December S&P 500 futures (ESZ23) are up +0.08%, and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.16% this morning after three major U.S. benchmark indices closed lower on Thursday as hawkish remarks from Federal Reserve Chair Jerome Powell tempered optimism regarding a peak in interest rates.
In Thursday’s trading session, Becton Dickinson and Company (BDX) plunged over -9% after the company issued downbeat FY24 guidance. Also, Tesla Inc (TSLA) slumped more than -5% after HSBC initiated coverage of the stock with a Reduce rating and a price target of $146. In addition, Arm Holdings (ARM) fell over -5% after the company provided disappointing Q3 sales guidance amid a slump in smartphone sales and uncertain timing for new licensing deals. On the bullish side, Walt Disney Company (DIS) gained more than +6% after the theme park and entertainment giant posted stronger-than-expected Q4 EPS and showed better streaming subscriber growth than expected.
The Labor Department’s report on Thursday showed claims for state unemployment benefits unexpectedly fell -3K to a seasonally adjusted 217K last week, although the figure still exceeded the consensus estimate of 215K.
“This week is kind of a dead zone for economic news, but next week, we are going to have CPI, PPI, and retail sales. People might be waiting for some more clarity on those,” said David Russell, global head of market strategy at TradeStation.
Federal Reserve Chair Jerome Powell assured on Thursday that the U.S. central bank would not hesitate to implement further policy tightening if inflation remains high and economic growth continues to be robust. Powell acknowledged the deceleration in price growth in recent months, saying that the Fed was “gratified by this progress,” but he emphasized that Fed officials are uncertain whether current monetary policy is “sufficiently restrictive” to bring inflation back to its target of 2% annual growth. “We are not confident that we have achieved such a stance. We know that ongoing progress toward our 2 percent goal is not assured,” Powell said during a policy panel at the 24th Jacques Polak Annual Research Conference hosted by the International Monetary Fund. Separately, Richmond Fed President Thomas Barkin stated that although there has been “real progress” on inflation, it remains uncertain whether the U.S. central bank will need to raise its policy rate further to finish the job, while Atlanta Fed President Raphael Bostic, speaking at the same event, said that monetary policy was likely sufficiently restrictive.
U.S. rate futures have priced in a 9.3% probability of a 25 basis point rate increase at the December meeting and a 19.4% chance of a 25 basis point rate hike at the January meeting.
Meanwhile, U.S. Treasury yields surged on Thursday following a weak auction of 30-year notes.
Today, all eyes are focused on the U.S. Michigan Consumer Sentiment preliminary reading in a couple of hours. Economists, on average, forecast that the Michigan consumer sentiment index will stand at 63.7 in November, compared to the previous value of 63.8.
Also, investors will likely focus on speeches from Dallas Fed President Lorie Logan and Atlanta Fed President Raphael Bostic.
In the bond markets, United States 10-year rates are at 4.639%, up +0.15%.
The Euro Stoxx 50 futures are down -0.71% this morning as investors digested hawkish comments from Fed Chair Jerome Powell and more corporate earnings results. Losses in materials and real estate stocks are leading the overall market lower. Data from the Office for National Statistics showed on Friday that the U.K. economy stagnated in the third quarter for the first time this year. Meanwhile, European Central Bank President Christine Lagarde is due to participate in a fireside chat later in the session. In corporate news, Diageo Plc (DGE.LN) plunged over -13% following the company’s announcement that it anticipates a decrease in organic operating profit growth in the first half of fiscal 2024. Also, Cie Financiere Richemont Sa (CFR.Z.IX) fell more than -5% after the Swiss group reported an unexpected drop in earnings.
U.K.’s GDP (preliminary), U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Italy’s Industrial Production data were released today.
U.K. GDP has been reported at 0.0% q/q and +0.6% y/y in the third quarter, stronger than expectations of -0.1% q/q and +0.5% y/y.
U.K. September GDP was at +0.2% m/m and +1.3% y/y, stronger than expectations of 0.0% m/m and +1.0% y/y.
U.K. September Industrial Production stood at 0.0% m/m and +1.5% y/y, compared to expectations of +0.1% m/m and +1.1% y/y.
U.K. September Manufacturing Production came in at +0.1% m/m and +3.0% y/y, weaker than expectations of +0.3% m/m and +3.1% y/y.
U.K. September Monthly GDP 3M/3M Change arrived at 0.0%, stronger than expectations of -0.1%.
The Italian September Industrial Production stood at 0.0% m/m, stronger than expectations of -0.2% m/m.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.47%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.24%.
China’s Shanghai Composite today closed lower as sentiment towards the country remained weak amid a series of disappointing economic readings this week. Automobile stocks led the declines on Friday, with Chongqing Changan Automobile slumping over -5%. Also, Hong Kong-listed tech stocks tumbled after China’s biggest chipmaker, SMIC, posted an 80% slump in third-quarter profit. Meanwhile, Reuters reported that China’s biggest private property developer, Country Garden Holdings, is working towards formulating a tentative plan to restructure its offshore debt by the year’s end. In other news, U.S. Treasury Secretary Janet Yellen commenced a two-day meeting with Chinese Vice Premier He Lifeng on Thursday, ahead of the Asia-Pacific Economic Cooperation summit next week.
“Despite an uptick in sentiment on higher turnover, mixed October macro data reaffirmed that macro pressure persists. For more sustainable recovery of market sentiment and fund flows, further reflationary measures and debt restructuring efforts would be key,” said analysts at Morgan Stanley.
Japan’s Nikkei 225 Stock Index closed lower today as investors digested hawkish remarks from Fed Chair Jerome Powell, while disappointing earnings from heavyweight names also weighed on sentiment. Losses in healthcare, consumer cyclical, and technology stocks led the overall market lower. Meanwhile, Japanese government bond yields climbed on Friday, rebounding from multi-week lows following the rise in U.S. Treasury yields due to a weak 30-year bond auction. In other news, Japan’s government will allocate 1.99 trillion yen ($13 billion) in a supplementary budget for the current fiscal year to support efforts aimed at boosting its chip industry. On the earnings front, SoftBank Group Corp plunged over -8% after the company reported an unexpected loss in the September quarter. Also, Sony Group fell about -2% after the entertainment and technology giant posted a 29% fall in operating profit in the July-September quarter. In addition, Nikon Corp tumbled more than -10% following the release of disappointing results. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.72% to 20.00.
Pre-Market U.S. Stock Movers
The Trade Desk (TTD) plunged about -26% in pre-market trading after the company issued weaker-than-expected Q4 sales guidance.
Unity Software Inc (U) slumped over -13% in pre-market trading after the company reported weaker-than-expected Q3 revenue and declined to provide guidance. Also, the company sold $1B in aggregate principal amount of 2.0% convertible senior notes due 2027.
Doximity Inc (DOCS) soared more than +20% in pre-market trading after reporting upbeat Q2 results and raising its FY24 revenue guidance.
Plug Power Inc (PLUG) tumbled over -28% in pre-market trading after the company posted downbeat Q3 results amid “unprecedented supply challenges” in the North American hydrogen market.
Medical Properties Trust Inc (MPW) slid over -2% in pre-market trading after Stifel downgraded the stock to Hold from Buy.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - November 10th
Algonquin Power (AQN), Airsculpt Technologies (AIRS), China Automotive (CAAS), Real Good Food (RGF), Silver Spike Investment (SSIC).
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