Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.35%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.32%.
Stock index futures this morning are mildly higher and have carryover support from a rally in the Euro Stoxx 50 to a 3-1/2 month high. European stocks rallied after Eurozone Nov CPI rose less than expected, knocking the 10-year German bund yield down to a 4-1/2 month low and bolstering expectations that the ECB is finished raising interest rates. U.S. stock index futures extended their gains on today’s Fed-friendly jobless claims and Oct core PCE reports.
On the positive side for stocks, M&A activity is supportive for stocks after AbbVie agreed to acquire ImmunoGen for $10.1 billion. Also, Salesforce is up more than +9% in pre-market trading after reporting Q3 adjusted EPS above consensus and raising its 2024 adjusted EPS forecast. In addition, Snowflake is up more than +8% after reporting Q3 revenue above consensus.
On the negative side, Pure Storage is down more than -16% after forecasting 2024 revenue below consensus. Also, Okta is down more than -3%, adding to Wednesday’s -2% loss after Wells Fargo Securities and KeyBanc Capital Markets downgraded the stock.
U.S. weekly initial unemployment claims rose +7,000 to 218,000, right on expectations. However, weekly continuing clams rose +86,000 to a 2-year high of 1.927 million, showing a weaker labor market than expectations of 1.865 million.
U.S. Oct personal spending rose +0.2% m/m, right on expectations. Oct personal income rose +0.2% m/m, right on expectations.
The U.S. Oct core PCE deflator, the Fed's preferred gauge of inflation, eased to +3.5% y/y from +3.7% y/y in Sep, right on expectations and the smallest increase in 2-1/2 years. The Oct headline deflator eased to +3.0% y/y from +3.4% in September, better than expectations of +3.1% y/y.
The markets are discounting a 4% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 46% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 100% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is up +3.7 bp at 4.292%. The 10-year German bund yield fell to a 4-1/2 month low of 2.395% and is down -0.2 bp at 2.430%. The 10-year UK gilt yield is up +5.4 bp at 4.150%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.44%. China’s Shanghai Composite Index closed up +0.26%. Japan’s Nikkei Stock Index closed up +0.50%.
The Euro Stoxx 50 today climbed to a 3-1/2 month high and is moderately higher. An easing of Eurozone consumer price pressures boosted stocks and bolstered expectations that the ECB is done raising interest rates after Eurozone Nov CPI rose less than expected. Today’s news also showed stronger-than-expected German Oct retail sales, which shows strength in consumer spending and is another positive factor for stocks.
Swaps tied to ECB meeting dates have now priced in a 49% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have fully priced in (+109%) a -25 bp rate cut at the April 11 ECB meeting.
The Eurozone Nov CPI eased to +2.4% y/y from +2.9% y/y in Oct, better than expectations of +2.7% y/y and the smallest increase in 2-1/3 years. Also, Nov core CPI eased to +3.6% y/y from +4.2% y/y in Oct, better than expectations of +3.9% y/y and the smallest increase in 1-1/2 years.
The German Nov unemployment change rose by +22,000, showing a weaker labor market than expectations of +20,000.
German Oct retail sales rose +1.1% m/m, stronger than expectations +0.4% m/m and the biggest increase in 13 months.
The Italian Nov unemployment rate unexpectedly rose +0.2 to a 6-month high of 7.8%, showing a weaker labor market than expectations of no change at 7.4%.
China’s Shanghai Composite today recovered from early losses and posted moderate gains. Stocks initially moved lower today after economic news showed that Chinese manufacturing and service sector activity unexpectedly declined this month. However, stocks recovered their losses and moved higher on speculation the weak growth would prompt the Chinese government to boost stimulus measures to support the economy. Chinese robot-related stocks rallied today after President Xi Jinping was seen observing a walking robot at an exhibition during his Shanghai visit.
The China Nov manufacturing PMI unexpectedly fell -0.1 to a 4-month low of 49.4, weaker than expectations of an increase to 49.8. Also, the Nov non-manufacturing PMI unexpectedly fell -0.4 to an 11-month low of 50.2, weaker than expectations of an increase to 50.9.
Japan’s Nikkei Stock Index today recovered from a 2-week low and finished moderately higher. Weakness in the yen today sparked a rally in exporter stocks, which helped the overall market recover from early losses. The yen retreated on dovish comments from BOJ board member Nakamura, who said the Japanese economy still needs the BOJ’s yield-curve control program and negative interest rates and “now is not the time” to adjust monetary policy. Also, a decline in government bond yields today sparked a rally in technology stocks.
The Japan Nov consumer confidence index unexpectedly rose +0.4 to 36.1, stronger than expectations of a decline to 35.6.
Japan Oct industrial production rose +1.0 % m/m, stronger than expectations of +0.8% m/m and the biggest increase in 4 months.
Japan Oct retail sales unexpectedly fell -1.6% m/m, weaker than expectations of a +0.4% m/m increase and the biggest decline in 2-1/2 years.
Pre-Market U.S. Stock Movers
Salesforce Inc (CRM) surged more than +9% in pre-market trading after reporting Q3 adjusted EPS of $2.11, better than the consensus of $2.06, and raising its 2024 adjusted EPS forecast to $8.18-$8.19 from a previous forecast of $8.04-$8.06, stronger than the consensus of $8.06.
HP Enterprise (HPE) climbed more than +4% in pre-market trading, adding to Wednesday’s +5% gain after Morgan Stanley upgraded the stock to equal weight from underweight.
Snowflake (SNOW) jumped more than+8% in pre-market trading after reporting Q3 revenue of $734.2 million, above the consensus of $713.8 million.
Snap (SNAP) and Pinterest (PINS) both climbed more than +3% in pre-market trading after Jeffries upgraded the stocks to buy from hold.
Nutanix (NTNX) rallied more than +9% in pre-market trading after Barclays raised its price target on the stock to $49 from $43 and Morgan Stanley raised its price target on the stock to $50 from $38.
Synopsys (SNPS) climbed more than +2% in pre-market trading after reporting Q3 adjusted EPS of $3.17, better than the consensus of $3.05.
Kroger (KR) is up more than +1% in pre-market trading after reporting Q3 sales of $34.00 billion, better than the consensus of $33.91 billion.
Okta (OKTA) is down more than -3% in pre-market trading, adding to Wednesday’s -2% loss after Wells Fargo Securities and KeyBanc Capital Markets downgraded the stock to hold-equivalent ratings from overweight.
Pure Storage (PSTG) slumped more than -16% in pre-market trading after forecasting 2024 revenue of $2.82 billion, weaker than the consensus of $2.96 billion.
Earnings Reports (11/30/2023)
Elastic NV (ESTC), Kroger Co/The (KR), Marvell Technology Inc (MRVL), UiPath Inc (PATH), Ulta Beauty Inc (ULTA).
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