CNBC Daily Open: U.S. consumers upbeat on the economy

People cross the street outside the Macy’s Herald Square store in New York City on Dec. 17, 2023.

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Futures flatFutures for S&P 500, Nasdaq 100 and the Dow Jones Industrial Average were all down about 0.1% as the U.S. markets return to trade after a holiday. Wall Street is coming off its first losing week in more than a month. On the corporate earnings front, results from Home Depot and Walmart are due before the bell.

Capital One merger

Capital One Financial will acquire Discover Financial Services in a $35.3 billion all-stock deal. The merger among two of the largest credit card issuers in the U.S, expands Capital One’s credit card offerings and its deposit base.

Alibaba’s overseas bet

Chinese e-commerce giant Alibaba Group is placing its bets on overseas businesses as domestic growth remains weak. The company’s latest earnings showed its international e-commerce business unit was a bright spot, with revenue up 44% from a year ago.

Magnificent worries  Deutsche Bank analysts underlined that the Magnificent 7’s total market cap alone would make it the second-largest country stock exchange in the world. But this has also raised concerns on related risks in the U.S. and global stock market.

[PRO] Only two ETFs shine

There were only two exchange-traded funds in the world that made money every year for the past decade. Both invested in defensive stocks and stood out among 8,300 equity ETFs worldwide, screened by CNBC Pro using FactSet data.

The bottom line

American consumers remain steady and upbeat on the economy despite sticky inflation.

The latest University of Michigan survey for February showed consumer sentiment index rose 0.6 points to 79.6, having posted solid gains in the previous two months.

“The fact that sentiment lost no ground this month suggests that consumers continue to feel more assured about the economy, confirming the considerable improvements in December and January across various aspects of the economy,” said Joanne Hsu, director of consumer surveys at the University of Michigan.

“Consumers continued to express confidence that the slowdown in inflation and strength in labor markets would continue.”

The optimism comes amid a surprise pullback in retail sales last week, which showed consumer spending took a big hit in January.

“The robust consumer confidence numbers provide some reassurance,” Pantheon Macroeconomics said in a note, adding that the “poor January retail sales report was a blip, rather than the start of a marked downturn in spending.”

Still, the survey showed inflation expectations for the year ahead inched up to 3% from 2.9% in January, reflecting the conundrum the Fed faces in bringing inflation down to its 2% target.

It also comes on the back of hot CPI and PPI readings that delivered a one-two punch for markets last week.

The mixed economic picture reaffirms the notion that the last mile of the inflation fight will be the toughest.