December S&P 500 futures (ESZ23) are trending up +0.34% this morning as market participants digested strong industrial output and retail sales data from China while also bracing for crucial U.S. PPI and retail sales data.
In Tuesday’s trading session, the benchmark S&P 500 and blue-chip Dow posted 2-month highs, and the tech-heavy Nasdaq 100 notched a 3-3/4 month high. Home Depot Inc (HD) climbed over +5% and was the top percentage gainer on the Dow after reporting a lesser-than-anticipated decline in Q3 comparable sales. Also, regional bank stocks gained ground, with KeyCorp (KEY) surging more than +9%, Zions Bancorporation (ZION) soaring over +7%, and Citizens Financial Group Inc (CFG) rising more than +6%. In addition, Snap Inc (SNAP) jumped over +7% after the Information reported that Amazon.com had agreed to enable users to make direct purchases from ads within the Snapchat app. On the bearish side, Fisker Inc (FSR) tumbled more than -18% after the company reported downbeat Q3 results and warned that it would delay its 10-Q filing after finding material weaknesses in internal controls.
The Labor Department’s report on Tuesday showed consumer prices were unchanged in October, compared to an expected rise of +0.1% m/m and the +0.4% m/m reading in September. On an annual basis, headline inflation came in at +3.2% in October, lower than the predicted figure of +3.3%. In addition, U.S. core CPI eased to +4.0% y/y in October from +4.1% y/y in September, the smallest increase in over 2 years.
“We’re happy to see both headline and core CPI come in lower than expected. It’s telling us that the Fed is done, there’s nothing left for it to do here. This is what the Fed was looking for, slowing inflation, slowing labor market, and the economy’s holding up at the same time,” said Thomas Hayes, chairman at hedge fund Great Hill Capital.
Meanwhile, on Tuesday, Chicago Fed President Austan Goolsbee welcomed the latest data indicating a decrease in U.S. inflation but emphasized that there’s still a way to go before it reaches the central bank’s 2% target. “Progress continues, though we still have a way to go,” Goolsbee said.
U.S. rate futures have priced in a 94.5% probability of no hike at the December meeting and a 90.8% chance of no hike at January’s monetary policy meeting.
On the earnings front, notable companies like Cisco (CSCO), TJX (TJX), Palo Alto Networks (PANW), NetEase (NTES), and Target (TGT) are set to report their quarterly figures today.
In other news, U.S. House lawmakers passed a temporary spending bill, reducing the likelihood of a government shutdown on November 18th. The two-part stopgap bill would extend government funding at current levels through mid-January.
Today, all eyes are focused on the U.S. Producer Price Index (PPI) in a couple of hours. Economists, on average, forecast that October U.S. PPI will stand at +0.1% m/m and +1.9% y/y, compared to the previous values of +0.5% m/m and +2.2% y/y.
Also, investors will likely focus on U.S. Core Retail Sales data, which came in at +0.6% m/m in September. Economists foresee the new figure to be -0.2% m/m.
U.S. Core PPI data will come in today. Economists expect October’s figures to be +0.3% m/m and +2.7% y/y, compared to the previous numbers of +0.3% m/m and +2.7% y/y.
U.S. NY Empire State Manufacturing Index will be reported today. Economists foresee this figure to stand at -2.80 in November, compared to the previous figure of -4.60.
U.S. Retail Sales data will also be closely watched today. Economists forecast October’s figure to be -0.3% m/m, compared to the previous value of +0.7% m/m.
U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be +1.793M, compared to the previous number of +0.774M.
In the bond markets, United States 10-year rates are at 4.467%, up +0.56%.
The Euro Stoxx 50 futures are up +0.46% this morning as investors welcomed cooler-than-expected inflation readings in the U.S. and the U.K., strengthening expectations for the conclusion of central banks’ policy tightening. Also contributing to positive sentiment were indications of resilience in the Chinese economy. Gains in mining and technology stocks are leading the overall market higher. Data from the Office for National Statistics showed Wednesday that the U.K.’s inflation rate fell to its lowest point in two years in October, dragged down by the decline in energy prices. Separately, Eurostat reported that industrial production in the Eurozone decreased largely as anticipated in September, wiping out a rise in August due to a sharp drop in the output of consumer goods. In corporate news, Alstom (ALO.FP) plunged over -16% after the train maker announced job cuts and asset sales to strengthen its balance sheet.
U.K.’s CPI, France’s CPI, Italy’s CPI, and Eurozone’s Industrial Production data were released today.
U.K. October CPI has been reported at 0.0% m/m and +4.6% y/y, weaker than expectations of +0.1% m/m and +4.8% y/y.
The French October CPI arrived at +0.1% m/m and +4.0% y/y, in line with expectations.
The Italian October CPI came in at -0.2% m/m and +1.7% y/y, weaker than expectations of -0.1% m/m and +1.8% y/y.
Eurozone September Industrial Production stood at -1.1% m/m and -6.9% y/y, weaker than expectations of -1.0% m/m and -6.3% y/y.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.55%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.52%.
China’s Shanghai Composite today closed higher as investors welcomed a decline in U.S. inflation, with additional domestic positive factors such as a potential 1 trillion yuan funding to support the property market, strong industrial output and retail sales data, and President Xi Jinping’s visit to the U.S. contributing to the boost in sentiment. The People’s Bank of China kept its key policy rates unchanged Wednesday while injecting a net 600 billion yuan fund into the banking system to boost liquidity. The PBOC’s liquidity injection was accompanied by data indicating an improvement in China’s economic activity for October as industrial output grew at a faster pace and retail sales growth topped expectations. Meanwhile, the meeting between Chinese President Xi Jinping and his U.S. counterpart, Joe Biden, is also closely monitored for potential easing of tensions. Hong Kong-listed Chinese property stocks surged on Wednesday after Bloomberg News reported that China intends to allocate a minimum of 1 trillion yuan in low-cost financing for the country’s urban village renovation and affordable housing programs. Tech giants listed in Hong Kong also outperformed.
“The general sense is that things are moving slowly in a more positive direction, but that the economy still needs the liquidity support that the PBOC seems to be starting to provide, and the slightly more helpful fiscal stance that the central government is taking,” analysts at ING wrote in a note.
The Chinese October Industrial Production stood at +4.6% y/y, stronger than expectations of +4.4% y/y.
The Chinese October Retail Sales came in at +7.6% y/y, stronger than expectations of +7.0% y/y.
The Chinese October Fixed Asset Investment arrived at +2.9% y/y, weaker than expectations of +3.1% y/y.
The Chinese October Unemployment Rate was at 5.0%, in line with expectations.
Japan’s Nikkei 225 Stock Index closed sharply higher today, topping the 33,000 psychological level for the first time in nearly two months, driven by robust corporate earnings and optimism that the Federal Reserve’s aggressive hiking cycle is over. Energy, real estate, and technology stocks led the gains on Wednesday. Meanwhile, government data showed on Wednesday that Japan’s economy contracted in July-September from the previous quarter on an annualized basis, snapping three straight quarters of expansion. In corporate news, Idemitsu Kosan Co., Ltd. soared over +18% after lifting its profit forecast and announcing a share split. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.75% to 18.57.
The Japanese GDP has been reported at -0.5% q/q and -2.1% y/y in the third quarter, weaker than expectations of -0.1% q/q and -0.6% y/y.
The Japanese September Industrial Production came in at +0.5% m/m, stronger than expectations of +0.2% m/m.
Pre-Market U.S. Stock Movers
JD.com Inc Adr (JD) gained over +4% in pre-market trading after the retailer reported better-than-expected Q3 results.
Solid Biosciences LLC (SLDB) surged about +27% in pre-market trading after announcing that the FDA cleared the company’s IND for Duchenne gene therapy candidate SGT-003.
Edgio Inc (EGIO) soared over +20% in pre-market trading following the announcement that existing investor Lynrock Lake Master Fund had provided the company with $66M of new financing.
Arcturus Therapeutics Holdings Inc (ARCT) climbed more than +19% in pre-market trading after the company reported upbeat Q3 results.
PolishedCom Inc (POL) slid over -9% in pre-market trading after postponing the reporting of its Q3 results.
Wix.Com Ltd (WIX) gained more than +2% in pre-market trading after Barclays upgraded the stock to Overweight from Equal Weight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - November 15th
Cisco (CSCO), TJX (TJX), Palo Alto Networks (PANW), NetEase (NTES), Target (TGT), Alcon (ALC), Xpeng (XPEV), Huazhu (HTHT), Tetra Tech (TTEK), Catalent Inc (CTLT), GlobalE Online (GLBE), Maximus (MMS), Copa (CPA), Advance Auto Parts (AAP), Endava (DAVA), J & J Snack Foods (JJSF), Hillenbrand (HI), Grupo Aval (AVAL), Kulicke&Soffa (KLIC), Griffon (GFF), INTL FCStone (SNEX), Corporacion America Airports (CAAP), Sonos (SONO), Chase (CCF), ZIM Integrated Shipping Services (ZIM), RMR Group Inc (RMR), Riskified (RSKD).
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