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Futures lower, Powell testimony, NYCB's cash infusion - what's moving markets

March 7, 2024 7:20 AM

Investing.com -- U.S. stock futures point to a negative start on Wall Street, as markets prepared for more testimony from Federal Reserve Chair Jerome Powell. Retailers Costco (NASDAQ: COST) and Kroger (NYSE: KR) are due to report their latest earnings, while shares in midsized lender NYCB end a rollercoaster trading session higher following a $1 billion cash infusion from a group of investors.

1. Futures edge lower

U.S. stock futures inched lower on Thursday, as investors awaited a second day of testimony on Capitol Hill from Federal Reserve Chair Jerome Powell and geared up for the release of key labor market data later in the week.

By 03:26 ET (08:26 GMT), the S&P 500 futures contract had shed 18 points or 0.4%, Nasdaq 100 futures had lost 99 points or 0.5%, and Dow futures dipped by 117 points or 0.3%.

The main averages on Wall Street closed higher in the prior session after Powell told a House committee that he expects the Fed will eventually slash interest rate down from more than two-decade highs this year. However, he flagged that policymakers wanted to see further evidence that inflation was sustainably easing toward the central bank's stated 2% target before rolling out any cuts. Powell is scheduled to testify to the Senate Committee on Banking, Housing, and Urban Affairs today.

Although Powell's comments fueled optimism that the Fed will eventually cut rates this year, the enthusiasm was tempered after Minneapolis Fed chief Neel Kashkari said that he did not expect more than two reductions in 2024.

Analysts at ING argued in a note to clients that signs of a cooling jobs market, sluggish household income growth, the exhaustion of pandemic-era savings and elevated rates "will result in weak consumer spending."

"This, in turn, should continue to dampen price pressures in the economy," the ING analysts said, adding that they forecast a first cut at the June meeting of the rate-setting Federal Open Market Committee.

2. Costco, Kroger ahead

An ebbing quarterly deluge of corporate earnings is due to feature Costco and Kroger on Thursday.

Membership-only retailer Costco has been bolstered by stronger demand for cheaper groceries from cost-conscious shoppers during a time of sticky inflation and high borrowing costs.

In December, the company known for offering customers products in bulk said sales of essential items like fresh food and sundries jumped. More expensive discretionary categories such as appliances and televisions also saw some improvement, Costco executives added.

Kroger, meanwhile, slashed its annual sales outlook in November, partly due to moderating grocery prices and lower consumer spending. The Ohio-based supermarket chain has launched more promotions to help offset these trends, but Chief Financial Officer Gary Millerchip warned that unit volume growth rates have not "improved at the pace we would have expected."

Markets will also be keeping an eye out for any comments from Kroger on its planned $24.6 billion acquisition of rival Albertsons (NYSE: ACI). U.S. trade regulators have sued to block the deal, which would be the largest supermarket tie-up in U.S. history, alleging that it is anticompetitive.

3. NYCB secures cash infusion

Shares in New York Community Bancorp (NYSE: NYCB) settled in the green following an erratic session on Wednesday, after the embattled midsized lender announced that it had secured $1 billion from a group of investors.

Former U.S. Treasury Secretary Steven Mnuchin's Liberty Strategic Capital, as well as investment groups Reverance capital Partners, Citadel Global Equities, Hudson Bay Capital, and others participated in the cash infusion, NYCB said.

NYCB's stock price gyrated throughout the trading day, dropping by 45% ahead of the announcement, and then spiking by 30% before eventually closing more than 7% higher.

The bank has come under intense pressure since it revealed an unexpected fourth-quarter loss on Jan. 31 that mainly stemmed from increased provisions linked to its exposure to the ailing commercial real estate market. Last week, concerns over NYCB were further heightened after it announced that "material weaknesses" had been discovered in its financial report controls.

4. Chinese exports, imports rise more than expected in first two months of 2024

China’s trade surplus grew more than expected in the first two months of 2024, boosted by some resilience in export demand, while imports were also buoyed by an uptick in holiday spending.

China’s trade balance for the January-February period was $125.16 billion, official data showed on Thursday. The reading was higher than estimates for a surplus of $110.30 billion, and up from December’s reading of $75.34 billion.

Exports increased at a substantially bigger-than-anticipated 7.1% year-on-year during the period, topping expectations of 1.9%. Imports rose 3.5% year-on-year in the January to February period, above projections of 1.5%.

5. Oil prices dip

Oil prices moved lower in European trade on Thursday, cutting short a recent rally, as markets digested demand cues from top importer China.

Data from China's General Administration of Customs showed that imports of crude oil into the country increased by 5.1% in the opening two months of the year compared the year-ago period.

Traders were also navigating signals on U.S. monetary policy. While assurances of interest rate cuts by Federal Reserve Chair Jerome Powell had boosted oil prices on Wednesday, later comments from Minneapolis Fed chief Neel Kashkari tempered this optimism.

Brent oil futures expiring in May fell 0.2% to $82.77 a barrel, while West Texas Intermediate crude futures dipped 0.2% to $78.22 per barrel by 03:27 ET (08:27 GMT). Both contracts rose by about 1% each in the previous session.


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