Morning Markets
March E-Mini S&P 500 futures (ESH24) are down -0.49%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.75%.
Stock index futures this morning are moving lower as bond yields climb as expectations for a March rate cut by the Fed recede. Swap markets now show expectations for a -25 bp rate cut by the Fed at the March 19-20 FOMC meeting have fallen to a 62% chance from a 100% chance last month.
Also, some negative corporate news is weighing on stock index futures. Microchip Technology is down more than -3% in pre-market trading after cutting guidance on its preliminary Q3 revenue estimate. Also, MSC Industrial Direct is down more than -6% after reporting Q1 net sales below consensus. In addition, Morgan Stanley, Netflix, CyberArk Software, and PayPal Holdings are down more than -1% after being downgraded.
Today’s U.S. trade news supports stocks after the Nov trade deficit unexpectedly narrowed to -$63.2 billion from $64.5 billion in Oct, better than expectations of a widening to -$64.9 billion and a positive factor for Q4 GDP.
The markets are discounting the chances for a -25 bp rate cut at 5% at the next FOMC meeting on Jan 30-31 and 62% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +1.8 bp at 4.032%. The 10-year German bund yield is up +4.4 bp at 2.180%. The 10-year UK gilt yield is up +3.7 bp at 3.810%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.76%. China’s Shanghai Composite Index closed up +0.20%. Japan’s Nikkei Stock Index closed up +1.16%.
The Euro Stoxx 50 today is posting moderate losses. Economic concerns are weighing on stocks after today’s news showed German Nov industrial production unexpectedly declined for the sixth consecutive month. Some negative corporate news is also undercutting stocks, with Hays Plc falling more than -9% after it cut guidance for the first half, citing a “clear” slowdown in December. On the positive side, the Eurozone Nov unemployment rate unexpectedly fell -0.1 to match a record low of 6.4%. Also, M&A activity supports equities after GSK Plc agreed to acquire Aiolos Bio for $1.4 billion.
The Eurozone Nov unemployment rate unexpectedly fell -0.1 to match a record low of 6.4%, showing a stronger labor market than expectations of no change at 6.5%.
German Nov industrial production unexpectedly fell -0.7% m/m, weaker than expectations of +0.3% m/m, and the sixth consecutive month industrial production has declined.
ECB Governing Council member Centeno said the December inflation report for the Eurozone was "good news" and officials will decide when to cut interest rates "sooner than we thought until recently."
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 47% for the following meeting on March 7.
China’s Shanghai Composite Index today recovered from a 20-month low and closed slightly higher. Expectations of additional easing from the PBOC gave Chinese stocks a boost after the Xinhua News Agency reported that the PBOC will use various tools to provide “strong support” for reasonable growth in credit, including cutting the reserve requirement ratio for banks as one option. Chinese suppliers to Nvidia rallied today after Nvidia announced new products to help the personal computer industry lure customers with “AI PCs.” Chinese stocks today initially moved lower on weakness in chip stocks after Samsung Electronics posted its sixth-straight quarter of declining operating profit, reflecting weak consumer demand.
Japan’s Nikkei Stock Index today rallied to a nearly 34-year high and closed moderately higher. Strength in technology stocks and lower government bond yields boosted the overall market. The 10-year JGB bond yield fell to a 2-1/2 week low on signs of easing price pressures after Tokyo Dec CPI rose less than expected at the slowest pace in 1-1/2 years. Also, positive corporate news boosted stocks, with Nintendo climbing more than +4% after Bernstein upgraded the stock to outperform from market perform. On the negative side, consumer spending remains stagnant after Japan's November household spending fell more than expected and declined for the ninth straight month.
Tokyo Dec CPI eased to +2.4% y/y from +2.7% y/y in Nov, better than expectations of +2.5% y/y and the slowest pace of increase in 1-1/2 years. Dec CPI ex-fresh food and energy eased to +3.5% y/y from +3.6% y/y in Nov, right on expectations.
Japan Nov household spending fell -2.9% y/y, weaker than expectations of -2.3% y/y, and the ninth consecutive month spending has declined.
Pre-market U.S. Stock Movers
Microchip Technology (MCHP) tumbled more than -3% in pre-market trading after saying its preliminary Q3 revenue will be down about -22%, weaker than previous guidance of down -15% to -20%.
MSC Industrial Direct (MSM) dropped over -6% in pre-market trading after reporting Q1 net sales of $964 million, weaker than the consensus of $972.3 million.
Netflix (NFLX) dropped more than -2% in pre-market trading after Citigroup downgraded the stock to neutral from buy.
PayPal Holdings (PYPL) fell more than -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.
HP Enterprise (HPE) sank over 10% in pre-market trading after the Wall Street Journal reported the company is in advanced talks to acquire Juniper Networks for about $13 billion.
Boeing (BA) is down nearly -1% in pre-market trading after the National Transportation Safety Board said it is considering widening the probe into other Boeing 737 Max jets after Alaska Air Group and United Airlines Holdings found loose parts in inspections of their Max 9 jets.
CyberArk Software Ltd (CYBR) slipped more than -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.
Morgan Stanley (MS) fell nearly -1% in pre-market trading after HSBC downgraded the stock to hold from buy.
Juniper Networks (JNPR) soared more than +20% in pre-market trading after the Wall Street Journal reported that HP Enterprise is in advanced talks to acquire the company for about $13 billion.
Acuity Brands (AYI) climbed more than +5% in pre-market trading after reporting Q1 adjusted EPS of $3.72, well above the consensus of $3.14.
United Airlines Holdings (UAL) rose more than +1% in pre-market trading after Bank of America Global Research upgraded the stock to buy from underperform.
Crowdstrike Holdings (CRWD) is up more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $304.
Match Group (MTCH) jumped more than +13% in pre-market trading after the Wall Street Journal reported that Elliot Investment Management had built a stake of about $1 billion in the company.
Exxon Mobil (XOM) rose more than +1% in pre-market trading after Redburn upgraded the stock to buy from neutral with a price target of $119.
Earnings Reports (1/9/2024)
Acuity Brands Inc (AYI), Aehr Test Systems (AEHR), Albertsons Cos Inc (ACI), AZZ Inc (AZZ), Dakota Gold Corp (DC), DZS Inc (DZSI), E2open Parent Holdings Inc (ETWO), Eagle Pharmaceuticals Inc/DE (EGRX), Inspired Entertainment Inc (INSE), MSC Industrial Direct Co Inc (MSM), Neogen Corp (NEOG), Park Aerospace Corp (PKE), PriceSmart Inc (PSMT), SMART Global Holdings Inc (SGH), TD SYNNEX Corp (SNX), Veradigm Inc (MDRX), VOXX International Corp (VOXX), WD-40 Co (WDFC).
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.
