Morning Markets
March E-Mini S&P 500 futures (ESH24) are down -0.05%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.06%.
Stock index futures this morning gave up overnight gains and turned lower as T-note yields jumped after U.S. consumer prices for December rose more than expected, dampening expectations for rate cuts from the Fed. Also, signs of strength in the U.S. labor market weighed on government bonds and stock prices after weekly initial unemployment claims unexpectedly fell to a 2-1/2 month low.
Heightened geopolitical risks in the Middle East pushed crude prices up more than +2% and are negative for stocks after Iran captured an oil tanker off the coast of Oman. Iran’s Tasnim news agency reported that Iran had a court order to seize the ship that was previously seized by the U.S. for carrying illicit Iranian oil.
U.S. Dec CPI climbed to +3.4% y/y from +3.1% y/y in Nov, stronger than expectations of +3.2% y/y. The Dec core CPI eased to +3.9% y/y from +4.0% y/y in Nov, the smallest increase in 2-1/2 years but above expectations of +3.8% y/y.
U.S. weekly initial unemployment claims unexpectedly fell -1,000 to a 2-1/2 month low of 202,000, showing a stronger labor market than expectations of an increase to 210,000.
The markets are discounting the chances for a -25 bp rate cut at 0% at the next FOMC meeting on Jan 30-31 and 67% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is up +1.1 bp at 4.040%. The 10-year German bund yield rose to a 1-month high of 2.252% and is up +1.9 bp at 2.231%. The 10-year UK gilt yield is down -0.8 bp at 3.810%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.07%. China’s Shanghai Composite Index closed up +0.31%. Japan’s Nikkei Stock Index closed up +1.77%.
The Euro Stoxx 50 today fell back from a 1-week high and is slightly lower. European stocks gave up early gains and turned lower after U.S. stock index futures dropped when U.S. Dec CPI rose more than expected. European stocks today initially moved higher on strength in mining stocks as Antofagasta rose nearly +2% after RBC Capital Markets upgraded the stock to outperform. On the negative side, economic concerns in the Eurozone are bearish for stocks after Italian Nov industrial production fell more than expected and by the most in 7 months. Also, Tesco Plc gave up a +2% gain and turned lower when it warned that shipping disruption in the Red Sea due to attacks on ships by Houthi rebels had boosted shipping costs for container shipping between Asia, Europe, and the U.S.
Italy Nov industrial production fell -1.5% m/m, weaker than expectations of -0.2% m/m and the biggest decline in 7 months.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 4% for its next meeting on January 25 and at 41% for the following meeting on March 7.
China’s Shanghai Composite Index today recovered from a 20-month low and posted moderate gains. Short covering emerged in Chinese stocks today amid expectations of policy easing by the PBOC. Also, an increase in foreign buying supported gains as foreign investors purchased onshore Chinese shares worth 4.2 billion yuan ($586 million) today. Food delivery company Meituan jumped more than +5% after completing its first share buyback. Also, stocks linked to Huawei Technology’s operating system rose after the company said it signed a partnership with JD.com on application development. Today’s modest gains in Chinese stocks are unlikely to reverse the negative sentiment, with economic news so far this year disappointing investors.
Japan’s Nikkei Stock Index extended this week’s rally to a nearly 34-year high today and closed sharply higher. Optimism about Japanese stocks remains strong, with the Nikkei Stock Index up more than +5% so far this year, outperforming other major markets globally. Positive corporate news is lifting stock prices after Fast Retailing reported better-than-expected Q1 operating income, and Seven & I reported better-than-expected Q3 operating income. Also, M&A activity is bullish for stocks after Seven & I said it was acquiring some operations from Sunoco. Domestic buying of Japanese stocks is another supportive factor for Japanese stocks due to the newly introduced tax-free retirement savings program that has encouraged more participation and increased domestic inflows to the stock market.
The Japan Nov leading index CI fell -1.2 to a 3-year low of 107.7, weaker than expectations of 107.9.
Pre-market U.S. Stock Movers
Cryptocurrency-related stocks are climbing in pre-market trading after U.S. regulators approved exchange-traded funds that invest directly in Bitcoin late Wednesday. As a result, Coinbase Global (COIN), Marathon Digital (MARA), Microstrategy (MSTR), and Riot Platforms (RIOT) are up more than +5%.
Netflix (NFLX) rose more than +2% in pre-market trading after Citic Securities initiated coverage of the stock with an add recommendation and a price target of $485.
Chewy (CHWY) rose more than +2% in pre-market trading after Barclays upgraded the stock to overweight from equal weight with a price target of $30.
Fidelity National Information Services (FIS) is up more than +2% in pre-market trading after Raymond James raised its price target on the stock to $80 from $71.
Hertz Global Holdings (HTZ) rose more than +1% in pre-market trading after deciding to sell about 20,000 electric vehicles from its U.S. fleet.
TechTarget (TTGT) jumped more than +10% in pre-market trading after Informa said it agreed to acquire a 57% stake in the company.
Sarepta Therapeutics (SRPT) rose more than +1% in pre-market trading after Needham & Co raised its price target on the stock to $140 from $93.
Citigroup (C) slid more than 1% in pre-market trading after it said it would set aside a $1.3 billion reserve to cover debt risk in Argentina and Russia.
KB Home (KBH) tumbled more than -3% in pre-market trading after forecasting full-year housing revenue of $6.40 billion-$6.80 billion, the midpoint below the consensus of $6.63 billion.
Yum! Brands (YUM) slid nearly -1% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.
Seagate Technology Holdings (STX) fell more than -1% in pre-market trading after BNP Paribas Exane downgraded the stock to underperform from neutral with a price target of $65.
Lyft (LYFT) slid more than -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.
Earnings Reports (1/11/2024)
Concrete Pumping Holdings Inc (BBCP), Vista Outdoor Inc (VSTO).
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.
