December S&P 500 E-Mini futures (ESZ24) are trending down -0.80% this morning as risk sentiment took a hit on worries about a possible U.S. government shutdown, while investors awaited the Federal Reserve’s first-line inflation gauge for fresh clues on its policy outlook.
The United States faced renewed political uncertainty on Thursday evening after the Republican-led House rejected a temporary funding plan supported by President-elect Donald Trump. Dozens of Republican lawmakers opposed the deal to fund the government for three months and suspend the U.S. debt ceiling for two years, with less than 24 hours remaining before a U.S. government shutdown.
In yesterday’s trading session, Wall Street’s major indices ended mixed. Lamb Weston Holdings (LW) tumbled over -20% and was the top percentage loser on the S&P 500 after the company posted downbeat FQ2 results and cut its annual adjusted EPS guidance. Also, Micron Technology (MU) plunged more than -16% and was the top percentage loser on the Nasdaq 100 after the memory maker issued below-consensus FQ2 guidance. In addition, Lennar (LEN) slid over -5% after the homebuilder reported weaker-than-expected FQ4 results and offered a soft FQ1 new orders forecast. On the bullish side, Darden Restaurants (DRI) surged more than +14% and was the top percentage gainer on the S&P 500 after posting upbeat FQ2 results and boosting its 2025 sales guidance.
The U.S. Commerce Department said Thursday that the Q3 GDP growth estimate was revised upward to 3.1% (q/q annualized) in its final print, stronger than expectations of no change at 2.8%. Also, U.S. November existing home sales rose +4.8% m/m to an 8-month high of 4.15M, stronger than expectations of 4.09M. In addition, the Conference Board’s leading economic index for the U.S. unexpectedly rose +0.3% m/m in November, stronger than expectations of -0.1% m/m and the largest increase in 2-3/4 years. At the same time, the U.S. Philadelphia Fed manufacturing index unexpectedly fell to a 20-month low of -16.4 in December, weaker than expectations of 2.9. Finally, the number of Americans filing for initial jobless claims in the past week fell by -22K to 220K, compared with the 229K consensus.
“This week’s data show the economy is set to end 2024 on a solid note, which is fortunate since we’ll have to contend with heightened policy uncertainty and possibly greater challenges in 2025. We think the Fed maintains an easing bias, but the bar for rate cuts just got higher,” Oren Klachkin, an economist at Nationwide, said in a note.
U.S. rate futures have priced in an 89.3% probability of no rate change and a 10.7% chance of a 25 basis point rate cut at the conclusion of the Fed’s January meeting.
Meanwhile, Wall Street is preparing for a quarterly event known as triple witching, during which derivatives contracts linked to equities, index options, and futures expire, prompting traders collectively to either roll over their current positions or initiate new ones. About $6.5 trillion worth of options tied to individual stocks, indexes, and exchange-traded funds are set to expire today, according to an estimate from derivatives analytical firm Asym 500.
Today, all eyes are focused on the U.S. core personal consumption expenditures price index, the Fed’s preferred price gauge, which is set to be released in a couple of hours. Economists, on average, forecast that the core PCE price index will stand at +0.2% m/m and +2.9% y/y in November, compared to the previous figures of +0.3% m/m and +2.8% y/y.
U.S. Personal Spending and Personal Income data will also be closely monitored today. Economists anticipate November Personal Spending to be +0.5% m/m and Personal Income to be +0.4% m/m, compared to October’s figures of +0.4% m/m and +0.6% m/m, respectively.
The University of Michigan’s U.S. Consumer Sentiment Index will be released today as well. Economists estimate this figure to arrive at 74.1 in December, compared to 71.8 in November.
In addition, market participants will be looking toward a speech from San Francisco Fed President Mary Daly.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.547%, down -0.50%.
The Euro Stoxx 50 futures are down -1.24% this morning as U.S. President-elect Donald Trump’s tariff threat to the European Union dampened sentiment in the region. Bank and mining stocks led the declines on Friday. Data from the Office for National Statistics released Friday showed that Britain’s monthly retail sales rebounded in November, albeit at a slower-than-anticipated rate. Separately, the Federal Statistical Office reported that Germany’s annual producer prices rose in November for the first time since June 2023. Meanwhile, U.S. President-elect Donald Trump issued a new trade warning to the EU, suggesting on social media that he might impose additional tariffs on the bloc unless it increased its purchases of oil and gas from the United States. Investors are now awaiting the Eurozone’s consumer confidence data for December due later in the day. In corporate news, Zealand Pharma A/S (ZEAL.C.DX) slid over -10% after the U.S. Food and Drug Administration declined to approve the Danish pharmaceutical company’s drug glepaglutide for treating bowel disease.
U.K.’s Retail Sales, U.K.’s Core Retail Sales, and Germany’s PPI data were released today.
U.K. November Retail Sales arrived at +0.2% m/m and +0.5% y/y, weaker than expectations of +0.5% m/m and +0.8% y/y.
U.K. November Core Retail Sales came in at +0.3% m/m and +0.1% y/y, compared to expectations of 0.0% m/m and +0.7% y/y.
The German November PPI has been reported at +0.5% m/m and +0.1% y/y, stronger than expectations of +0.3% m/m and -0.3% y/y.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.06%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.29%.
China’s Shanghai Composite Index ended marginally lower today as investors awaited Beijing’s next steps to bolster the economy. The benchmark index suffered a weekly loss. Telecom and consumer stocks lost ground on Friday. At the same time, semiconductor stocks outperformed as signs of fresh Sino-U.S. tensions in technology spurred bets on domestic chip manufacturers. This followed a report by The Information stating that the U.S. Department of Commerce had recently requested Nvidia to look into how its products ended up in China over the past year. Meanwhile, China kept its benchmark lending rates steady at the monthly fixing on Friday, in line with expectations. The one-year loan prime rate was maintained at 3.1%, and the five-year rate stayed at 3.6%, according to the People’s Bank of China. Despite this, investors continue to expect more policy support in 2025, including additional rate cuts, reduced reserve requirements for banks, and stronger fiscal measures. In other news, local media reported that banks in several Chinese cities unexpectedly raised mortgage rates, signaling that the industry’s net interest margin might be approaching its bottom. In corporate news, Tencent rose over +2% in Hong Kong after the tech giant announced plans to roll out a gifting feature on its WeChat platform.
Japan’s Nikkei 225 Stock Index closed lower today as investors digested stronger-than-expected inflation data from the country. Bank stocks led the declines on Friday as domestic bond yields dropped across the yield curve. The benchmark index posted its steepest weekly decline since early November. Government data released Friday showed that Japan’s core inflation accelerated for the first time in three months in November, driven by increasing food and fuel prices, boosting expectations for a rate hike. Still, the Bank of Japan decided to keep its policy rate unchanged on Thursday, citing the need to monitor wage trends and overseas uncertainties as well as gather further evidence of domestic economic recovery. Meanwhile, the yen strengthened against the dollar on Friday following remarks from Japan’s Finance Minister Katsunobu Kato, who expressed concern over recent currency fluctuations and warned of potential intervention if speculative trading is considered excessive. In other news, S&P Global Ratings noted in a release on Thursday that potentially higher U.S. tariffs on Japanese imports could weaken earnings prospects for the nation’s corporates. In corporate news, Kadokawa plunged about -16% after Sony Group’s plan to increase its stake dashed market hopes for a potential buyout. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -3.01% to 23.18.
The Japanese November National Core CPI stood at +2.7% y/y, stronger than expectations of +2.6% y/y.
Pre-Market U.S. Stock Movers
FedEx (FDX) climbed over +7% in pre-market trading after the delivery services giant reported better-than-expected FQ2 adjusted EPS and announced plans to spin off its freight division into a separate publicly traded company.
Nike (NKE) slid more than -3% in pre-market trading as cautious FQ3 revenue guidance overshadowed stronger-than-expected FQ2 results.
U.S. Steel (X) slumped over -4% in pre-market trading after cutting its Q4 adjusted EBITDA guidance.
Mission Produce (AVO) surged more than +9% in pre-market trading after the company reported better-than-expected FQ4 results.
Lamb Weston Holdings (LW) fell over -1% in pre-market trading after Citi downgraded the stock to Neutral from Buy.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - December 20th
Carnival Corp (CCL), Winnebago Industries (WGO).
