Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.14%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.37%.
Stock index futures this morning are mildly higher, led by strength in technology stocks, with Alphabet and Advanced Micro Devices up more than +2% in pre-market trading. Stock index futures maintained most of their gains after weekly U.S. jobless claims came in near expectations, although continuing claims fell more than expected, a sign that laid-off workers are finding jobs.
On the positive side for stocks, Alphabet is up more than +2% in pre-market trading after Google released Gemini, the “largest and most capable AI model” the company has ever built. Also, Advanced Micro Devices is up more than +2% after unveiling its new MI300 accelerator chip, saying the processor will be able to run AI software faster than rival products. In addition, Dollar General is up more than +3% after reporting Q3 net sales above consensus.
On the negative side, Chewy is down more than -9% after reporting Q3 net sales below consensus and cutting its 2024 net sales forecast. Also, C3.ai is down more than -9% after reporting Q2 revenue below consensus and forecasting 2024 revenue below consensus. In addition, Veeva Systems is down more than -3% after forecasting Q4 revenue below consensus.
U.S. weekly initial unemployment claims rose +1,000 to 220,000, right on expectations. Weekly continuing claims fell -64,000 to 1.861 million, showing a stronger labor market than expectations of 1.910 million.
The markets are discounting a 1% 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 72% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (141%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +5.5 bp at 4.159%. The 10-year German bund yield recovered from an 8-month low of 2.166% and is up +0.9 bp at 2.209%. The 10-year UK gilt yield is up +5.5 bp at 3.998%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.28%. China’s Shanghai Composite Index closed down -0.09%. Japan’s Nikkei Stock Index closed down -1.76%.
The Euro Stoxx 50 today is modestly lower as prices consolidate below Wednesday’s 16-year high. Weakness in European airline stocks is weighing on the overall market after JPMorgan Chase double-downgraded both Air France-KLM and Lufthansa and moved IAG down a notch. All three airlines are now rated underweight. Losses in the overall market are limited as European chipmakers moved higher after U.S. peer Advanced Micro Devices gave an upbeat forecast for the size of the AI chip industry, saying it could climb to more than $ 400 billion in the next four years. Also, European government bond yields continue to fall on speculation the ECB could cut interest rates in Q1 of next year as the 10-year German bund yield today fell to an 8-month low.
Swaps tied to ECB meeting dates have now priced in a 74% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have priced in a 64% chance of -50 bp of rate cuts by the April 11 ECB meeting.
Eurozone Q3 employment was revised lower to +0.2% q/q and +1.3% y/y from the previously reported +0.3% q/q and +1.4% y/y.
German Oct industrial production unexpectedly fell -0.4% m/m, weaker than expectations of +0.2% m/m.
China’s Shanghai Composite index today dropped to a 6-week low and closed slightly lower. China’s lackluster recovery is dampening investor sentiment and weighing on stocks after today’s trade news showed China Nov exports rose more than expected, but Nov imports unexpectedly declined. The unexpected fall in imports raises concerns about domestic demand and spending in China. Losses in the overall market were limited as Chinese pharmaceutical stocks rallied after JPMorgan Chase said there were expectations that influenza infections would increase during the winter months. Also, Chinese AI stocks jumped triggered by the launch of Google’s Gemini software, which Google says is the “largest and most capable AI model” it ever built.
Chinese trade news was mixed as Nov exports rose +0.5% y/y, stronger than expectations of no change. However, Nov imports unexpectedly fell -0.6% y/y, weaker than expectations of +3.9% y/y.
Japan’s Nikkei Stock Index closed sharply lower. Japanese stocks retreated today as bond yields jumped after comments from BOJ Governor Ueda to the Japanese parliament suggested the BOJ would soon exit its ultra-easy monetary policy. Technology stocks moved lower after the 10-year JGB bond yield rose to a 1-week high of 0.769%. Ueda’s hawkish comments also pushed the yen up to a 3-month high against the dollar, which weighed on exporter stocks. On the positive side, Japanese airline stocks rose, following U.S. peers higher on bullish projections from the International Air Transport Association (IATA) that forecasted airline industry profits to reach $23.5 billion this year, more than double a prediction made in June.
BOJ Governor Ueda told the Japanese parliament today that handling monetary policy "will become even more challenging from the year-end and through next year," stoking speculation that the BOJ would soon end its negative interest rate monetary policy.
The Japan Oct leading index CI fell -0.2 to 108.7, a smaller decline than expectations of 108.2.
Pre-Market U.S. Stock Movers
Alphabet (GOOGL) rose more than +2% in pre-market trading after Google released Gemini, the “largest and most capable AI model” the company has ever built.
Advanced Micro Devices (AMD) climbed more than +2% in pre-market trading after unveiling its new MI300 accelerator chip, saying the processor can run AI software faster than rival products.
Dollar General (DG) rose more than +3% in pre-market trading after reporting Q3 net sales of $9.69 billion, stronger than the consensus of $9.65 billion.
Cerevel Therapeutics (CERE) jumped more than +13% in pre-market trading after AbbVie acquired the company in a deal valued at about $8.7 billion.
Rivian Automotive (RIVN) climbed more than +2% in pre-market trading after Stifel initiated coverage on the stock with a buy recommendation and a price target of $23.
Braze (BRZE) rallied more than +8% in pre-market trading after reporting Q3 revenue of $124 million, stronger than the consensus of $117.3 million, and raised its 2024 revenue forecast to $465 million-$466 million from a previous forecast of $451.5 million-$454.5 million, above the consensus of $454.2 million.
Semtech (SMTC) climbed more than +9% in pre-market trading after reporting an unexpected Q3 adjusted EPS profit of 2 cents, better than the consensus for a loss of -15 cents.
Datadog (DDOG) gained more than +1% in pre-market trading after Stifel upgraded the stock to buy from hold with a price target of $140.
Chewy (CHWY) sank more than -9 % in pre-market trading after reporting Q3 net sales of $2.74 billion, below the consensus of $2.75 billion, and cut its 2024 net sales forecast to $11.08 billion-$11.10 billion from a previous estimate of $11.15 billion-$11.35 billion, weaker than the consensus of $11.24 billion.
C3.ai (AI) dropped more than -9% in pre-market trading after reporting Q2 revenue of $73.2 million, below the consensus of $74.3 million and forecasting 2024 revenue of $295 million-$320 million, the midpoint below the consensus of $308.2 million.
Take-Two Interactive Software (TTWO) fell more than -1% in pre-market trading after Bank of America Global Research downgraded the stock to neutral from buy.
Veeva Systems (VEEV) dropped more than -3% in pre-market trading after forecasting Q4 revenue of $620 million-$622 million, weaker than the consensus of $623.5 million.
Danaher (DHR) slid more than -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.
Earnings Reports (12/7/2023)
Broadcom Inc (AVGO), Ciena Corp (CIEN), Cooper Cos Inc/The (COO), DocuSign Inc (DOCU), Dollar General Corp (DG), Guidewire Software Inc (GWRE), HashiCorp Inc (HCP), Lululemon Athletica Inc (LULU), RH (RH), Smartsheet Inc (SMAR), Vail Resorts Inc (MTN).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
