December S&P 500 futures (ESZ23) are trending up +0.25% this morning as the latest U.S. employment data fueled bets that the Federal Reserve will cut interest rates as soon as March, with investors’ focus now turning to the ADP National Employment numbers due later in the day.
In Tuesday’s trading session, Wall Street’s major indexes ended mixed. Gitlab Inc (GTLB) soared over +11% after the company reported better-than-expected Q3 results and lifted its FY24 forecast. Also, CVS Health Corp (CVS) climbed more than +3% after the healthcare conglomerate issued above-consensus FY24 revenue guidance and announced a new drug pricing method. On the bearish side, Charter Communications Inc (CHTR) fell over -8% after CFO Jessica Fischer cautioned about short-term challenges for the company. In addition, Designer Brands Inc (DBI) plummeted more than -33% after the footwear retailer posted downbeat Q3 results and lowered its full-year guidance.
A Labor Department report on Tuesday showed that U.S. JOLTs job openings fell to a 2-1/2 year low of 8.733M in October, weaker than expectations of 9.300M. At the same time, the U.S. November ISM services index came in at 52.7, stronger than expectations of 52.0. Also, the U.S. S&P Global services PMI stood at 50.8 in November, in line with expectations.
“Additional signs of a cooling labor market solidify the notion that the Fed’s tightening trajectory has been relegated to the history books. Now, all eyes are turning to next week’s FOMC meeting, making it a must-watch but done-deal event,” said Hebe Chen, an analyst at IG Markets Ltd.
Meanwhile, U.S. rate futures have priced in a 99.7% chance of no hike at the upcoming monetary policy meeting and a 100% probability of no hike at January’s monetary policy meeting. Also, U.S. rate futures have priced in a 53.0% chance of a 25 basis point rate cut at the March meeting.
On the earnings front, notable companies like Campbell Soup (CPB), Chewy (CHWY), GameStop Corp (GME), and C3.ai (AI) are slated to release their quarterly results today.
Today, all eyes are focused on U.S. ADP Nonfarm Employment Change data in a couple of hours. Economists, on average, forecast that November ADP Nonfarm Employment Change will stand at 130K, compared to the previous value of 113K.
Also, investors are likely to focus on U.S. Unit Labor Costs data, which came in at +2.2% q/q in the second quarter. Economists foresee the third-quarter figure to be -0.9% q/q.
U.S. Nonfarm Productivity data will come in today. Economists foresee this figure to stand at +4.9% q/q in the third quarter, compared to the second-quarter number of +3.5% q/q.
U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -1.354M, compared to last week’s value of +1.609M.
In the bond markets, United States 10-year rates are at 4.185%, up +0.43%.
The Euro Stoxx 50 futures are up +0.22% this morning amid increasing expectations of a peak in global interest rates, with investors anticipating the release of the U.S. ADP jobs report. Gains in mining and travel stocks are leading the overall market higher. The Federal Statistics Office said Wednesday that German industrial orders unexpectedly fell in October. Separately, Eurostat reported on Wednesday that Eurozone retail sales returned to growth on a monthly basis in October. Meanwhile, markets have now fully priced six quarter-point rate cuts by the European Central Bank in 2024. In corporate news, Merck Kgaa (MRK.D.DX) plunged over -13% following the pharmaceutical company’s announcement that its experimental multiple sclerosis drug, evobrutinib, did not meet the primary goal in late-stage trials. At the same time, Tui Ag (TUI.LN) surged over +10% after Europe’s biggest travel operator said it expects a sharp jump in operating profit in 2024.
Germany’s Factory Orders and Eurozone’s Retail Sales data were released today.
The German October Factory Orders came in at -3.7% m/m, weaker than expectations of +0.2% m/m.
Eurozone October Retail Sales arrived at +0.1% m/m and -1.2% y/y, weaker than expectations of +0.2% m/m and -1.1% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.11% and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.04%.
China’s Shanghai Composite today closed slightly lower as investor sentiment remained fragile following Moody’s downgrade of China’s credit outlook. Moody’s Investors Service on Tuesday lowered its outlook from stable to negative while retaining a long-term rating of A1 on the country’s sovereign bonds, citing risks related to “structurally and persistently lower medium-term economic growth” and the ongoing crisis in its property sector. Also, Moody’s revised the outlooks of 18 Chinese corporates to negative on Wednesday. Meanwhile, the onshore Chinese yuan edged lower against the dollar even as officials ramped up support for the currency. In other news, Reuters reported that China’s major state-owned banks engaged in selling U.S. dollars in the onshore spot foreign exchange market for the second consecutive day on Wednesday to bolster the Chinese currency. Investor focus is now squarely on the Chinese trade data scheduled for release on Thursday.
Japan’s Nikkei 225 Stock Index closed sharply higher today as indications of a cooling U.S. labor market increased speculation about a peak in global interest rates, leading investors to buy back beaten-down rate-sensitive stocks. All sectors of the Nikkei 225 ended in the green, with utilities and real estate stocks experiencing the largest gains. Also, chip-related stocks gained ground on Wednesday, with chip-making equipment manufacturer Tokyo Electron Ltd rising over +2% and chip-testing equipment maker Advantest Corp climbing +3%. Meanwhile, Japanese government bond yields fell to the lowest level since mid-August, mirroring an overnight decline in U.S. Treasury yields. In other news, Bank of Japan Deputy Governor Ryozo Himino stated on Wednesday that the central bank can smoothly transition away from monetary easing once sustainable 2% inflation is attained, but for now, it is necessary to maintain loose monetary policy. “The Bank of Japan should carefully monitor the evolution of wages and prices, judge the timing of the exit, and design its process,” Himino said. In corporate news, Sakura Internet Inc. soared over +12%, extending yesterday’s gains following a statement from Nvidia CEO Jensen Huang, who mentioned that the U.S. semiconductor giant would collaborate with Japanese companies such as Sakura Internet to build artificial intelligence factories in Japan. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.53% to 18.22.
Pre-Market U.S. Stock Movers
SentinelOne Inc (S) soared over +16% in pre-market trading after the cybersecurity firm reported upbeat Q3 results and raised its full-year revenue forecast.
Yext Inc (YEXT) tumbled more than -20% in pre-market trading after the company posted mixed Q3 results and lowered its FY24 revenue outlook.
Box Inc (BOX) plunged over -12% in pre-market trading after reporting weaker-than-expected Q3 results and cutting its FY24 guidance.
MongoDB (MDB) slid more than -5% in pre-market trading ever after the database company reported upbeat Q3 results and upped its annual guidance.
Aspen Aerogels Inc (ASPN) surged about +18% in pre-market trading after securing an additional EV thermal barrier commercial award.
Shake Shack Inc (SHAK) rose more than +3% in pre-market trading after Raymond James upgraded the stock to Strong Buy from Outperform with an unchanged price target of $78.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - December 6th
Brown Forman (BFb), Campbell Soup (CPB), Chewy (CHWY), Braze (BRZE), Thor Industries (THO), GameStop Corp (GME), Ollie’s Bargain Outlet (OLLI), Sprinklr (CXM), C3.ai (AI), Greif Bros (GEF), Greif Bros B (GEFb), Korn Ferry (KFY), John Wiley&Sons B (WLYB), John Wiley&Sons (WLY), Verint (VRNT), Oxford Industries (OXM), Duckhorn Portfolio (NAPA), Semtech (SMTC), United Natural Foods (UNFI), Couchbase (BASE), Argan (AGX), Lovesac (LOVE), Alico (ALCO), Vera Bradley (VRA), DLH Holdings (DLHC), Sportsmans (SPWH).
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