Morning Markets
December E-Mini S&P 500 futures (ESZ23) are down -0.25%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.36%.
Stock index futures this morning are moderately lower, weighed down by reduced optimism that the Fed will cut interest rates early next year. U.S. equity markets also have a negative carryover from today’s slide in China’s Shanghai Composite to a 5-week low after Moody's Investors Service cut its outlook on China’s sovereign debt to negative, which is bearish for global growth prospects. Losses in stock index futures are limited by positive carryover from today’s rally in the Euro Stoxx 50 to a 4-month high as European government bond yields fell after ECB Executive Board member Schnabel said another hike in interest rates by the ECB was "rather unlikely."
On the negative side for stocks, Take-Two Interactive Software is down more than -6% in pre-market trading on disappointment that the company did not give a release date for its Grand Theft Auto VI game and only said it would be released in 2025. Also, Designer Brands is down more than -30% after reporting Q4 adjusted EPS well below consensus and cutting its 2024 EPS forecast. In addition, Albemarle and Livent are down more than -2% after Piper Sandler downgraded the stocks to underweight from neutral, citing a significant deterioration of global lithium markets.
On the positive side, G-III Apparel Group is up more than +7% after reporting Q3 adjusted EPS well above consensus and raising its 2024 adjusted EPS forecast. Also, CVS Health Corp is up more than +3% after forecasting stronger-than-expected 2024 revenue. In addition, GitLab is up more than +12% after reporting Q3 revenue above consensus and raising its 2024 revenue forecast.
The markets are discounting a 4% 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 67% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than discounting (137%) 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 -4.2 bp at 4.211%. The 10-year German bund yield fell to a 6-month low of 2.276% and is down -7.7 bp at 2.277%. The 10-year UK gilt yield is down -10.4 bp at 4.090%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.44%. China’s Shanghai Composite Index closed down -1.67%. Japan’s Nikkei Stock Index closed down -1.37%.
The Euro Stoxx 50 today climbed to a 4-month high and is moderately higher. European stocks received a boost today from a decline in the 10-year German bund yield to a 6-month low after ECB Executive Board member Schnabel said further interest rate hikes by the ECB are unlikely. Economic optimism also improved and supported stocks after the Eurozone Nov S&P composite PMI was revised higher. On the negative side, bank stocks were under pressure, with Barclays Plc down more than -2% after Qatar’s wealth fund sold almost half its stake in the bank.
ECB Executive Board member Schnabel said inflation in the Eurozone is showing a "remarkable" slowdown, making another hike in interest rates "rather unlikely."
The Eurozone Nov S&P composite PMI was revised upward by +0.5 to 47.6 from the previously reported 47.1.
Eurozone Oct PPI rose +0.2% m/m and fell -9.4% y/y, close to expectations of +0.2% m/m and -9.5% y/y.
The ECB's monthly inflation expectations survey showed Oct 1-year inflation expectations unchanged at 4.0% from Sep, stronger than expectations of 3.8%. 3-year inflation expectations were 2.5%, unchanged from Sep and right on expectations.
China’s Shanghai Composite today tumbled to a 5-week low and closed moderately lower. Investor sentiment toward Chinese stocks took a hit today after Moody’s Investors Service cut its outlook for Chinese sovereign bonds to negative from stable. Foreign investors ramped up their selling of Chinese stocks as data from Bloomberg showed foreign investors sold 7.5 billion yuan ($1 billion) of mainland shares on a net basis via trading links with Hong Kong today, the most since Oct 19. Chinese tech stocks were under pressure today after Lenovo dropped more than -8% after chairman Yang Yuanqing reduced his holdings in the company. Also, NetEase fell more than -4% after rival Tencent Holdings announced it would launch Dream Star on December 15, a highly anticipated party game. Chinese stocks declined despite stronger-than-expected reports on services activity last month.
Moody's Investors Service kept its long-term rating on China's sovereign bond at A1 but cut its outlook to negative from stable, saying China's usage of fiscal stimulus to support local governments and its spiraling property downturn poses risks to its economy.
The China Nov Caixin services PMI rose +1.1 to 51.5, stronger than expectations of 50.5.
Japan’s Nikkei Stock Index today fell to a 3-week low and closed moderately lower. Negative carryover from Monday’s slump in U.S. technology stocks weighed on Japanese technology stocks today as optimism for Fed interest rate cuts early next year faded. Also, sectors that rely on the Chinese economy retreated today as Japanese steelmakers, machinery makers, and precision machinery firms moved lower on concerns about China’s growth. In addition, today’s economic news showed the Japan Nov Jibun Bank services PMI was revised downward, and Tokyo CPI for November slowed more than expected, suggesting weak domestic demand.
The Japan Nov Jibun Bank services PMI was revised downward by -0.9 to 50.8 from the previously reported 51.7.
Tokyo Nov CPI eased to +2.6% y/y from +3.2% y/y in Oct, weaker than expectations of +3.0% y/y and the smallest increase in 16 months. The Tokyo Nov CPI ex-fresh food and energy eased to +3.6% y/y from +3.8% y/y in Oct, better than expectations of +3.7% y/y.
Pre-Market U.S. Stock Movers
Take-Two Interactive Software (TTWO) dropped more than -6 % in pre-market trading on disappointment that the company did not give a release date for its Grand Theft Auto VI game and only said it will be released in 2025.
Designer Brands (DBI) sank more than -30% in pre-market trading after reporting Q4 adjusted EPS of 24 cents, well below the consensus of 49 cents, and cutting its 2024 EPS forecast to 40 cents-70 cents from a prior view of $1.20-$1.50, weaker than the consensus of $1.28.
SpringWorks Therapeutics (SWTX) tumbled more than -8% after pricing an offering of 9.5 million shares at $29 per share, below Monday’s closing price of $31.66.
Vornado Realty Trust (VNO) dropped more than -2% in pre-market trading after Moody’s Investors Service cut the company’s senior unsecured debt rating to junk or Ba1 from Baa3.
Albemarle (ALB) and Livent (LTHM) fell more than -2% in pre-market trading after Piper Sandler downgraded the stocks to underweight from neutral, citing a significant deterioration of global lithium markets.
Equitable Holdings Inc (EQH) slid more than-1% in pre-market trading after Keefe, Bruyette & Woods downgraded the stock to market perform from outperform.
Gitlab (GTLB) rallied more than +12% in pre-market trading after reporting Q3 revenue of $149.7 million, better than the consensus of $141.7 million, and raising its 2024 revenue forecast to $573 million-$574 million from a previous forecast of $555 million-$557 million, stronger than the consensus of $556.3 million.
CVS Health Corp (CVS) climbed more than +3% in pre-market trading after forecasting 2024 revenue of at least $366 billion, stronger than the consensus of $345.52 billion.
G-III Apparel Group (GIII) jumped more than +7% in pre-market trading after reporting Q3 adjusted EPS of $2.78, well above the consensus of $2.06, and raising its 2024 adjusted EPS forecast to $3.90-$4.00 from a previous estimate of $3.20-$3.30, better than the consensus of $3.24.
Ferguson Plc (FERG) gained more than +1% in pre-market trading after reporting Q1 revenue of $7.71 billion, above the consensus of $7.62 billion.
XP Inc (XP) gained more than +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30.
Earnings Reports (12/5/2023)
AutoZone Inc (AZO), Core & Main Inc (CNM), Ferguson PLC (FERG), J M Smucker Co/The (SJM), MongoDB Inc (MDB), SentinelOne Inc (S), Toll Brothers Inc (TOL).
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.
