March S&P 500 E-Mini futures (ESH24) are trending down -0.20% this morning as investors digested disappointing earnings results from global economic bellwether FedEx and looked ahead to a fresh batch of U.S. economic data.
FedEx Corporation (FDX) plunged over -9% in pre-market trading following the announcement of weaker-than-expected Q2 results, coupled with the Memphis-based shipping giant’s projection of a single-digit decline in revenue for FY24.
In Tuesday’s trading session, the benchmark S&P 500 posted a 23-month high, and the blue-chip Dow and tech-heavy Nasdaq 100 climbed to new all-time highs. Chewy Inc (CHWY) soared over +9% after Jefferies initiated coverage of the stock with a Buy rating and a $27 price target. Also, Illumina Inc (ILMN) gained more than +8% after activist investor Carl Icahn advocated for the removal of legacy Illumina directors in the wake of news that the company plans to proceed with the divestiture of Grail. In addition, Kenvue Inc (KVUE) rose over +2% after a court ruled in favor of the company in a class-action lawsuit related to Tylenol. On the bearish side, Factset Research Systems (FDS) fell more than -2% after lowering its FY24 adjusted EPS guidance.
Economic data on Tuesday showed that U.S. housing starts unexpectedly rose +14.8% m/m to a 6-month high of 1.560M in November, stronger than expectations of 1.360M. At the same time, the U.S. November Building Permits fell -2.5% m/m to a 4-month low of 1.460M, compared to an expected figure of 1.470M.
Richmond Fed President Thomas Barkin suggested on Tuesday that the Fed would cut interest rates if recent progress on inflation continues, but he emphasized the need for a conviction that inflation is on track to return to the Fed’s 2% target. “If you’re going to assume that inflation comes down nicely, of course, we would respond appropriately,” Barkin said. At the same time, Atlanta Fed President Raphael Bostic said he anticipates that the U.S. central bank will implement two rate cuts in 2024, during the second half of the year, as inflation gradually declines, but clarified, “It is not like there has been an active discussion on this.”
Meanwhile, U.S. rate futures have priced in a 12.4% probability of a 25 basis point rate cut at the January FOMC meeting and a 71.1% chance of a 25 basis point rate cut at the March FOMC meeting.
On the earnings front, notable companies like Micron Technology (MU), General Mills (GIS), and BlackBerry (BB) are slated to release their quarterly results today.
Today, all eyes are focused on U.S. CB Consumer Confidence data in a couple of hours. Economists, on average, forecast that December CB Consumer Confidence will stand at 103.8, compared to the previous figure of 102.0.
Also, investors will likely focus on U.S. Existing Home Sales data, which was at 3.79M in October. Economists foresee the November figure to be 3.78M.
U.S. Current Account data will come in today as well. Economists foresee this figure to stand at -197.0B in the third quarter, compared to the second-quarter value of -212.1B.
In the bond markets, United States 10-year rates are at 3.891%, down -1.71%.
The Euro Stoxx 50 futures are down -0.28% this morning as soft inflation data from the U.K. and Germany increased the probability of interest-rate cuts while also highlighting the risk of an economic downturn. Data from the Office for National Statistics on Wednesday revealed that British annual headline inflation dropped below 4% in November, marking the lowest rate since September 2021. Also, U.K. core inflation declined more rapidly than anticipated. Separately, a survey showed on Wednesday that consumer confidence in Germany improved for the second consecutive month in data for January, propelled by a significant rise in income expectations. Meanwhile, Germany’s 10-year yield fell below 2% for the first time in nine months following a report that revealed German producer prices declined more than anticipated in November. In corporate news, Telefonica Sa (TEF.E.DX) climbed over +4% after the Spanish government unveiled plans to buy a stake of up to 10% in the telecoms giant. At the same time, Argenx Se (ARGX.BB) plummeted about -30% after announcing negative top-line results from its ADDRESS study.
U.K.’s CPI, U.K.’s Core CPI, Germany’s GfK Consumer Climate Index, and Germany’s PPI data were released today.
U.K. November CPI has been reported at -0.2% m/m and +3.9% y/y, weaker than expectations of +0.2% m/m and +4.3% y/y.
U.K. November Core CPI stood at -0.3% m/m and +5.1% y/y, weaker than expectations of +0.2% m/m and +5.5% y/y.
The German January GfK Consumer Climate Index came in at -25.1, stronger than expectations of -27.0.
The German November PPI arrived at -0.5% m/m, weaker than expectations of -0.2% m/m.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.03% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.37%.
China’s Shanghai Composite closed lower today as investor sentiment remained gloomy after last week’s Central Economic Work Conference fell short of offering significant stimulus measures to support the struggling recovery. Media, artificial intelligence, and brokerage stocks led the declines on Wednesday. At the same time, technology stocks listed in Hong Kong outperformed, tracking Wall Street’s overnight gains. The People’s Bank of China maintained benchmark lending rates unchanged at the monthly fixing on Wednesday, in line with market expectations following the central bank’s decision to keep its medium-term policy rate steady last week. The one-year loan prime rate was left at 3.45%, and the five-year rate was unchanged at 4.20%. Meanwhile, a BofA Asia fund manager survey released on Wednesday revealed that over 60% of investors prefer adopting a wait-and-see approach or exploring opportunities in other markets rather than being exposed to Chinese equities. “Investor interest towards risk assets in China is shockingly low,” the survey said. In other news, the United States has appended 13 Chinese companies to a list of entities receiving U.S. exports that officials have been unable to inspect, as indicated in a government notice posted on Tuesday. In corporate news, Alibaba Group Holding Ltd gained over +2% following the announcement that the company appointed a new CEO to lead its domestic e-commerce arm.
Japan’s Nikkei 225 Stock Index closed sharply higher and hit a 5-month high today as investors scaled back bets for an interest rate hike in the next few months. Data from the Ministry of Finance on Wednesday revealed that Japan’s exports in November declined for the first time in three months, primarily due to weakened shipments of chips bound for China. Meanwhile, Japan’s benchmark 10-year bond yield dropped to its lowest level since the Bank of Japan tweaked yield curve control in late July. In other news, the Nikkei newspaper reported on Wednesday that Japan’s government plans to increase its long-term interest rate estimate, utilized in formulating the state budget, to 1.9% for the next fiscal year, up from the current year’s 1.1%. In corporate news, TOPPAN Holdings Inc. soared over +8% following Daiwa Securities’ decision to upgrade its rating for the printing firm to Outperform. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.17% to 16.71.
The Japanese November Trade Balance has been reported at -776.9B, stronger than expectations of -962.4B.
The Japanese November Exports stood at -0.2% y/y, weaker than expectations of +1.5% y/y.
The Japanese November Imports came in at -11.9% y/y, weaker than expectations of -8.6% y/y.
“The BOJ’s decision to stay on hold is likely to support Japanese stocks in the near term, but there may be a correction during the January to March period due to risks such as a deterioration in earnings,” Citigroup Inc. analysts, including Ryota Sakagami, wrote in a note.
Pre-Market U.S. Stock Movers
FedEx Corporation (FDX) plunged over -9% in pre-market trading following the announcement of weaker-than-expected Q2 results, coupled with the Memphis-based shipping giant’s projection of a single-digit decline in revenue for FY24.
Steelcase Inc (SCS) slid more than -10% in pre-market trading after the company reported mixed Q3 results and issued soft Q4 guidance.
Guardant Health Inc (GH) tumbled over -10% in pre-market trading after revealing that the FDA tentatively scheduled an advisory committee meeting to assess the market application for the company’s Shield blood test for colorectal cancer screening on March 28th, 2024.
Lowe’s Companies Inc (LOW) fell more than -1% in pre-market trading after Stifel downgraded the stock to Hold from Buy with a price target of $240.
DocuSign Inc (DOCU) dropped over -3% in pre-market trading after Wells Fargo downgraded the stock to Underweight from Equal Weight.
Paramount Global (PARA) rose more than +1% in pre-market trading after Wells Fargo upgraded the stock to Equal Weight from Underweight with a price target of $18.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - December 20th
Micron (MU), General Mills (GIS), Toro (TTC), BlackBerry (BB), Winnebago Industries (WGO), MillerKnoll (MLKN), Innovative Solutions (ISSC).
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