Morning Markets
March E-Mini S&P 500 futures (ESH24) are down -0.18%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.25%.
Stock index futures this morning are mildly lower on economic concerns due to weak profit results from FedEx, seen as a bellwether for the economic outlook. FedEx is down more than -9% in pre-market trading after reporting Q2 EPS below consensus.
On the positive side, government bond yields worldwide are falling on signs that global price pressures continue to decline after UK November consumer prices eased more than expected and rose at the slowest pace in more than two years. Slowing inflation figures have bolstered speculation that global central banks could begin cutting interest rates early next year.
U.S. weekly MBA mortgage applications fell -1.5% for the week ended Dec 15. The home purchase sub-index fell -0.6%, and the refinancing sub-index fell -1.8%. The average 30-year fixed rate mortgage fell -24 bp to 6.83%, a 6-month low.
The markets are discounting the chances for a -25 bp rate cut at 12% at the next FOMC meeting on Jan 30-31 and 87% at the following meeting on March 19-20.
U.S. and European government bond yields today are lower. The 10-year T-note yield fell to a 4-3/4 month low of 3.870% and is down -5.2 bp at 3.879%. The 10-year German bund yield dropped to a 9-month low of 1.961% and is down -5.2 bp at 1.964%. The 10-year UK gilt yield fell to an 8-1/4 month low of 3.521% and is down -11.7 bp at 3.535%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.05%. China’s Shanghai Composite Index closed down -1.03%. Japan’s Nikkei Stock Index closed up +1.37%.
The Euro Stoxx 50 today is slightly lower, following losses in U.S. stock index futures. Fresh inflation risks are weighing on stocks on concern that attacks on ships in the Red Sea will cause shipping delays and drive up the price of goods. Shipping companies are diverting cargoes around Africa instead of taking the shorter route through the Suez Canal due to attacks on commercial ships in the Red Sea by Iran-backed Houthi militants. The rerouting will mean higher shipping costs and longer delivery times. Over 20% of containers passing through the Suez Canal carry goods from Asia to Europe.
European stocks are seeing underlying support from some positive economic news. UK Nov CPI increased at the slowest pace in more than 2 years, knocking European government bond yields lower. Also, Eurozone Nov new car registrations rose for the sixteenth consecutive month. In addition, a gauge of German investor confidence rose more than expected to a 5-month high. Finally, German producer prices declined more than expected in November, easing inflation pressures.
UK Nov CPI eased to +3.9% y/y from +4.6% y/y in Oct, weaker than expectations of +4.3% y/y and the smallest increase in more than two years.
Eurozone Nov new car registrations rose +6.7% y/y to 886,000, the sixteenth consecutive month registrations have increased.
German Nov PPI fell -0.5% m/m and -7.9% y/y, weaker than expectations of -0.3% m/m and -7.5% y/y.
The German Jan GfK consumer confidence index rose +2.5 to a 5-month high of -25.1, stronger than expectations of -27.0.
Swaps tied to ECB meeting dates are pricing in a 43% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting, down further from 63% last Friday.
China’s Shanghai Composite index today tumbled to a 13-month low and closed moderately lower. Persistent economic worries are weighing on Chinese stocks as recent government stimulus measures have failed to boost growth or market sentiment. A selloff in Chinese telecom companies and consumer discretionary stocks weighed on the overall market. Also, property stocks retreated after China inflation-adjusted home prices fell -0.2% y/y in Nov, the twenty-first consecutive monthly loss. On the positive side, Chinese shipping companies rose amid expectations that freight rates will rise as shippers avoid the Red Sea after recent attacks on commercial shipping in the area.
Japan’s Nikkei Stock Index today rallied to a 1-month high and closed sharply higher. Strength in technology stocks led the Nikkei Stock Index higher on carryover support from Tuesday’s rally in the Nasdaq 100 to a record high. Japanese stocks also have support on lower bond yields after the Bank of Japan (BOJ) maintained negative interest rates on Tuesday and offered no guidance on whether it might scrap negative rates next year. The dovish BOJ outcome knocked bond yields lower as the 10-year JGB bond yield today fell to a 4-1/2 month low of 0.555%.
Japanese trade news was weaker than expected as Japan Nov exports unexpectedly fell -0.2% y/y, weaker than expectations of +1.4% y/y. Also, Nov imports fell -11.9% y/y, weaker than expectations of -8.6% y/y.
Pre-Market U.S. Stock Movers
General Mills (GIS) tumbled more than -4% in pre-market trading after cutting its full-year organic net sales forecast to -1% to 0% from a previous estimate of +3% to +4%.
FedEx (FDX) sank more than -9% in pre-market trading after reporting Q2 adjusted EPS of $3.99, weaker than the consensus of $4.19.
AON Plc (AON) fell more than -7% in pre-market trading after acquiring NFP Corp for about $13.4 billion in cash and stock.
Zoom Video Communications (ZM) dropped more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $70.
DocuSign (DOCU) dropped more than -3% in pre-market trading after Wells Fargo Securities downgraded the stock to underweight from equal weight.
Lowe’s (LOW) slid more than -1% in pre-market trading after Stifel downgraded the stock to hold from buy.
Cinemark (CNK) fell more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $13.
Costco Wholesale (COST) dropped nearly -1% in pre-market trading after Northcoast Research downgraded the stock to neutral from buy.
Paramount Global (PARA) climbed more than +2% in pre-market trading after Wells Fargo Securities upgraded the stock to equal weight from underweight.
Discover Financial Services (DFS) rose more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral with a price target of $133.
WW International (WW) jumped more than +3% in pre-market trading after Guggenheim Securities initiated coverage on the stock with a buy rating and a price target of $14.
KeyCorp (KEY) rose more than +1% in pre-market trading after Stephens upgraded the stock to overweight from equal weight with a price target of $16.50.
Earnings Reports (12/20/2023)
General Mills Inc (GIS), Micron Technology Inc (MU), MillerKnoll Inc (MLKN), Toro Co/The (TTC), Veradigm Inc (MDRX), Waldencast plc (WALD), Winnebago Industries Inc (WGO).
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.
