December S&P 500 futures (ESZ23) are up +0.32%, and December Nasdaq 100 E-Mini futures (NQZ23) are up +0.37% this morning as the Federal Reserve’s indication of interest-rate cuts next year boosted sentiment, while investors also awaited crucial U.S. retail sales data.
As widely expected, the Federal Reserve kept its federal funds rate target range unchanged at 5.25%-5.50% for the third consecutive meeting on Wednesday. Also, the Fed’s updated Summary of Economic Projections showed a decrease in the median forecast for the federal funds rate at the end of 2024, declining from 5.125% to 4.625%, suggesting three quarter-point rate cuts next year. At the same time, Fed Chair Jerome Powell underscored that the projections do not constitute a predetermined plan, emphasizing that policymakers are not ruling out additional interest-rate increases if necessary to curb resurging inflationary pressures. Still, Powell acknowledged that officials discussed the question of when it would be appropriate to initiate interest rate cuts during this week’s meeting.
In Wednesday’s trading session, the benchmark S&P 500 and tech-heavy Nasdaq 100 rose to 23-month highs, while the blue-chip Dow climbed to an all-time high. Vertex Pharmaceuticals Inc (VRTX) surged over +13% and was the top percentage gainer on the S&P 500 after announcing positive results from the Phase 2 trial of its non-opioid pain therapy, VX-548, in patients with painful diabetic peripheral neuropathy. Also, regional bank stocks gained ground, with Zions Bancorporation (ZION) soaring more than +9% and KeyCorp (KEY) climbing over +7%. In addition, Take-Two Interactive Software Inc (TTWO) rose more than +3% after the Nasdaq announced that the company would be added to the Nasdaq 100 Index before the market opens on Monday, December 18th. On the bearish side, Pfizer Inc (PFE) plunged over -6% after the pharmaceutical giant provided weaker-than-expected FY24 guidance.
Economic data on Wednesday showed the U.S. November producer price index came in at 0.0% m/m and +0.9% y/y, better than expectations of +0.1% m/m and +1.0% y/y. Also, U.S. core PPI eased to +2.0% y/y in November from +2.3% y/y in October, better than expectations of +2.2% y/y and the slowest pace of increase in 2-3/4 years.
Meanwhile, U.S. rate futures have priced in a 20.7% probability of a 25 basis point rate cut at the next central bank meeting in January and a 72.3% chance of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.
In other news, Goldman Sachs Group Inc. economists revised their outlook for the Federal Reserve in 2024, now expecting a more rapid and steeper series of interest-rate cuts. “We now forecast three consecutive 25 basis-point cuts in March, May, and June to reset the policy rate,” the Goldman economists wrote in a note.
On the earnings front, notable companies like Costco (COST), Lennar (LEN), and Jabil Circuit (JBL) are slated to release their quarterly results today.
Today, all eyes are focused on U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that November Retail Sales will stand at -0.1% m/m, compared to the previous value of -0.1% m/m.
Also, investors will likely focus on U.S. Core Retail Sales data, which came in at +0.1% m/m in October. Economists foresee the November figure to be -0.1% m/m.
U.S. Export and Import Price Indexes for November will come in today. Economists anticipate the export price index to be at -1.0% m/m and the import price index to stand at -0.8% m/m.
U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 220K, compared to last week’s value of 220K.
In the bond markets, United States 10-year rates are at 3.954%, down -2.03%.
The Euro Stoxx 50 futures are up +0.74% this morning as investors cheered the Federal Reserve’s signal of lower borrowing costs in 2024 and looked forward to policy verdicts from the European Central Bank and Bank of England. Gains in real estate and mining stocks are leading the overall market higher. Meanwhile, the focus now shifts to the interest rate decisions from the Bank of England and European Central Bank due later in the session, with expectations that rates will be held steady. Also, market participants are pricing in about 150 basis points of ECB rate cuts in 2024 and 125 basis points by the BOE. In corporate news, Vivendi Se (VIV.FP) climbed over +8% after the French media company announced its intention to examine splitting up certain business activities. Also, Ams-Osram Ag (AMS.Z.IX) soared more than +9% after Jefferies upgraded the stock to Buy from Hold.
Spain’s CPI data was released today.
The Spanish November CPI has been reported at -0.3% m/m and +3.2% y/y, compared to expectations of -0.4% m/m and +3.2% y/y.
Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.33% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.73%.
China’s Shanghai Composite closed slightly lower today as investors digested credit data indicating ongoing weakness in domestic demand while also awaiting a slew of crucial economic data releases from the country on Friday. Real estate and liquor stocks underperformed on Thursday. At the same time, tech giants listed in Hong Kong gained ground. Data on Wednesday showed that new bank lending in China rose less than anticipated in November despite the central bank maintaining an accommodative policy to bolster a fragile recovery in the world’s second-largest economy. In corporate news, Country Garden Holdings Co. rose over +1% after a unit of the troubled developer surprisingly repaid an 800 million yuan ($111 million) bond, alleviating worries of a potential default. Investor attention is currently centered on the upcoming release of Chinese data for November, which includes fixed asset investment, unemployment, industrial production, and retail sales, set for Friday.
“November’s credit and money data were modestly disappointing, and the composition of credit and loans data continued to show sluggish credit demand. We continue to expect further monetary policy easing (including more RRR cuts and policy rate cuts) in light of deflationary pressures, soft credit demand, and weak sentiment,” Goldman Sachs said in a note.
The Chinese November New Loans stood at 1,090.0B, weaker than expectations of 1,300.0B.
Japan’s Nikkei 225 Stock Index closed lower today, snapping a three-day winning streak as the yen’s sharp rally and falling Treasury yields weighed on export-oriented and bank stocks. Export-heavy automobile stocks slumped on Thursday as the Japanese yen hit a 4-1/2 month high against the dollar, with Toyota Motor Corp falling over -3% and Honda Motor Co Ltd plunging -5%. Bank stocks also retreated, with Mitsubishi UFJ Financial sliding over -3% and Sumitomo Mitsui Financial Group dropping more than -5%. Government data showed on Thursday that Japan’s core machinery orders unexpectedly rose in October from the previous month. Separately, data showed on Thursday that industrial production growth in Japan was revised higher in October. In corporate news, Recruit Holdings Co Ltd climbed over +7% following the staffing agency’s announcement of a stock buyback program of up to 200 billion yen ($1.41 billion). The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +4.22% to 18.01.
The Japanese October Core Machinery Orders came in at +0.7% m/m and -2.2% y/y, stronger than expectations of -0.5% m/m and -5.1% y/y.
The Japanese October Industrial Production arrived at +1.3% m/m, stronger than expectations of +1.0% m/m.
Pre-Market U.S. Stock Movers
Adobe Systems Incorporated (ADBE) plunged over -6% in pre-market trading after the Photoshop maker offered a weaker-than-expected FY24 guidance and disclosed an ongoing U.S. government investigation into its cancellation rules for software subscriptions.
Codexis Inc (CDXS) surged about +21% in pre-market trading after entering into an exclusive licensing deal with Aldevron for Codex HiCap RNA Polymerase.
Amtech Systems Inc (ASYS) tumbled more than -26% in pre-market trading after the company reported downbeat Q4 results and provided below-consensus Q1 revenue guidance.
Six Flags Entertainment New (SIX) rose over +2% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $32.
Stanley Black & Decker Inc (SWK) fell more than -1% in pre-market trading after JPMorgan downgraded the stock to Underweight from Neutral with an $89 price target.
Tripadvisor Inc (TRIP) climbed over +2% in pre-market trading after BTIG upgraded the stock to Buy from Neutral with a $25 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - December 14th
Costco (COST), Lennar (LEN), Jabil Circuit (JBL), Scholastic (SCHL), Quanex Building Products (NX), Moolec Science (MLEC).
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