Author: Reuters

By Carolina Mandl, Amruta Khandekar and Ankika Biswas

(Reuters) -U.S. stocks fell on Friday after a hotter-than-expected producer prices report eroded hopes for imminent interest rate cuts by the Federal Reserve.

A Labor Department report showed producer prices increased more than expected in January, feeding fears inflation was picking up after months of cooling.

The data could encourage the Fed to wait before cutting rates. Earlier this week, a hot consumer prices report sparked a selloff in equity markets although a slump in January retail sales on Thursday stoked hopes of rate cuts.

“The inflation data this week are definitely going to keep the Fed at least on pause until summer,” said Carol Schleif, chief investment officer at BMO family office. “Data is bumpy, it’s not a straight line.”

Treasury yields spiked after the report as traders added to bets that the Fed may defer the first rate cut until after June.

“The theme of higher for longer is really the continuing market narrative” for interest rates, said Greg Bassuk, Chief Executive Officer at AXS Investments.

Two Fed officials set the tone for caution. Atlanta Fed President Raphael Bostic said he needed more evidence that inflation pressures are falling, but is open to lowering rates at some point in the next few months. San Francisco Fed President Mary Daly said “there is more work to do” to ensure stable prices, despite remarkable progress.

According to preliminary data, the S&P 500 lost 24.18 points, or 0.49%, to end at 5,005.15 points, while the Nasdaq Composite lost 132.38 points, or 0.83%, to 15,775.65. The Dow Jones Industrial Average fell 149.48 points, or 0.39%, to 38,623.64.

Most megacap stocks dropped, with Meta Platforms falling and dragging the S&P 500 communication services index down.

Robust corporate earnings and surging enthusiasm around artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.

Applied Materials jumped after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in AI.

Vulcan Materials gained after forecasting a higher full-year profit, aiding a rise in the S&P 500 materials sector index.

Roku slumped after forecasting a bigger first-quarter loss, while crypto exchange Coinbase Global jumped on posting its first quarterly profit since 2021.

DoorDash dropped as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.

(Reporting by Carolina Mandl, in New York, Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Maju Samuel, Chizu Nomiyama and David Gregorio)

By Caroline Valetkevitch

NEW YORK (Reuters) -U.S. Treasury yields jumped and the dollar edged up on Friday after data showed U.S. producer prices increased more than expected in January, adding to the view that any interest rate cuts by the Federal Reserve are not imminent.

U.S. stocks were lower in afternoon trading, while the MSCI global stock index was up slightly.

The producer price index for final demand rose 0.3% last month after declining by a revised 0.1% in December, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI rebounding 0.1% following a previously reported 0.2% drop.

A U.S. consumer prices reading earlier this week was also stronger than expected.

The yield on the benchmark U.S. 10-year Treasury note climbed 5.3 basis points to 4.293%, down from an earlier high of 4.33%, and was on pace for its second straight weekly gain.

The greenback also gained after the data. The dollar index gained 0.02% to 104.29, with the euro up 0.02% at 1.0773. Against the Japanese yen, the dollar strengthened 0.23% to 150.26.

The dollar/yen has been trading near levels that have been typically seen as potential catalysts for official intervention.

Bank of Japan Governor Kazuo Ueda said on Friday that monetary policy would most likely remain accommodative, even after ending negative interest rates, echoing recent reassurances from BOJ officials that have weighed on the yen.

The dollar index gained 0.06% at 104.32, with the euro up 0.01% at 1.0772.

“A number like this, it definitely pushes off the Fed for another month or two,” said Tom di Galoma, co-head of global rates trading at BTIG in New York, referring to the PPI data.

On Friday, market expectations the Fed will start cutting rates in June were dialed back, with CME’s FedWatch Tool now showing a 69.9% chance for a cut of at least 25 basis points, down from the nearly 90% in the prior session.

On Wall Street, the Dow Jones Industrial Average fell 91.08 points, or 0.23%, to 38,682.04l; the S&P 500 lost 13.66 points, or 0.27%, to 5,016.07; and the Nasdaq Composite lost 90.35 points, or 0.57%, to 15,815.82.

MSCI’s gauge of stocks across the globe rose 0.82 points, or 0.11%, to 751.37.

Earlier on Friday, Japan’s benchmark Nikkei rallied to a 34-year high and was on the cusp of eclipsing the all-time peak reached during the heyday of the nation’s bubble economy in the 1980s.

Figures on Thursday showed that Japan and Britain slipped into recession at the end of last year.

With the dollar gaining, gold has been under pressure this week. Gold eased on Friday and was on course for a second straight weekly fall.

Spot gold XAU= was up 0.4% to $2,012.86 per ounce.

U.S. crude gained $1.16 to settle at $79.19 a barrel.

(Reporting by Caroline Valetkevitch; additional reporting by Amanda Cooper in London and Stella Qiu in Sydney and Chuck Mikolajczak in New York; Editing by Gerry Doyle, Nick Macfie, Susan Fenton, Deepa Babington and Jonathan Oatis)

By Nicole Jao

NEW YORK (Reuters) -Oil prices settled higher on Friday as geopolitical tensions in the Middle East more than offset a forecast from the International Energy Agency for slowing demand.

Brent crude futures settled up 61 cents, or 0.74% at $83.47 a barrel. U.S. West Texas Intermediate crude settled $1.16, or 1.49%, higher at $79.19 with the nearby March contract expiring on Tuesday. The April contract rose 87 cents to $78.46.

For the week, Brent gained more than 1% and the U.S. benchmark rose about 3%.

The growing risk of a wider conflict in the Middle East supported crude prices.

On Thursday, Hezbollah said it fired dozens of rockets at a northern Israeli town in a “preliminary response” to the killing of 10 civilians in southern Lebanon, the deadliest day for Lebanese civilians in four months of cross-border hostilities.

The oil market’s reaction to news from the Middle East was moderate, said Giovanni Staunovo, an analyst at UBS.

“The market sees oil still flowing and disruptions have been small,” he said.

Gaza’s largest functioning hospital was under siege in Israel’s war with Islamist group Hamas, as warplanes struck Rafah, the last refuge for Palestinians in the enclave, officials said.

Threats persisted in the Red Sea after a missile fired from Yemen struck an India-bound tanker carrying crude oil.

U.S. producer prices increased more than expected in January amid strong gains in the costs of services, which could amplify inflation worries. Still, a slump in retail sales prompted hopes the Fed will soon start cutting rates, which could support oil demand.

“Hopes for U.S. rate cuts provided support on Thursday, but investors are now adjusting their positions ahead of a long (holiday) weekend in the U.S.,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

On Thursday, the IEA said global oil demand growth was losing momentum and trimmed its 2024 growth forecast.

The agency expects global oil demand growth to decelerate to 1.22 million barrels per day (bpd) in 2024, about half of the growth seen last year, in part due to a sharp slowdown in Chinese consumption. It had previously forecast 2024 demand growth of 1.24 million bpd.

The Organization of the Petroleum Exporting Countries (OPEC) expects oil use to keep rising for the next two decades.

U.S. energy firms this week cut the number of oil and natural gas rigs in operation for the second time in three weeks, energy services firm Baker Hughes said in its closely followed report on Friday.

(Additional reporting by Natalie Grover in London, Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; editing by Jonathan Oatis, Kirsten Donovan and David Gregorio)

By Gertrude Chavez-Dreyfuss and Herbert Lash

NEW YORK (Reuters) -The dollar retreated on Friday amid concerns about the strength of the U.S. economy after higher-than-expected producer prices raised expectations that the Federal Reserve will desist from cutting interest rates until at least the middle of the year.

The rise in producer prices reported by the Labor Department was the largest in five months and followed a hotter-than-expected report on Tuesday for consumer prices last month.

But data on Thursday for U.S. retail sales in January showed the sharpest drop in 10 months, giving some in the market pause as the report suggested slowing momentum in consumer spending as sales were revised lower in November and December too.

“The FX side of things tends to focus on the fact that there’s still somewhat of a question mark when it comes to real activity in the U.S. economy,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

The currency market’s paring of gains was “a bit of a bizarre reaction,” Rai said. It also might be positioning ahead of the long U.S. holiday weekend and a divergence with the Treasury market of how to interpret the economic data, he said.

U.S. markets will be closed on Monday for the Presidents’ Day holiday.

The dollar index, a gauge of the greenback’s value versus six major currencies, was on track for a fifth straight week of gains. It last rose 0.01% to 104.26, and was up about 0.12% for the week.

Fed funds futures have priced in just a 10.5% chance of a rate cut in March and 33.7% odds of easing in May, according to CME Group’s FedWatch Tool. At the beginning of the year odds that the Fed would cut rates in March were 79%.

The yield on two-year Treasury notes, which typically moves in step with interest rate expectations, rose 9.1 basis points to 4.659%.

The resilient U.S. labor market, stronger-than-expected economic growth and the inflation data indicate the dollar could be higher than it is, said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.

“I just see sideways trading or a slow grind higher for the dollar as a more likely scenario,” Epstein said.

The euro rose 0.04% to $1.0775, while the yen weakened 0.22% to 150.23 per dollar.

The yen has touched 150 the last few days, putting the market on high alert to a possible intervention by Japanese authorities to weaken the yen.

The Japanese currency, which is highly sensitive to U.S. rates, is down 6.5% against the dollar this year as investors pare back their expectations of the Fed cutting rates.

A separate report showed that U.S. single-family homebuilding dropped in January, likely due to harsh weather, but a rise in permits for future construction suggested a rebound is likely in the coming months.

Single-family housing starts, which account for the bulk of homebuilding, dropped 4.7% to a seasonally adjusted annual rate of 1.004 million units last month.

The U.S. consumer sentiment survey was also released on Friday, but the currency market showed little reaction.

U.S. consumer sentiment was little changed in February while one-year inflation expectations inched up.

The University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 79.6 this month, compared with 79.0 in January. Economists polled by Reuters had forecast a preliminary reading of 80.0.

The survey’s reading of one-year inflation expectations edged up to 3.0% this month from 2.9% in January.

(Reporting by Gertrude Chavez-Dreyfuss and Herbert Lash in New York and Stefano Rebaudo; Editing by Alison Williams and Jonathan Oatis)

By Gursimran Mehar and Ananya Mariam Rajesh

(Reuters) -Nike will cut about 2% of its total workforce, or more than 1,600 jobs, the sportswear giant said late on Thursday to lower expenses as demand for its shoes and sneakers comes under pressure.

Higher rental and interest rates have led customers to cut back spending on high-priced goods, resulting in sportswear companies such as Nike and Adidas warning that retailers are lowering their orders through wholesale channels.

Nike had in December outlined a $2 billion savings plan over the next three years, which included tightening the supply of some products and reducing management layers.

The cost cuts would include about $400 million to $450 million in employee severance costs in third quarter, it had said. Nike had about 83,700 employees as of May 31, 2023.

The job cuts are Nike getting out in front of the fear that demand “could soften still further”, said GlobalData managing director Neil Saunders.

Nike has also lost some retail shelf space to newer brands like Decker Outdoors’ Hoka and On Holding as their running shoes resonate with customers looking for catchy and innovative styles.

“Nike also wants to invest more in areas like running so it can gain market share, to do that it needs to balance the additional expenses with some reductions elsewhere,” Saunders said.

The Wall Street Journal, which first reported on the news, said the cuts were expected to start on Friday, and a second phase would be completed by the end of the current quarter.

The layoffs are not expected to impact employees in stores and distribution centers or those in its innovation team, the report said.

Nike’s shares were down 4% after brokerage Oppenheimer downgraded the stock to “perform” and cut price target on concerns of “spotty consumer demand” over the next several quarters.

(Reporting by Anirudh Saligrama, Devika Nair and Ananya Mariam Rajesh in Bengaluru; Editing by Sherry Jacob-Phillips and Arun Koyyur)

By Nicole Jao

NEW YORK (Reuters) – Oil prices rose slightly on Friday as geopolitical tensions in the Middle East offset a forecast by the International Energy Agency that warned of slowing demand.

Brent crude futures rose 47 cents to $83.33 a barrel by 12:09 p.m. (1709 GMT). U.S. West Texas Intermediate crude gained 75 cents, or 1%, to $78.78 with the nearby March contract expiring on Tuesday. The April contract rose 51 cents to $78.10.

For the week, Brent is set to gain about 1% and the U.S. benchmark is on track to rise about 2.5%.

The growing risk of a wider conflict in the Middle East supported crude oil prices during the session.

Gaza’s largest functioning hospital was under siege on Friday in Israel’s war with Islamist group Hamas, as warplanes struck Rafah, the last refuge for Palestinians in the enclave, officials said.

On Thursday, Hezbollah said it fired dozens of rockets at a northern Israeli town in a “preliminary response” to the killing of 10 civilians in southern Lebanon, the deadliest day for Lebanese civilians in four months of cross-border hostilities.

“The geopolitical tensions are causing consumer prices to start to rise, not just in the energy complex,” said Tim Snyder, economist at Matador Economics.

U.S. producer prices increased more than expected in January amid strong gains in the costs of services, which could amplify worries that inflation is picking up again.

Crude climbed more than 1% on Thursday as a larger-than-expected drop in U.S. retail sales prompted hopes the Fed will soon start cutting rates, which could be positive for oil demand.

“Hopes for U.S. rate cuts provided support on Thursday, but investors are now adjusting their positions ahead of a long (holiday) weekend in the U.S.,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

Meanwhile, the IEA said on Thursday that global oil demand growth was losing momentum and trimmed its 2024 growth forecast, weighing on prices.

The agency expects global oil demand growth to decelerate to 1.22 million barrels per day (bpd) in 2024, about half of the growth seen last year, in part due to a sharp slowdown in Chinese consumption. It had previously forecast 2024 demand growth of 1.24 million bpd.

The Organization of the Petroleum Exporting Countries (OPEC), meanwhile, expects oil use to keep rising for the next two decades.

(Additional reporting by Natalie Grover in London, Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; editing by Jonathan Oatis, Kirsten Donovan)

By Deborah Mary Sophia

(Reuters) – Home Depot’s annual forecast will be the prime focus for investors when the U.S. home improvement bellwether reports fourth-quarter results on Tuesday, as they scour for signs of a rebound in demand after a turbulent year.

“(2023 was) expected very much to be a transition year. All eyes are on 2024 and 2025, expecting a more normalized home improvement environment,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management.

“It should be mostly smooth sailing going forward,” she said. Logan Capital holds shares in Home Depot.

Home Depot and smaller rival Lowe’s are set to round out 2023 with their fifth consecutive decline in quarterly same-store sales, as tighter budgets and a shift in spending to services triggered a pause in home improvement projects.

That is expected to change as mortgage rates stabilize and the U.S. housing market shows signs of bottoming out.

Wall Street analysts have also become increasingly bullish on recovery in the home improvement space, especially in the back half of 2024, banking on factors including an expected improvement in discretionary spending and home sales.

THE CONTEXT

Promotions around holiday shopping events like Black Friday may have propped up sales in the fourth quarter, but weaker sales reports are largely expected at the end of what brokerage Truist called a “digestion” year for the industry, where companies lapped the tremendous growth seen during the pandemic.

“I don’t think the investors that have stuck with (Home Depot) thus far are going to be too freaked out by slowing sales (in the quarter), which have been widely expected at this point,” Logan Capital’s Henry said.

For 2024, Home Depot is expected to forecast roughly flat comparable sales, improving from an estimated 3.2% decline in 2023, according to LSEG data. Lowe’s is likely to forecast a 1.1% drop, compared with a projected 4.8% fall last year.

Both companies are expected to return to positive same-store sales in the second half of 2024.

“… we certainly do not see the macro climate getting worse from here, we’re more confident that we’ll see all those (improving macro) trends come together by (the second half),” Bernstein analysts said.

THE FUNDAMENTALS

** Home Depot is expected to report a 3.3% drop in fourth-quarter same-store sales, and a per-share profit of $2.77

** Lowe’s, which reports results on Tuesday, Feb. 27, is expected to have seen same-store sales decline about 7.1%; Earnings per share are projected to be $1.68

WALL STREET SENTIMENT

** Home Depot shares have risen about 4% so far this year, while Lowe’s has gained 2.6%, both underperforming a more than 5% increase in the benchmark S&P 500 index

** Lowe’s stock jumped about 12% in 2023, with Home Depot adding roughly 10%

** Home Depot is rated “buy” among 36 brokerages covering the stock, LSEG data showed; At least six brokerages raised their price targets on the stock in the past month, taking median PT to $370 from $350 a month ago.

** Lowe’s has an average “buy” rating with a median PT of $235

(Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)

By Sheila Dang and Katie Paul

(Reuters) – A group of 20 tech companies announced on Friday they have agreed to work together to prevent deceptive artificial-intelligence content from interfering with elections across the globe this year.

The rapid growth of generative artificial intelligence (AI), which can create text, images and video in seconds in response to prompts, has heightened fears that the new technology could be used to sway major elections this year, as more than half of the world’s population is set to head to the polls.

Signatories of the tech accord, which was announced at the Munich Security Conference, include companies that are building generative AI models used to create content, including OpenAI, Microsoft and Adobe. Other signatories include social media platforms that will face the challenge of keeping harmful content off their sites, such as Meta Platforms, TikTok and X, formerly known as Twitter.

The agreement includes commitments to collaborate on developing tools for detecting misleading AI-generated images, video and audio, creating public awareness campaigns to educate voters on deceptive content and taking action on such content on their services.

Technology to identify AI-generated content or certify its origin could include watermarking or embedding metadata, the companies said.

The accord did not specify a timeline for meeting the commitments or how each company would implement them.

“I think the utility of this (accord) is the breadth of the companies signing up to it,” said Nick Clegg, president of global affairs at Meta Platforms.

“It’s all good and well if individual platforms develop new policies of detection, provenance, labeling, watermarking and so on, but unless there is a wider commitment to do so in a shared interoperable way, we’re going to be stuck with a hodgepodge of different commitments,” Clegg said.

Generative AI is already being used to influence politics and even convince people not to vote.

In January, a robocall using fake audio of U.S. President Joe Biden circulated to New Hampshire voters, urging them to stay home during the state’s presidential primary election.

Despite the popularity of text-generation tools like OpenAI’s ChatGPT, the tech companies will focus on preventing harmful effects of AI photos, videos and audio, partly because people tend to have more skepticism with text, said Dana Rao, Adobe’s chief trust officer, in an interview.

“There’s an emotional connection to audio, video and images,” he said. “Your brain is wired to believe that kind of media.”

(Reporting by Sheila Dang in Dallas and Katie Paul in New York; Editing by Matthew Lewis)

By Amruta Khandekar and Ankika Biswas

(Reuters) – Wall Street’s main indexes were subdued on Friday after a hotter-than-expected producer prices report pushed back market speculations of imminent interest rate cuts by the U.S. Federal Reserve.

A Labor Department report showed producer prices increased more than expected in January amid strong gains in costs of services, heightening fears that inflation was picking up after months of cooling.

The producer price index data gave Fed policymakers fresh validation for their wait-and-see approach to cut rates after a hot consumer prices report sparked a selloff in equity markets earlier this week, although a slump in January retail sales provided some relief on Thursday.

“The PPI print really confirms the high reading from CPI and really throws some cold water on those that were hoping for cuts sooner rather than later,” said Jeffrey Schulze, director and investment strategist at ClearBridge Investments.

“The earliest time frame for the Fed to potentially embark on a cutting cycle is going to be the June meeting.”

Treasury yields spiked after the report, with the yield on the benchmark 10-year note last at 4.291%, as traders added to bets that the Fed may defer the first rate cut until after June.

Most megacap stocks dropped, with Meta Platforms falling 1.8% and dragging the S&P 500 communication services index down 1.1%.

The tech-heavy Nasdaq is set to snap a five-week winning streak, while the benchmark S&P 500 also lost some steam this week after jumping more than 5% so far this year.

Robust corporate earnings and a surge in enthusiasm around the potential for artificial intelligence has helped the S&P 500 close above the 5,000-point mark for the fourth time this year.

Focus will be on remarks by San Francisco Fed chief Mary Daly during the day after Atlanta Fed President Raphael Bostic noted more data is needed to convince him inflation pressures are truly falling, but he is open to lowering rates at some point in the next few months.

At 11:30 a.m. ET, the Dow Jones Industrial Average was down 31.97 points, or 0.08%, at 38,741.15, the S&P 500 was up 1.65 points, or 0.03%, at 5,031.38, and the Nasdaq Composite was down 19.62 points, or 0.12%, at 15,886.56.

Applied Materials jumped 8.5% to a record high after the semiconductor equipment supplier forecast better-than-expected second-quarter revenue on strong demand for advanced chips used in AI.

Vulcan Materials gained 6.9% after forecasting a higher full-year profit, aiding a 1.1% rise in the S&P 500 materials sector index.

Roku slumped 22.5% after forecasting a bigger first-quarter loss, while crypto exchange Coinbase Global jumped 15.8% on posting its first quarterly profit since 2021.

DoorDash dropped 9.6% as the delivery firm forecast a quarterly profitability metric below expectations, hurt by higher labor costs.

Declining issues outnumbered advancers for a 1.34-to-1 ratio on the NYSE and a 1.36-to-1 ratio on the Nasdaq.

The S&P index recorded 52 new 52-week highs and three new lows, while the Nasdaq recorded 86 new highs and 40 new lows.

(Reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta and Maju Samuel)

By Lananh Nguyen

(Reuters) -Goldman Sachs CEO David Solomon was awarded $31 million in compensation for 2023, up 24% from $25 million in 2022, the company said in a filing on Friday.

Solomon’s pay comprises a $2 million base salary, unchanged from the previous year, and a bonus of $8.7 million in cash and $20.3 million in performance-linked stock, the bank said.

The pay bump comes after the bank’s profit fell 24% to $8.52 billion in 2023.

“The Compensation Committee believes that the actions of senior management were critical to reorienting the firm with a much stronger platform for 2024 and beyond,” Goldman disclosed in its regulatory filing, in reference to the pay hike.

Among peers on Wall Street, JPMorgan Chase CEO Jamie Dimon’s compensation climbed 4.3% in 2023, while Morgan Stanley’s former CEO James Gorman earned 17% higher in the same period.

(Reporting by Lananh Nguyen in New York; Editing by Arun Koyyur and Shinjini Ganguli)