ECONOMIC SILUET: 5 things to know before the stock market opens Wednesday

Rabu, 03 Mei 2023

5 things to know before the stock market opens Wednesday

WED, MAY 03, 2023

MORNING SQUAWK

1. Is this it?

The Federal Reserve is expected to increase its benchmark interest rate Wednesday afternoon, as policy-making officials wrap up a two-day meeting. But as is usually the case on Fed decision days, the market will want to know more about what's next. There are plenty of strong indications the Fed may pause hikes here, especially as the economy processes a banking crisis that has already brought down three large U.S. financial institutions. (See below.) Investors will also be eager to hear what Fed Chairman Jerome Powell and his crew say about the overall economic outcome and the recession that has yet to materialize despite numerous predictions from other experts. Follow live market updates.

2. Regional banks, national worries

If you thought JPMorgan's post-failure acquisition of First Republic might have nipped concerns about regional banks in the bud, you may want to reconsider. Shares of PacWest plunged nearly 28% Tuesday, meaning it has fallen more than 71% so far this year. Western Alliance shares declined 15%. The stocks didn't look so hot in the premarket session Wednesday, either. The SPDR S&P Regional Banking ETF, meanwhile, fell more than 6% on Tuesday. The banking issues have weighed on investors' minds this week as earnings season marches on and markets gear up for another Fed rate hike. The three major averages have fallen for two straight sessions.

3. Market to Ford: Tough

Ford easily beat expectations when it reported quarterly results after the bell Tuesday. It posted 63 cents per share in adjusted earnings, well ahead of Wall Street's expectation of 41 cents. Automotive revenue came in at $39.09 billion, more than $3 billion above estimates. While the Ford EV unit's losses widened as the company ramps up production, earnings from the company's legacy internal combustion engine and fleet businesses more than made up for it. All in all, a good report, but Ford didn't think it was enough to boost its guidance for the year. Investors, in turn, largely shrugged off the otherwise positive numbers from the Detroit stalwart. Shares of Ford were flat to slightly negative in extended trading.

4. China comes alive for Starbucks

Starbucks' big beats on earnings and revenue weren't enough to wow investors after the bell Tuesday. But the coffee giant's results out of China may give them something to savor over the long term. (More so than olive oil coffee, anyway.) Starbucks said same-store sales in China, its second biggest market behind the U.S., grew for the first time since its fiscal third quarter in 2021. The growth returned after the Chinese government lifted its so-called zero Covid policy and consumers headed back to cafes after a surge of infections. Starbucks is building momentum in China, as well – same-store China sales were up 30% in March, and it has carried over into the current quarter, executives said. Still, the company maintained its guidance for the year.

5. PC pain for AMD

And here's yet another case of a company beating earnings expectations while not impressing investors. AMD did just that, but it also offered revenue guidance for the current quarter that came in below Wall Street's estimates. The stock fell in extended trading. The chipmaker is suffering from depressed demand out of the personal computer market. PC shipments dropped 30% in the first quarter, according to IDC. In turn, AMD's PC processor sales tumbled during the period. For what it's worth, CEO Lisa Su said the company expects a rebound from the PC and server markets in the second half of the year.

— CNBC's Mike Calia wrote this newsletter. Sarah Min, Jesse Pound, Michael Wayland, Amelia Lucas and Kif Leswing contributed.

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