Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.17%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.29%.
Stock index futures this morning are moderately higher as bond yields fell after U.S. Nov producer prices rose less than expected. The markets now await the conclusion of the 2-day FOMC meeting this afternoon.
Today, the FOMC is expected to hold interest rates steady for the third consecutive meeting, keeping its federal funds rate target range unchanged at 5.25%-5.50%. Fed Chair Powell is then expected to hold a press conference after the conclusion of today’s meeting. The markets will look for clues from the post-FOMC meeting statement and comments from Powell about whether and when the Fed expects to cut interest rates next year.
U.S. Nov PPI final demand eased to +0.9% y/y from +1.2% y/y in Oct, better than expectations of +1.0% y/y and the smallest increase in 5 months. Also, Nov PPI ex-food and energy eased to +2.0% y/y from +2.3% y/y in Oct, better than expectations of +2.2% and the smallest increase in 2-3/4 years.
On the bullish side for stocks, Take-Two Interactive Software is up more than +3% in pre-market trading after the Nasdaq said the company will be added to the Nasdaq 100 Index before the market opens on Monday, December 18. Also, Vertex Pharmaceuticals is up more than +7% after it announced positive results from a mid-stage study of its non-opioid drug to treat diabetic peripheral neuropathy.
On the bearish side, Pfizer is down more than -6% after forecasting 2024 revenue well below consensus. Also, Tesla is down more than -1% after recalling more than 2 million vehicles to fix autopilot safety flaws.
The markets are discounting a 1% chance for a +25 bp rate hike at the conclusion of today’s 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 47% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and have more than fully discounted (110%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -2.7 bp at 4.174%. The 10-year German bund yield is down -2.5 bp at 2.201%. The 10-year UK gilt yield fell to a 6-3/4 month low of 3.860% and is down -9.7 bp at 3.871%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.13%. China’s Shanghai Composite Index closed down -1.15%. Japan’s Nikkei Stock Index closed up +0.25%.
The Euro Stoxx 50 today is moderately higher and is trading just below Tuesday’s 16-year high. Strength in chemical makers and leisure companies is leading the overall market higher. Chemical makers rallied after UBS double-upgraded BASF to buy from sell and upgraded Arkema to buy from neutral. Entain Plc climbed more than +4 % to lead leisure stocks higher after the company’s CEO stepped down following pressure from activist investors. On the negative side, Eurozone's October industrial production fell more than expected. Also, telecom stocks with sales and revenue exposure to Argentina were under pressure after the country devalued the peso by 54%.
Eurozone Oct industrial production fell -0.7% m/m, weaker than expectations of -0.3% m/m.
Swaps tied to ECB meeting dates have now priced in a 55% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have fully priced in that -25 bp of rate cuts by the April 11 ECB meeting.
China’s Shanghai Composite index today closed moderately lower after Chinese leaders at the annual Central Economic Work Conference vowed to make industrial policy their top economic priority next year, disappointing investors hoping to see more forceful stimulus to boost growth. Losses in property stock weighed on the overall market after the conference’s language on housing was little changed from previous statements and offered no new remedies for the faltering property sector. Weakness in credit growth also weighed on stocks after China Nov aggregate financing, the broadest measure of credit growth, rose less than expected. On the positive side, Chinese AI and robot stocks rose after government leaders vowed to put greater emphasis on developing artificial intelligence.
China Nov new yuan loans were 1.09 trillion yuan, less than expectations of 1.30 trillion yuan. Nov aggregate financing, the broadest measure of credit growth, was 2.450 trillion yuan, weaker than expectations of 2.595 trillion yuan.
Japan’s Nikkei Stock Index today posted modest gains before the outcome of today’s FOMC meeting and next week’s BOJ meeting. Export-related and material stocks such as electronics and machinery makers climbed today on the back of gains in U.S. technology stocks on Tuesday. An improvement in business sentiment also supported stocks after the Japan Q4 Tankan sentiment of large manufacturers rose more than expected. In addition, Japanese semiconductor equipment suppliers rose on optimism signs of recovery in the memory chip market are emerging.
The Japan Q4 Tankan sentiment of large manufacturers rose +3 to 12, stronger than expectations of 10.
Pre-Market U.S. Stock Movers
Take-Two Interactive Software (TTWO) climbed more than +3% in pre-market trading after the Nasdaq said the company will be added to the Nasdaq 100 Index before the market opens on Monday, December 18.
Vertex Pharmaceuticals (VRTX) jumped more than +7% in pre-market trading after it announced positive results from a mid-stage study of its non-opioid drug to treat diabetic peripheral neuropathy.
Microsoft (MSFT) rose nearly +1% in pre-market trading after Truist Securities initiated coverage on the stock with a buy recommendation and a three-year price target of $600.
Roblox (RBLX) gained more than +1% in pre-market trading after Wells Fargo Securities initiated coverage on the stock with a buy recommendation and a price target of $49.
C4 Therapeutics (CCCC) surged more than +18% in pre-market trading after Stifel upgraded the stock to buy from hold with a price target of $12.
Neurocrine Biosciences (NBIX) rose more than +1% in pre-market trading after William O’Neil reinstated coverage on the stock with a buy rating.
Pfizer (PFE) tumbled more than -6% in pre-market trading after forecasting 2024 revenue of $58.5 billion-$61.5 billion, well below the consensus of $62.94 billion.
Tesla (TSLA) is down more than -1% in pre-market trading after recalling more than 2 million vehicles to fix autopilot safety flaws.
Coherent (COHR) dropped more than -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.
Hertz Global Holdings (HTZ) fell nearly -4% in pre-market trading after Oppenheimer downgraded the stock to perform from outperform.
Church & Dwight (CHD) slid more than -1% in pre-market trading after Citigroup downgraded the stock to sell with a price target of $90.
Inspire Medical Systems (INSP) fell more than -1% in pre-market trading after Wells Fargo Securities downgraded the equal weight from overweight.
Trex Co (TREX) dropped more than -1% in pre-market trading after Barclays downgraded the stock to underweight from equal weight.
Earnings Reports (12/13/2023)
ABM Industries Inc (ABM), Adobe Inc (ADBE), Nordson Corp (NDSN), Ocean Biomedical Inc (OCEA), Photronics Inc (PLAB), REV Group Inc (REVG).
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.
