March S&P 500 E-Mini futures (ESH24) are up +0.02%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.08% this morning in light trading on the final trading day of 2023.
In Thursday’s trading session, Wall Street’s major indexes closed mixed. Advanced Micro Devices Inc (AMD) climbed over +1% on optimism that the company’s new AI product line will boost profits in the upcoming year. Also, casino stocks gained ground after the Nevada Gaming Board reported a +22.6% y/y increase in November gambling revenue on the Las Vegas Strip to $821 million, with Caesars Entertainment Corporation (CZR) and Las Vegas Sands Corp (LVS) rising more than +1%. In addition, EchoStar Corporation (SATS) soared over +6% after being chosen for inclusion in the S&P SmallCap 600 index, effective before the opening of trading on January 2nd. On the bearish side, Tesla Inc (TSLA) fell more than -3% following a Reuters report stating that two U.S. senators are urging the company to recall cars with components experiencing frequent failures, which Tesla has previously attributed to customers and user errors.
The Labor Department’s report on Thursday showed claims for state unemployment benefits rose +12K to 218K last week, weaker than expectations of 210K. Also, U.S. pending home sales were unchanged m/m in November, weaker than expectations of +1.0% m/m.
Optimism regarding early rate cuts, a potential soft landing for the American economy, and the enthusiasm for artificial intelligence have fueled impressive gains on Wall Street this year. The Dow Jones Industrials and S&P 500 Indexes are poised to end 2023 higher by about +14% and +25%, respectively. The Nasdaq 100 Index has surged an impressive +54%, propelled by a recovery in mega-cap tech names.
Meanwhile, U.S. rate futures have priced in a 16.5% chance of a 25 basis point rate cut at the January meeting and an 83.3% chance of at least a 25 basis point rate cut at the March meeting.
“The rapid decline in inflation is likely to lead the Fed to cut early and fast to reset the policy rate from a level that most participants will likely soon see as far offside. We expect three consecutive 25-bp cuts in March, May, and June, followed by one cut per quarter until the funds rate reaches 3.25-3.5% in 2025 Q3. Our forecast implies 5 cuts in 2024 and 3 more cuts in 2025,” analysts at Goldman Sachs wrote in a note.
On the economic data front, investors are likely to focus on the U.S. Chicago PMI, due later in the day. Economists, on average, forecast that the December Chicago PMI will come in at 51.0, compared to the previous number of 55.8.
In the bond markets, United States 10-year rates are at 3.888%, up +0.97%.
The Euro Stoxx 50 futures are up +0.33% this morning. Gains in media and energy stocks are leading the overall market higher. Preliminary data from the National Statistics Institute revealed on Friday that the annual inflation rate in Spain inched down in December as fuel prices decreased and food prices stabilized. Meanwhile, the Euro Stoxx 50 index is approaching a +19% advance this year, with technology and retail ranking among the best-performing sectors. Volumes are anticipated to be low on the last trading day of the year, with several regional markets, including Germany and the U.K., closing early on Friday. In corporate news, Ferrexpo Plc (FXPO.LN) rose more than +5% following the release of the company’s end-of-year report.
U.K.’s Nationwide HPI and Spain’s CPI (preliminary) data were released today.
U.K. December Nationwide HPI has been reported at 0.0% m/m and -1.8% y/y, compared to expectations of 0.0% m/m and -1.4% y/y.
The Spanish December CPI stood at 0.0% m/m and +3.1% y/y, weaker than expectations of +0.3% m/m and +3.4% y/y.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.68%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.22%.
China’s Shanghai Composite closed higher today. The yuan reached its highest level against the U.S. dollar since June and is anticipated to appreciate in 2024 as narrowing interest-rate differentials ease capital outflows, a Bloomberg survey shows. However, the Shanghai Composite Index declined by approximately -4% for the year amid the country’s sluggish post-COVID recovery and intermittent geopolitical tensions. Property stocks led the declines in 2023, with retail, new energy, and tourism stocks also ranking among the biggest losers. Highlighting diminishing confidence, net foreign buying via Stock Connect this year amounted to approximately 44 billion yuan ($6.20 billion), the lowest since 2015, as overseas investors withdrew in large numbers since August. At the same time, some investors perceive deep value in the battered stocks. In a post on Friday, Shanghai hedge fund manager Li Bei mentioned that investors underweight on China might find themselves compelled to increase positions in 2024, given the likelihood that the market has already reached its bottom. In other news, Jefferies mentioned in its 2024 outlook, “We have turned tactically positive on China,” pointing to Beijing’s economic stimulus, the rebounding yuan currency, and “trough valuation.”
“China disappointed investors who expected a strong recovery post-COVID. The economy was hit with widespread and persistent housing and local government debt problems, the clean-up of which continues,” William Witherell, a chief global economist at Cumberland Advisors, said in a note.
Japan’s Nikkei 225 Stock Index closed slightly lower today amid a lack of any market-moving cues. Losses in energy stocks led the overall market lower. Meanwhile, the benchmark Topix recorded an annual return of +25%, and the Nikkei 225 Stock Average surged by +28%, marking the best performance for both gauges since 2013, with the weak yen, corporate governance reforms, and signs of sustained inflation buoying sentiment. The yen is on track for its biggest monthly gain this year against the greenback as Bank of Japan Governor Kazuo Ueda continued to lay the groundwork for the nation’s first rate hike since 2007. In corporate news, Rakuten Group Inc. climbed over +7% after the e-commerce and fintech firm announced that the number of subscribers of its mobile phone services exceeded 6 million this month. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.11% to 17.46.
“Japan’s stock rally this year is really quite meaningful. It’s a sign that we’re finally returning to a normal situation, a non-deflationary environment where the Bank of Japan’s monetary policy easing has likely supported the market,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd.
Pre-Market U.S. Stock Movers
Annexon Inc (ANNX) climbed about +2% in pre-market trading following the Thursday disclosure by the company’s director, Muneer A Satter, of the purchase of approximately 350,000 shares at $2.88 each, amounting to $1 million.
Boston Scientific Corp (BSX) gained more than +1% in pre-market trading following the company’s announcement that it expects the FDA to approve its Farapulse PFA System for the treatment of atrial fibrillation in Q1 2024.
LYFT Inc (LYFT) plunged over -5% in pre-market trading after Nomura downgraded the stock to Reduce from Neutral with a price target of $13.
Mullen Automotive Inc (MULN) rose more than +2% in pre-market trading, extending yesterday’s gains after delivering 50 Mullen ONE electric cargo vans to Randy Marion Automotive Group for $1.68 million.
Uber Technologies Inc (UBER) fell over -1% in pre-market trading after Nomura downgraded the stock to Neutral from Buy with a price target of $62.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - December 29th
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