Morning Markets
The S&P 500 Index ($SPX) (SPY) is up +0.11%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.3%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.26%.
Stock index futures this morning are mixed on position squaring ahead of Tuesday’s U.S. consumer price report and the results of the Tue/Wed FOMC meeting. U.S. Nov CPI is expected to ease to +3.1% y/y from +3.2% y/y in Oct, while Nov CPI ex-food and energy is expected to remain unchanged at +4.0% y/y.
The markets will look to the results of this week’s central bank meetings from the Fed, ECB, and BOE to see if policymakers support pausing their interest rate hike campaigns and when they may begin to pivot to easier policies.
M&A activity is supportive of stocks after Occidental Petroleum agreed to acquire CrownRock LP in a cash-and-stock deal valued at about $12 billion. Also, Macy’s reportedly received a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
Also on the bullish side, Cigna is up more than +9% after it ended talks on acquiring Humana and said it will boost its stock buyback program by an additional $10 billion. Also, Macy’s is up more than +20% after receiving a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management. In addition, Nike, Snap, and Universal Health Services are up more than +1% after being upgraded.
On the bearish side for stocks, cryptocurrency-related stocks are falling in pre-market trading, with the price of Bitcoin down more than -5%. Also, Biomea Fusion is down more than -12% after reporting underwhelming topline updates from a dosing cohort of a mid-stage trial for its drug in treating patients with type 2 diabetes. In addition, Albemarle is down more than -2% after Morgan Stanly cut its view for the North American chemicals sector to in-line from attractive.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting 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 42% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are nearly fully discounting (99%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is up +4.6 bp at 4.272%. The 10-year German bund yield is down -1.1 bp at 2.265%. The 10-year UK gilt yield is up +3.2 bp at 4.073%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.37%. China’s Shanghai Composite Index closed up +0.74%. Japan’s Nikkei Stock Index closed up +1.50%.
The Euro Stoxx 50 today climbed to a new 16-year high and is moderately higher. Strength in energy and healthcare stocks are outperforming mining stocks, which are under pressure after disappointing news on consumer and producer prices in China raised deflation concerns and weighed on iron ore prices. Market activity is muted ahead of central bank results this week from the FOMC on Wednesday and from the ECB and BOE on Thursday.
Swaps tied to ECB meeting dates have now priced in a 63% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have priced in a 45% chance of -50 bp of rate cuts by the April 11 ECB meeting.
China’s Shanghai Composite index today recovered from a 1-1/2 month low and closed moderately higher. Chinese stocks today initially moved lower after consumer prices for November fell by the steepest pace in three years, deepening worries over the economy’s strength. However, short covering emerged in afternoon trading, and stock prices recovered with a spike in volumes for an exchange-traded fund tracking state-owned shares, fueling speculation of government buying.
China Nov CPI fell -0.5% y/y, weaker than expectations of -0.2% y/y and the biggest decline in 3 years. Nov PPI fell -3.0% y/y, weaker than expectations of -2.8% y/y.
Japan’s Nikkei Stock Index today settled moderately higher. A rally in exporter stocks today led the overall market higher after the yen fell sharply when a report said the BOJ was in no hurry to scrap negative interest rates. Japanese stocks related to AI also rallied in the wake of a renewed rally in similar stocks in the U.S. last week. Tsuruha Holdings rose more than +3% after Japan’s second-largest drug store chain was said to draw interest from private equity firms, including Bain Capital and Blackstone.
According to people familiar with the matter, BOJ officials see little need to rush into scrapping its negative interest rate policy as they have yet to see enough evidence of wage growth that would support sustainable inflation.
Japan's Nov machine tool orders fell -13.6% y/y. For the eleventh consecutive month, orders have declined.
The Japan Q4 BSI large manufacturing business conditions index rose to 5.7 from 5.4 in Q3, the highest in 2 years.
Pre-Market U.S. Stock Movers
Cryptocurrency-related stocks are falling in pre-market trading, with the price of Bitcoin down more than -5%. As a result, Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are down more than -3%.
Biomea Fusion (BMEA) slumped more than -12% in pre-market trading after reporting underwhelming topline updates from a dosing cohort of a mid-stage trial for its drug in treating patients with type 2 diabetes.
Super Micro Computer (SMCI) tumbled more than -3% in pre-market trading after Susquehanna Financial Group downgraded the stock to negative from neutral.
Albemarle (ALB) is down more than -2% in pre-market trading after Morgan Stanly cut its view for the North American chemicals sector to in-line from attractive.
Align Technology (ALGN), eBay (EBAY), Zoom Video Communications (ZM), JD.com (JD), and Lucid Group (LCID) are down more than -4% in pre-market trading after the Nasdaq 100 announced the stocks would be removed from the index before the market open on Monday, December 18.
Cigna (CI) jumped more than +9% in pre-market trading after it ended talks on acquiring Humana and said it would boost its stock buyback program by an additional $10 billion.
Macy’s (M) surged more than +20% in pre-market trading after the company received a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
Door Dash (DASH), MongoDB (MDB), Roper Technology (ROP), and Splunk (SPLK) are up more than +2% in pre-market trading after the Nasdaq 100 announced the stocks would be added to the index before the market open on Monday, December 18.
Nike (NKE) rose more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral with a price target of $135.
Spotify Technology SA (SPOT) is up more than +1% in pre-market trading after Rosenblatt Securities upgraded the stock to buy from neutral with a price target of $300.
Snap (SNAP) jumped more than +4% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $22.
Universal Health Services (UHS) rose more than +1% in pre-market trading after Goldman Sachs double-upgraded the stock to buy from sell.
HP Inc (HPQ) gained more than +2% in pre-market trading after Evercore ISI upgraded the stock to outperform from in-line with a price target of $40.
Earnings Reports (12/11/2023)
Blue Bird Corp (BLBD), Casey's General Stores Inc (CASY), Liberty Media Corp-Liberty Liv (LLYVA), Oil-Dri Corp of America (ODC), Oracle Corp (ORCL), Waldencast Plc (WALD).
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