Morning in New York: consumer spending data will increase volatility

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The key event of the upcoming trading for market participants will be the publication of the report on personal income and expenditures of Americans for December, as well as data on the consumer spending deflator (PCE) - the key inflation benchmark for the Fed. Additional attention will be drawn to the release of preliminary estimates of GDP dynamics for the fourth quarter, which will allow to form a benchmark for the indicator for the first three months of this year. We forecast the economy to grow at 3.7% p.a., while the consensus is for 2.8%. The trade balance remains the key variable.

Our model estimates household income and expenditures to increase by 0.4% and 0.3% month-on-month, respectively (consensus: +0.3% and +0.4% mom). After unexpectedly weak retail sales in seasonally adjusted terms, there is a risk that the impact of this factor will lead to notable bias in the estimates of income and expenditures for December as well. In the event of a formal deviation of the actual results from the forecast, it is important to take into account the peculiarities of seasonal adjustment before drawing conclusions about the dynamics of demand. In general, the situation in the economy remains favorable, the growth of household income and consumption remains stable. This supports the attractiveness of small capitalization companies for investors.

Freedom Broker's forecast for the PCE deflator puts it at +0.25% mom for the overall indicator and +0.19% mom for the core indicator (consensus for both: +0.3% mom). This outcome would be consistent with a gradual normalization of inflationary pressures and would support expectations of restrained action by the Fed to adjust monetary conditions in 2026. We see no significant risks of deviation from these estimates, as the dynamics of PCE is largely determined by the already published CPI and PPI data. Lower deflator values than the market expects will be a bullish signal for bonds and may support interest in risky assets. If PCE exceeds forecasts, expectations regarding the timing of the Fed's rate cut will become more cautious, which may cause short-term strengthening of the dollar and growth of UST yields.

Anglogold Ashanti PLC (AU), PPL Corporation (PPL), Hudbay Minerals Inc (HBM), Western Union Company (WU) will report before the opening of the trading session.

Futures on American stock indices demonstrate positive dynamics. We assess the balance of risks for the upcoming session as neutral with increased volatility. Continued heightened tension in the Middle East and uncertainty over the Supreme Court decision regarding the legality of import tariffs set by the White House limit the growth potential.

- Quotes of biotechnology company Grail (GRAL) collapsed on the premarket by 48% after the publication of extremely disappointing results of clinical trials and quarterly report. Investors were alarmed by the efficacy data of the flagship test for early cancer detection, which came in significantly below targets. Such a large-scale drop in the issuer's shares reflects the market's reconsideration of the long-term prospects for commercialization of the company's key product, taking into account regulatory risks.

- Opendoor Technologies (OPEN) shares soared 15% in after-hours trading thanks to a financial report that beat Wall Street expectations on revenue and margins. Despite the general pressure in the real estate sector, i-buyer showed a significant improvement in unit economics and accelerated residential sales. The market reacted positively to the company's optimistic outlook for first quarter 2026 home purchase transaction volume.

- Copart (CPRT) shares are losing 6% on the premarket after the release of its quarterly report, as its earnings per share were below the consensus forecast. The main pressure on quotes came from a decline in operating margins due to higher administrative and logistics costs. Analysts expressed concern about the slowdown in online car auction volume growth compared to last year's record levels.

- Quotes of Akamai Technologies (AKAM) fell by almost 9% amid the publication of quarterly results and a conservative forecast for the current period. While the company's cybersecurity revenue continues to grow at double-digit rates, growth in content delivery network (CDN) revenue has slowed more significantly than the market had anticipated. Investors were also wary of management's plans to increase capital investments in edge computing.

- Shares of RingCentral (RNG), a developer of cloud-based enterprise communications solutions, are up 7% on the premarket after reporting better-than-expected results across all key metrics. The growth driver was the successful introduction of AI features into the RingSense platform, which helped attract large enterprise customers and increase average revenue per user. In addition, management presented a strong cash flow outlook for 2026, which reinforced investor confidence in the company's financial strength.

Trading on February 19 on the U.S. stock exchanges ended mostly in the negative, although the indices managed to recoup some of the intraday losses. S&P 500 interrupted a three-day series of growth, correcting by 0.28%, NASDAQ 100 and Dow Jones also closed in negative territory, while Russell 2000 rose by 0.24%.

The key drivers of the decline were the escalation of the conflict in the Middle East and weak performance of the technology sector. The shares of the "Magnificent Seven" traded mostly worse than the market, the most active were the sell-offs of Apple (AAPL: -1.43%). The energy sector (XLE: +1.1%) was the leader of growth, supported by the rally in WTI oil prices (+2.1%). The financial industry (XLF: -0.84%) was the outsider, pressured by concerns about liquidity in the private equity segment and deteriorating situation in large banks.

The published macro statistics again exceeded expectations, confirming the stability of the economy, but limiting the room for maneuver of the Fed. The number of initial jobless claims amounted to 206 thousand (consensus: 225 thousand). The Philly Fed manufacturing activity index unexpectedly rose. The market reacted to the strong data with restraint as it focused on the difficulties in the housing market. The Pending Home Sales Index fell 0.8%, hitting an all-time low, indicating continued problems with real estate affordability.

Additional pressure on the sentiment of stock exchange players was exerted by the rhetoric of representatives of the regulator's management and foreign policy news. Stephen Miran, a member of the Fed's Board of Governors, toughened his stance by proposing to cut the rate in 2026 by 100 bps rather than 150 bps. US President Donald Trump gave Iran ten days to conclude a nuclear deal and threatened it with a military strike if an agreement is not reached.

-Deere & Co. (DE: +11.6% at the close of trading on Feb. 19) reported strong quarterly results and gave a solid outlook. The company's management stated that the bottom of the current cycle has passed and that demand is recovering in the construction and small agricultural equipment segments.

-Omnicom Group (OMC: +15.4%) reported organic revenue growth of 26%. The investment community positively assesses the prospects of integrating new assets into the company's business.

- Booking Holdings (BKNG: -6.2%) revenue for the last quarter exceeded average market expectations. However, the management gave a cautious EBITDA forecast for January-March. In addition, market participants continue to fear competitive threats from AI tour planners.

-EPAM Systems (EPAM: -17%) reported successful fourth-quarter results, however, which were offset by management's uncertain revenue guidance and analysts' concerns about pressure on growth rates from the integration of recent acquisitions.

-Occidental Petroleum (OXY: +9.4%) not only beat average market guidance for fourth-quarter production and earnings, but also announced a dividend increase with lower-than-expected planned capital expenditures for 2026.

This article was AI-translated and verified by a human editor