By Geoffrey Smith
Investing.com -- Amazon (NASDAQ:AMZN) could be inching its way toward a breakup, if talk from an activist investor is to be believed. That's still a long way in the future though. In the meantime, the e-commerce giant has patched up its quarrel with Visa (NYSE:V) over interconnection fees. Walmart (NYSE:WMT) earnings are due, a day after a solid retail sales report for January and the latest Fed minutes reinforced fears of higher interest rates. Data on jobless claims and housing starts are the big economic news. Russian-backed separatists in eastern Ukraine keep the region on tenterhooks, but oil drifts downwards after signs of demand destruction from high prices in the U.S. Here's what you need to know in financial markets on Thursday, 17th February.
1. Amazon nudged in the direction of breakup?
Amazon may be on the verge of being pushed into breaking itself up. That at least is the ultimate logical conclusion of comments by activist investor Dan Loeb, who reportedly told a call with clients that he sees another trillion dollars of untapped value in the company.
The opportunity comes from the fact that Amazon’s underlying businesses have radically different profitability profiles. In the last quarter, Amazon made effectively all of its money from hosting Cloud services. Its e-commerce business, by contrast, operated at a loss owing to rising cost pressures in the U.S. and remains as far as ever from making a profit outside the country.
Amazon was also in the news overnight for patching up its quarrel with Visa over card fees. The truce means that Amazon customers will continue to be able to use Visa cards in the U.K. and that other surcharges imposed in Australia and Singapore, introduced last year, will be dropped.
Amazon's Big Tech rivals Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:FB) will also be in the spotlight later after Google said it will stop cross-app tracking, another blow to the ability of Facebook and other social media networks to sell targeted ads.
2. Jobless claims and housing starts
The weekly update from the labor market comes at 8:30 AM ET, with analysts looking for initial jobless claims to stay in their recent range of just over 200,000.
The numbers come at the same time as January data for housing starts and building permits, which are expected to ease off only slightly from December’s levels. Housing starts haven’t sustained the current level of activity since the subprime boom in 2006, but have so far resisted pressure from rising mortgage rates.
The Philly Fed business survey is the other main data point of the day.
3. Stocks set to open lower; Walmart earnings eyed
U.S. stock markets are set to open lower after the publication of the Federal Reserve’s latest policy meeting minutes offered a sharp reminder of the pressure on the central bank to raise interest rates and sell down its holdings of bonds.
By 6:15 AM ET, Dow Jones futures were down 174 points, or 0.5%, while S&P 500 futures were down by a comparable amount and Nasdaq 100 Futures were down 0.7%.
The day’s big corporate news will be Walmart earnings, due for early release, which come a day after official retail sales data for January showed a sharp rebound in spending. The outlook for consumption from the U.S.’s biggest brick-and-mortar retailer will offer a perspective that official data – struggling with distortions to the usual seasonal adjustment process – may not capture.
Also in focus will be Nvidia (NASDAQ:NVDA), which is marked down in premarket after issuing guidance that wasn’t as explosively optimistic as many expected, and DoorDash (NYSE:DASH), whose record revenue in the last quarter defied fears that the reopening of physical restaurants would hit its business.
4. Ukraine tensions continue to bubble as separatists reportedly fire over the border
Tensions on the Ukrainian border continue to bubble, as Kyiv and NATO repeat that there has been no meaningful withdrawal of Russian troops from advanced positions that could be used as a springboard for invasion.
Local media reported that Russian-backed separatists in eastern Ukraine fired artillery at targets in the government-held village of Stanytsia Luhanska, and that government forces refused to fire back, fearful of creating a provocation that would create a pretext for a Russian invasion.
European natural gas futures rose as much as 8% in early trading but retraced to be up around 5% by midday. The Russian ruble, meanwhile, fell around 1% against the dollar.
5. Crude retreats further after U.S. inventory rise
Crude oil prices fell back towards $91 a barrel, as signs of slackening demand in the U.S. added to the factors that are making further gains difficult at such elevated levels.
The Energy Information Administration had said on Wednesday that U.S. crude stocks had risen by 1.1 million barrels last week, in contrast to the American Petroleum Institute’s assessment of a modest decline. Gasoline inventories, however, looked tighter, falling by 1.3 million barrels.
By 6:25 AM ET, U.S. Crude futures were down 2.4% at $91.42 a barrel, while Brent crude was down 2.1% at $92.77 a barrel.
(CORRECTION: the original version of this article incorrectly described Amazon's profitability. Amazon does not break out the profits from its advertising business.)