March S&P 500 E-Mini futures (ESH24) are trending down -0.34% this morning as investors looked ahead to the latest reading on U.S. job openings as well as the release of the Federal Reserve’s December policy meeting minutes.
In Tuesday’s trading session, Wall Street’s major indexes ended mixed, with the benchmark S&P 500 dropping to a 1-week low and the tech-heavy Nasdaq 100 falling to a 2-week low. Apple Inc (AAPL) slumped over -3% after Barclays downgraded the stock to Underweight from Equal Weight with a price target of $160. Also, chip stocks lost ground following a report from Bloomberg News indicating that ASML Holding NV canceled some shipments of its chip-making machines to China at the request of U.S. President Joe Biden’s administration, with Advanced Micro Devices Inc (AMD) plunging about -6% and Intel Corporation (INTC) sliding over -4%. In addition, Boeing Co (BA) dropped more than -3% after Goldman Sachs removed the stock from its U.S. Conviction List. On the bullish side, Moderna Inc (MRNA) surged over +13% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after Oppenheimer upgraded the stock to Outperform from Market Perform.
“It’s not uncommon for markets to pause to digest a bull run of the magnitude experienced in the fourth quarter just ended. In fact, it would appear to us to make good sense for markets to pause considering the run-up in stock prices,” Oppenheimer Asset Management’s Chief Investment Strategist John Stoltzfus said.
Economic data on Tuesday showed that the U.S. S&P Global manufacturing PMI was unexpectedly revised lower to a 6-month low of 47.9 in December, weaker than expectations of 48.2. Also, U.S. November construction spending rose +0.4% m/m compared to the forecasted +0.5% m/m level.
In other news, Kristalina Georgieva, the head of the International Monetary Fund, told CNN International on Tuesday that the U.S. economy is “definitely” on track for a soft landing thanks to the Federal Reserve’s “decisiveness” in curbing inflation. “It has brought the desired impact without pushing the economy into recession,” she said.
Meanwhile, U.S. rate futures have priced in a 10.9% probability of a 25 basis point rate cut at the Fed’s monetary policy committee meeting later this month and a 66.4% probability of a 25 basis point rate cut at the March meeting.
Today, market participants will be closely monitoring the release of the Federal Reserve’s minutes from the December meeting, seeking fresh insights into the timing of potential rate cuts.
BMO Capital Markets’ Ian Lyngen anticipates a hawkish tone. “A dovish surprise, while unlikely, would hold far greater shock value for a market that has moved away from taking the Fed at face value in favor of a more skeptical approach,” the strategist wrote.
On the economic data front, investors will likely focus on U.S. JOLTs Job Openings data. Economists, on average, forecast that November JOLTs Job Openings will come in at 8.850M, compared to the previous value of 8.733M.
The U.S. ISM Manufacturing PMI will be reported today as well. Economists foresee this figure to stand at 47.1 in December, compared to the previous number of 46.7.
In the bond markets, United States 10-year rates are at 3.980%, up +0.84%.
The Euro Stoxx 50 futures are down -0.93% this morning as risk-on sentiment dampened at the beginning of the year. Food and beverage stocks gained ground on Wednesday, while construction and materials stocks underperformed. The Federal Labour Office reported on Wednesday that the unemployment rate in Germany increased slightly in December to 5.9%, with the seasonally adjusted number of unemployed individuals rising by +5,000 to 2.703 million. In corporate news, Ap Moller Maersk A/S (MAERB.C.DX) climbed over +4% after Goldman Sachs upgraded the stock to Neutral from Sell. At the same time, Ryanair Holdings Plc (RYA.I.DX) fell more than -3% after the low-cost carrier announced that multiple online travel agents had stopped selling its flights in early December due to legal and regulatory pressure.
Germany’s Unemployment Rate and Germany’s Unemployment Change data were released today.
The German December Unemployment Rate stood at 5.9%, in line with expectations.
The German December Unemployment Change came in at 5K, stronger than expectations of 20K.
China’s Shanghai Composite Index (SHCOMP) closed up +0.17%, while the Japanese market was closed for a holiday.
China’s Shanghai Composite closed slightly higher today. Chinese gaming stocks advanced on Wednesday following a Reuters report indicating that Beijing ousted a top official responsible for overseeing the country’s gaming industry, which suggests the government is attempting to mitigate a backlash against stringent new regulations that led to an $80 billion rout across the sector. Feng Shixin was dismissed from his position as head of the publishing unit at China’s Publicity Department, which runs the country’s gaming regulator, Reuters reported. As a result, Tencent Holdings Ltd and NetEase Inc rose by about +1%. Meanwhile, artificial intelligence and information technology stocks underperformed on Wednesday. Hong Kong-listed tech giants also retreated. In other news, Reuters reported on Wednesday that certain leading banks in China have heightened their examination of the asset quality of smaller peers and implemented stricter criteria for interbank lending to mitigate credit risk. In corporate news, CIFI Holdings Co Ltd surged over +13% after the Shanghai-based property developer said Wednesday it had presented five alternatives featuring varied maturity extensions and haircuts to its bondholders as part of a plan to restructure its $7 billion offshore debt.
“Putting together December Caixin and official PMI reflects further softness in domestic demand conditions and slowing service sector, manufacturers focus on export market competition,” J.P. Morgan analysts said in a note.
Pre-Market U.S. Stock Movers
Arcutis Biotherapeutics Inc (ARQT) climbed over +7% in pre-market trading after Mizuho Securities upgraded the stock to Buy from Neutral with a price target of $8.
Pure Storage Inc (PSTG) gained more than +4% in pre-market trading following the announcement by S&P Dow Jones Indices that the company will replace Patterson Companies Inc. in the S&P MidCap 400 index, effective before the opening of trading on Friday, January 5th.
SoFi Technologies Inc. (SOFI) plunged over -5% in pre-market trading after Keefe Bruyette downgraded the stock to Underperform from Market Perform with a price target of $6.50.
Verizon Communications Inc (VZ) rose about +1% in pre-market trading after KeyBanc upgraded the stock to Overweight from Sector Weight with a $45 price target.
Rocket Companies Inc (RKT) slid more than -3% in pre-market trading after Wells Fargo downgraded the stock to Equal Weight from Overweight with a price target of $14.
Charles Schwab Corp (SCHW) fell about -0.9% in pre-market trading after Goldman Sachs downgraded the stock to Neutral from Buy with a price target of $71.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - January 3rd
Unifirst (UNF), Cal-Maine (CALM), Simulations Plus (SLP), Resources Connection (RGP).
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