Morning Markets
December E-Mini S&P 500 futures (ESZ23) are down -0.35%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.67%.
Stock index futures this morning are moderately lower as bond yields jumped after the monthly U.S. payroll report showed a larger-than-expected increase in nonfarm payrolls and an unexpected decline in the unemployment rate to a 4-month low, dampening speculation that the Fed will cut interest rates as early as Q1 next year. Losses in stock index futures were limited as wage growth was close to expectations, a supportive factor for Fed policy.
U.S. Nov nonfarm payrolls rose +199,000, stronger than expectations of +185,000. The Nov unemployment rate fell -0.2 to a 4-month low of 3.7%, showing a stronger labor market than expectations of no change at 3.9%.
U.S. Nov average hourly earnings were +4.0% y/y, unchanged from Oct and right on expectations.
On the negative side for stocks, Lululemon Athletica is down more than -2% in pre-market trading after forecasting Q4 net revenue below consensus. Also, RH is down more than -8% after cutting its 2024 adjusted operating margin forecast. In addition, DocuSign is down more than -2% after giving a margin outlook that some analysts said was seen as cautious, considering its strong Q3 results.
On the positive side, Carrier Global is up more than +5% after Honeywell International agreed to buy the company’s security unit for $5 billion. Also, Smartsheet is up more than +3% after reporting Q3 adjusted EPS above consensus and raising its 2024 adjusted EPS forecast. In addition, Broadcom is up nearly +1% after analysts said strength in AI computing is helping to offset a slowdown in chip sales.
The markets are discounting a 1% 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 49% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (110%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +7.8 bp at 4.228%. The 10-year German bund yield is up +8.4 bp at 2.275%. The 10-year UK gilt yield is up +8.2 bp at 4.049%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.52%. China’s Shanghai Composite Index closed up +0.11%. Japan’s Nikkei Stock Index closed down -1.6%.
The Euro Stoxx 50 today rallied to a 16-year high and is moderately higher. Strength in luxury and travel stocks is leading the broader market higher today after China vowed to strengthen the government’s fiscal policy to boost domestic demand. Also, speculation that the ECB will begin lowering borrowing costs early next year underpins equity prices. On the negative side, mining stocks are under pressure after Anglo American Plc dropped more than -6% when it said it would make deep production cuts for almost all commodities it mines next year in a bid to cut costs.
Swaps tied to ECB meeting dates have now priced in a 74% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have priced in a 61% chance of -50 bp of rate cuts by the April 11 ECB meeting.
China’s Shanghai Composite index today closed slightly higher. Chinese stocks received support today after China’s Politburo, compromising the top 24 leaders of the Communist Party, pledged to strengthen the government’s fiscal measures and make monetary policy more effective, bolstering efforts to revive growth. Chinese airline and tourism stocks rose today after China and the EU agreed to accelerate the resumption of flights and personnel exchanges. Also, AI stocks rose as the launch of Google’s Gemini software boosted sentiment.
Japan’s Nikkei Stock Index today fell sharply for a second day and posted a 4-week low. Japanese stocks fell after the yen surged to a 4-month high against the dollar Thursday on bets the BOJ will end negative interest rates as early as this month. Also, soaring government bond yields weighed on stocks after the 10-year JGB bond yield rose to a 3-week high of 0.808%. Economic concerns also weighed on stocks after the Japan Q3 GDP was unexpectedly revised lower to -2.9% (y/y annualized) from -2.1%, the steepest pace of contraction since the pandemic. Retailer stocks retreated today, led by a -3 % fall in Fast Retailing after SMBC Nikko downgraded the stock.
Japan's Q3 GDP was unexpectedly revised lower to -2.9% (y/y annualized) from -2.1%, weaker than expectations of -2.0%. The Q3 GDP deflator was revised upward to a record +5.3% y/y from +5.1% y/y.
Japan Oct labor cash earnings rose +1.5% y/y, stronger than expectations of +1.0% y/y.
The Japan Nov eco watches survey outlook unexpectedly rose +1.0 to 49.3, stronger than expectations of a decline to 48.1.
Pre-Market U.S. Stock Movers
Lululemon Athletica (LULU) dropped more than -2% in pre-market trading after forecasting Q4 net revenue of $3.14 billion-$3.17 billion, below the consensus of $3.18 billion.
DocuSign (DOCU) fell more than -2% in pre-market trading after giving a margin outlook that some analysts said was seen as cautious, considering its strong Q3 results.
Honeywell International (HON) dropped more than -2% in pre-market trading after the Wall Street Journal reported the company was acquiring the security business of Carrier Global for about $5 billion.
RH (RH) tumbled more than -8% in pre-market trading after cutting its 2024 adjusted operating margin forecast to 13.6%-14% from a previous forecast of 14.5%-15.5 %, weaker than the consensus of 15.2%.
HashiCorp (HCP) plunged more than -20% in pre-market trading after several analysts cut their price targets on the stock after results showed a slowdown in key metrics, such as revenue from the previous quarter.
Qualcomm (QCOM) slid more than -1% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.
Verisk Analytics (VRSK) fell nearly -1% in pre-market trading after Deutsche Bank downgraded the stock to hold from buy.
Carrier Global (CARR) jumped more than +5% in pre-market trading after Honeywell International agreed to buy the company’s security unit for $5 billion.
Smartsheet (SMAR) climbed more than +3% in pre-market trading after reporting Q3 adjusted EPS of 16 cents, stronger than the consensus of 9 cents, and raised its 2024 adjusted EPS forecast to 68 cents-69 cents from a previous forecast of 53 cents-57 cents, above the consensus of 55 cents.
Broadcom (AVGO) rose nearly +1% in pre-market trading after analysts said strength in AI computing is helping to offset a slowdown in chip sales.
Earnings Reports (12/8/2023)
Dakota Gold Corp (DC), DZS Inc (DZSI), Inspired Entertainment Inc (INSE), Johnson Outdoors Inc (JOUT), National Beverage Corp (FIZZ), Veradigm Inc (MDRX).
More Stock Market News from Barchart
- 3 AI Stocks That Could Make You Rich in 2024
- S&P Futures Slip as Investors Await Key U.S. Jobs Report
- Stocks Settle Higher as AI Optimism Lifts Technology Stocks
- 2 Beaten-Down Growth Stocks With 90% or More Upside Potential in 2024
