By Geoffrey Smith
Investing.com — Alphabet (NASDAQ:GOOGL), Exxon Mobil (NYSE:XOM) and United Parcel Service (NYSE:UPS) release earnings, while the ISM puts out its monthly U.S. manufacturing survey. Stocks are set to consolidate after a sharp rebound in response to a change of tone from the Federal Reserve. And oil prices ease after newswires report OPEC predicting that the global market will swing back into surplus this year. Here’s what you need to know in financial markets on Tuesday, 1st February.
1. New economy earnings, old economy earnings
Two updates from opposite ends of the investing spectrum lead the day’s earnings calendar, allowing a rough comparison of whether the old or new economy represents better value at the current levels.
Exxon Mobil reports before the open, and is expected to report a sharp improvement in cash flow due to resurgent oil and gas prices in the fourth quarter. More important, however, will be its guidance and what that says about the sustainability of a rally that has continued since the start of the year, taking crude prices to their highest since 2014.
After the close, Alphabet will report its fourth-quarter earnings. The owner of Google and one of the world’s biggest Cloud-hosting operations had a strong year in 2021 as advertisers paid up handsomely to reach an audience that was still largely home-bound. Analysts will be looking for any sign of that momentum flagging in line with consumer-focused macro indicators in the last two months.
2. The Fed’s slight change of focus
Two senior Federal Reserve officials pushed back against the spreading opinion that the central bank will raise interest rates by much more than it has guided for this year.
Kansas City Fed President Esther George and her San Francisco counterpart Mary Daly both pushed back against the notion of rapid-fire rate increases, albeit both remained committed to tightening policy.
George, a noted ‘hawk’ on inflation who holds one of the rotating votes on the Federal Open Market Committee this year, said that it would be better to run down the balance sheet more quickly, thus pushing up long-term rates and keeping the yield curve steep.
Daly, a non-voting member on the FOMC this year, was more overtly dovish, telling a Reuters event that tightening should be “gradual and not disruptive.”
3. Stocks set to open lower
The stock market’s strong end to January is struggling to translate into a bright start for February. After rebounding sharply on Monday in response to comments coming out of the Fed, the main indices are marked lower again in overnight trading.
By 6:15 AM ET (1115 GMT), Dow Jones futures were down 42 points, or 0.1%, while S&P 500 futures were down 0.3% and NASDAQ 100 futures were down 0.2%.
Companies likely to be in focus later include Sony (NYSE:SONY), whose $3.6 billion acquisition of Destiny publisher Bungie appears at first glance to be an underwhelming response to Microsoft’s deal for Activision Blizzard (NASDAQ:ATVI) last month. Electronic Arts (NASDAQ:EA), also mooted as a possible takeover target in the current environment, reports earnings later, along with United Parcel Service (NYSE:UPS) and Stanley Black & Decker (NYSE:SWK) before the open, and Advanced Micro Devices (NASDAQ:AMD) and PayPal (NASDAQ:PYPL) after the close.
The Institute for Supply Management’s manufacturing index heads the data calendar at 10 AM ET.
4. Tesla to recall over 50,000 cars due to crash risk
Tesla (NASDAQ:TSLA) is to recall over 53,000 cars due to suspected crash risks.
Newswires reported the National Highways Traffic Safety Administration as saying that the company’s “Full Self-Driving” software may allow vehicles to travel through an all-way stop intersection without first coming to a stop.
The company had to recall nearly half a million Model 3 and Model S cars at the end of last year to fix issues with rearview cameras and trunks that also contributed to crash risks. Tesla said at the time it wasn’t aware of any crashes caused by the risks that the NHTSA flagged.
5. Crude slips on OPEC forecasts; API due
Crude oil prices edged lower after newswires quoted sources close to OPEC as seeing the global market in surplus by over 1 million barrels a day this year.
The forecasts are among those due to be analysed by OPEC’s Joint Technical Committee meeting on Tuesday, ahead of the regular review of output quotas by OPEC and allies led by Russia later in the week.
U.S. crude futures edged down 0.2% to $88.00 a barrel, while Brent crude fell 0.3% to $89.05 a barrel.
The American Petroleum Institute releases its weekly inventory data at 4:30 PM as usual.
Alphabet, Exxon Earnings, OPEC Forecasts and Fed Comments – What’s Moving Markets