a year ago. 

The advertising agency estimated comparable sales in 2023 to increase between 3% and 5%, slower than 6.7% in 2022 but ahead of expectations. 

The company also guided operating margin in 2023 to improve to 15% from 13.5% in 2022. 

Rolls Royce Holdings Plc soared 20.5% to  129.73 pence after the aerospace and defense company reported higher-than-expected earnings. 

The defense contractor and power systems maker guided underlying operating profit in 2023 between £0.8 billion and £1.0 billion and free cash flow between £0.6 billion and £0.8 billion. 

Total revenue in 2022 increased to £13.5 billion from £11.2 billion and pre-tax loss increased to £1.5 billion from £294 million in the previous year. 

Real gross domestic product expanded at a slower pace than previously estimated in the fourth quarter. GDP in the fourth quarter rose at annual pace of 2.7%, lower than previously estimated 2.9% pace. In the third quarter, real GDP increased at 3.2%. For the full-year 2022, real GDP growth slowed to 2.1% from 5.9% in 2021.  

U.S. Fourth Quarter Economic Growth Revised Lower

Real gross domestic product expanded at a slower pace than previously estimated in the fourth quarter. 

GDP in the fourth quarter rose at an annual pace of 2.7%, lower than previously estimated 2.9% pace, the U.S. Bureau of Economic Analysis reported Thursday. 

In the third quarter, real GDP increased at 3.2%. 

Compared to the third quarter, the deceleration in real GDP in the fourth quarter primarily reflected a downturn in exports and decelerations in consumer spending, nonresidential fixed investment, and state and local government spending. 

The changes were partly offset by an increase in private inventory investment, a smaller decrease in residential fixed investment, and an acceleration in federal government spending.

For the full-year 2022, real GDP growth was unrevised at the pace of 2.1% from 5.9% in 2021.  

Movers: eBay, Dollar General, Domino's Pizza, Nvidia, Papa John's

eBay Inc declined 5.8% to $45.09 after the online marketplace a loss in its latest quarter and forecasted wea sales growth in the fiscal first quarter  

eBay said revenue in the fourth quarter decreased 4% to $2.5 billion and gross merchandise volume declined 12% to $18.2 billion. 

Net income in the quarter dropped to $672 million from $1.9 billion and diluted earnings per share fell to $1.23 from $3.25 a year ago. 

In 2022, revenue declined to $7.1 billion from $7.7 billion and net income swung to a loss of $1.3 billion from a profit of $13.6 billion (including gain from discontinued operations of $13.4 billion).

The online marketplace declared a cash dividend of 25 cents a share payable on March 24 to shareholders on record of March 10. 

The company guided revenue in the first quarter ending in March from continuing operations in the range between $2.46 billion and $2.5 billion. 

Dollar General Corp declined 4.5% to $215.0 after the discount retailer lowered its comparable sales and diluted earnings per share estimate for the fiscal year. 

The company blamed the shortfall on higher-than-expected inventory damages and lower-than-expected sales because of Winter Storm Elliott during the fourth quarter. 

Dollar General Corp lowered its same store sales increase estimate for the fiscal year ending on February 3 to 4.3% from the previous estimate towards the upper end of the range between 4.0% and 4.5%. 

The discount retailer lowered its diluted earnings per share growth in the range of approximately 4.5% to 5.0%, compared to its previous estimate between 7% and 8%.

Domino's Pizza Inc dropped 12.7% to $304.27 after the food service company lowered its sales and unit growth outlook. 

Domino's Pizza said fourth quarter revenue increased 3.6% to $1.39 billion and same store sales at the U.S. company owned and franchised stores increased 0.9% and international stores rose 2.6%. 

Net income in the fourth quarter increased to $158.3 million from $155.7 million and diluted earnings per share rose to $4.43 from $4.25 a year ago. 

The company lowered its global sales outlook over the next two-to-three years to between 4% and 8% from the previous estimate between 6% and 10%. 

The company also guided down global net unit growth in the range between 5.% and 7% from the previous range between 6% and 8% in the corresponding period. 

The company also announced a 10% increase in quarterly dividend to $1.21 per share to shareholders of record as of March 15 to be paid on March 30.

Nvidia Inc increased 14.5% to $237.68 after the advanced semiconductor chipmaker offered bullish outlook for AI driven demand for faster chips. 

Nvidia said revenue in the fourth quarter ending in January decreased 21% to $6.05 billion from $7.6 billion and gross margin declined to 63.3% from 65.4% a year ago. 

Net income fell 53% to $1.4 billion from $3.0 billion and diluted earnings per share declined to 57 cents from $1.18 in the previous year. 

In fiscal year 2023, revenue was flat at $26.9 billion and net income dropped 55% to $4.3 billion from $9.7 billion and diluted earnings per share fell to $1.74 from $3.85 a year ago. 

Papa John's International Inc declined 7.5% to $85.43 after the pizza chain operator reported weaker-than-anticipated sales. 

Papa John's said revenue in the fourth quarter declined 0.5% to $526 million and comparable sales increased 1% and 26% on a three-year basis. 

Net income declined 4.4% to $23.5 million from $24.6 million and diluted earnings per share eased to 66 cents from 67 cents a year ago.  

Revenue in 2022 increased 1.5% to $2.1 billion from $2.06 billion and net income plunged 43% to $67.8 million from $120 million or diluted earnings per share was $1.89 compared to 12 cents a year ago. 

The company announced a dividend of 42 cents a share to be paid on February 17 to shareholders on record on February 6. 

The company said $299.8 million were still available for stock repurchase after completing $125 million of its stock buyback in 2022. 

Nvidia Corporation said revenue in the fourth quarter ending in January decreased 21% to $6.05 billion from $7.6 billion and gross margin declined to 63.3% from 65.4% a year ago. Net income fell 53% to $1.4 billion from $3.0 billion and diluted earnings per share declined to 57 cents from $1.18 in the previous year. 

In fiscal year 2023, revenue was flat at $26.9 billion and net income dropped 55% to $4.3 billion from $9.7 billion and diluted earnings per share fell to $1.74 from $3.85 a year ago. 

eBay said revenue in the fourth quarter decreased 4% to $2.5 billion and gross merchandise volume declined 12% to $18.2 billion. Net income in the quarter dropped to $672 million from $1.9 billion and diluted earnings per share fell to $1.23 from $3.25 a year ago. 

In 2022, revenue declined to $7.1 billion from $7.7 billion and net income swung to a loss of $1.3 billion from a profit of $13.6 billion (including gain from discontinued operations of $13.4 billion).  

Papa John's said revenue in the fourth quarter declined 0.5% to $526 million and comparable sales increased 1% and 26% on a three-year basis. Net income declined 4.4% to $23.5 million from $24.6 million and diluted earnings per share eased to 66 cents from 67 cents a year ago.  

Revenue in 2022 increased 1.5% to $2.1 billion from $2.06 billion and net income plunged 43% to $67.8 million from $120 million or diluted earnings per share was $1.89 compared to 12 cents a year ago. 

Domino's Pizza said fourth quarter revenue increased 3.6% to $1.39 billion and same store sales at the U.S. company owned and franchised stores increased 0.9% and international stores rose 2.6%. 

Net income in the fourth quarter increased to $158.3 million from $155.7 million and diluted earnings per share rose to $4.43 from $4.25 a year ago. 

Dollar General lowered its same store sales increase estimate for the fiscal year ending on February 3 to 4.3% from the previous estimate towards the upper end of the range between 4.0% and 4.5%. 

The discount retailer lowered its diluted earnings per share growth in the range of approximately 4.5% to 5.0%, compared to its previous estimate between 7% and 8%.

Walmart Inc said total revenues in the fourth quarter rose 7.9% to $164 billion and comparable sales in the U.S. rose 8.3% from the previous year and 13.9% from two-years ago.

Consolidated net income soared 76% to $6.3 billion from $3.6 billion and diluted earnings per share rose to $2.32 from $1.28 in the previous year. 

Home Depot Inc said revenue in the fiscal fourth quarter ending in January increased 0.3% to $35.8 billion from the previous year. Comparable sales for the fourth quarter fell 0.3% and comparable sales in the U.S. decreased 0.3%.

Net earnings for the fourth quarter were $3.4 billion or $3.30 per diluted share compared with net earnings of $3.4 billion or $3.21 per diluted share a year ago. 

Expeditors International said revenue in the fourth quarter fell 36% to $3.6 billion and net income dropped 52% to $219 million from $452.8 million in the previous year. Diluted earnings per share declined 48% to $1.38 compared to $2.69 in the previous year. 

Copart said revenue in the fiscal second quarter ending in January increased 10.9% to $956.7 million and net income rose to 2.2% to $23.2 million compared to $287.4 million a year ago. Diluted earnings per share increased to 62 cents from 61 cents a year ago.