March S&P 500 E-Mini futures (ESH24) are down -0.37%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.51% this morning as the climb in U.S. Treasury yields sapped demand for risk assets while investors braced for key U.S. inflation data later this week and the kickoff of the earnings season on Friday.
In Monday’s trading session, Wall Street’s major indices closed higher, with the benchmark S&P 500 rising to a 1-week high. American Airlines Group (AAL) climbed over +7% and was the top percentage gainer on the S&P 500 after Morgan Stanley upgraded the stock to Overweight from Equal Weight. Also, NVIDIA Corporation (NVDA) gained more than +6% after unveiling new artificial intelligence products for personal computers. In addition, Apple Inc (AAPL) rose over +2% following the announcement that its Vision Pro mixed-reality device will be available for sale in the United States starting February 2nd. On the bearish side, Boeing Co (BA) slumped more than -8% and was the top percentage loser on the Dow and S&P 500 after the U.S. Federal Aviation Administration ordered a temporary grounding of 171 Boeing 737 MAX 9 jets following an incident where a fuselage section on a new Alaska Airlines jet blew out during flight.
Economic data on Monday showed that U.S. consumer credit rose +$23.75B in November, stronger than expectations of +$9.00B.
Atlanta Fed President Raphael Bostic stated on Monday that inflation has decreased more than he anticipated and is currently on a trajectory toward reaching the Fed’s 2% target, although it is premature to declare victory. “We are on a path to 2% today. The goal is to make sure we stay on the path,” Bostic said. Also, Fed Governor Michelle Bowman said inflation might ease toward the Fed’s 2% target with interest rates held at current levels and offered potential backing for reducing borrowing costs if price pressures diminish. “Should inflation continue to fall closer to our 2% goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive,” Bowman said.
Meanwhile, U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at the next central bank meeting in January and a 55.4% chance of a 25 basis point rate cut at the March FOMC meeting.
The focus this week will be on Thursday’s release of the U.S. consumer inflation report and the commencement of the fourth-quarter earnings season. Major lenders, including JPMorgan (JPM), Bank of America (BAC), and Citigroup (C), are scheduled to report their results on Friday, along with leading U.S. carrier Delta Air Lines (DAL) and health insurance giant UnitedHealth (UNH).
“This week’s inflation data could determine whether last week’s pullback is a blip on the radar or something larger,” said Chris Larkin, a managing director for trading and investing at E-Trade from Morgan Stanley.
Today, investors will likely focus on U.S. Trade Balance data. Economists, on average, forecast that the November Trade Balance will stand at -$65.00B, compared to the previous value of -$64.30B.
In the bond markets, United States 10-year rates are at 4.051%, up +1.26%.
The Euro Stoxx 50 futures are down -0.40% this morning, erasing an early advance as investors digested weak German economic data and looked ahead to crucial U.S. inflation data for insights into the Federal Reserve’s monetary policy stance this year. Losses in technology and bank stocks are leading the overall market lower. The EU’s statistics agency Eurostat said Tuesday that the Eurozone unemployment rate unexpectedly ticked lower in November. Separately, data revealed on Tuesday that German industrial production experienced an unexpected decline in November on a month-on-month basis, marking the sixth consecutive monthly decrease. In corporate news, Trigano (TRI.FP) rose over +3% after the French camping van maker reported growth in its Q1 sales.
Germany’s Industrial Production and Eurozone’s Unemployment Rate were released today.
The German November Industrial Production stood at -0.7% m/m, weaker than expectations of +0.2% m/m.
Eurozone November Unemployment Rate was at 6.4%, stronger than expectations of 6.5%.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.20%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.16%.
China’s Shanghai Composite today closed slightly higher, snapping a five-day losing streak. Tourism stocks outperformed on Tuesday amid rising enthusiasm for winter travel, with Changbai Mountain Tourism Co Ltd and Dalian Sunasia Tourism Holding climbing about +10%. Real estate and new energy stocks also gained ground. Meanwhile, a Chinese central bank official signaled that Beijing is prepared to loosen policy further by reducing banks’ official reserves. The People’s Bank of China will employ a range of tools to provide “strong support” for reasonable credit growth, said Zou Lan, head of the central bank’s monetary policy department, in an interview with Xinhua News Agency late Monday. He highlighted “reserve requirements” as one option, suggesting that policymakers have contemplated reductions to that ratio as a way to enhance lending capacity and bolster credit. In corporate news, Lenovo Group Ltd rose more than +4% after unveiling over 40 new devices and products powered by AI at the Consumer Electronics Show.
“There were few signs of a recovery in the first week of 2024, with a risk-off move broadly across China's asset classes. We think the PBOC is quite likely to cut its benchmark lending rates next Monday,” said Ting Lu, a chief China economist at Nomura.
Japan’s Nikkei 225 Stock Index closed higher today, hitting a nearly 34-year high. Technology stocks led the Nikkei’s rise on Tuesday following an overnight tech-led U.S. rally, with Tokyo Electron Ltd rising over +3% and Advantest Corp climbing more than +6%. Government data showed on Tuesday that core inflation in Japan’s capital slowed for the second consecutive month in December as cost-push price pressures continued to ease. Separately, government data on Tuesday indicated that Japanese household spending in November declined compared to the same month a year earlier, marking the ninth consecutive month of decline. In corporate news, DeNA Co Ltd soared over +9% following an after-market announcement on Friday that it would initiate preparations for the listing of shares for an equity-method affiliate company. Also, Nintendo Co., Ltd gained over +4% amid swirling news that the company could unveil a new game console this year. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +4.01% to 19.20.
The Japanese December Tokyo Core CPI has been reported at +2.1% y/y, in line with expectations.
The Japanese November Household Spending came in at -1.0% m/m and -2.9% y/y, weaker than expectations of +0.2% m/m and -2.3% y/y.
Pre-Market U.S. Stock Movers
Juniper Networks Inc (JNPR) surged about +24% in pre-market trading after a Wall Street Journal report indicated that Hewlett Packard Enterprise is in advanced talks to acquire the networking company for around $13 billion.
Netflix Inc (NFLX) fell over -2% in pre-market trading after Citi downgraded the stock to Neutral from Buy with an unchanged $500 price target.
Microchip Technology Inc (MCHP) slid more than -4% in pre-market trading after the company cut its Q3 revenue guidance amid a weakening economic environment.
Urban Outfitters Inc (URBN) gained over +5% in pre-market trading following the clothing retailer’s announcement of a 10% year-over-year sales increase through November and December.
Unity Software Inc (U) rose more than +3% in pre-market trading after the company disclosed in an SEC filing on Monday its intention to reduce approximately 1,800 employee roles, constituting about 25% of its current workforce.
PayPal Holdings Inc (PYPL) dropped about -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight with a price target of $66.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - January 9th
Albertsons (ACI), Synnex (SNX), Acuity Brands (AYI), Neogen (NEOG), WD-40 (WDFC), PriceSmart (PSMT), Tilray (TLRY), AZZ (AZZ), E2open Parent Holdings (ETWO), Smart Global (SGH), Aehr Test Systems (AEHR), Saratoga Investment Corp (SAR), VOXX (VOXX).
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