March S&P 500 E-Mini futures (ESH24) are up +0.18%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.11% this morning as optimism about interest rate cuts from the U.S. Federal Reserve next year continued to underpin sentiment, with investors bracing for the release of fresh data on the U.S. housing market.
In Monday’s trading session, Wall Street’s major indexes closed higher, with the benchmark S&P 500 rising to a 23-month high and the tech-heavy Nasdaq 100 notching a 2-year high. United States Steel Corporation (X) soared over +26% after Nippon Steel Corp said it would buy the company for $14.1 billion. Also, Netflix Inc (NFLX) rose about +3% after Morgan Stanley raised its price target on the stock to $550 from $475. In addition, Adobe Systems Incorporated (ADBE) gained over +2% following its decision to terminate the $20 billion merger agreement with Figma Inc. due to regulatory hurdles in the U.K. and Europe. On the bearish side, VF Corporation (VFC) plunged more than -7% after the Vans sneaker maker reported a cyberattack impacting its ability to fulfill some orders ahead of the holidays. The company said hackers encrypted “some” systems and stole personal data.
Chicago Fed President Austan Goolsbee stated on Monday that the market might have misunderstood the central bank’s intended message last week and countered the notion that the Fed is actively preparing for a series of rate cuts. “I was confused a bit ... was the market just imputing ‘Here’s what we want them to be saying.’ I thought there seemed to be some confusion about how the FOMC even works. We don’t debate specific policies speculatively about the future,” Goolsbee said in an interview on CNBC. Also, Cleveland Fed President Loretta Mester said that financial markets had gotten “a little bit ahead” of the central bank in anticipating early interest-rate cuts next year. “The next phase is not when to reduce rates, even though that’s where the markets are at. It’s about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%,” Mester told the Financial Times in an interview. At the same time, San Francisco Fed President Mary Daly said that reductions to the U.S. central bank’s benchmark rate are likely to be appropriate next year due to an improvement in inflation this year, the Wall Street Journal reported.
“Clearly, markets are pricing a lot more cuts than they were before the Fed’s decision last week, but since Friday the comments from various officials have seen investors become more skeptical about the chances of aggressive easing,” said Henry Allen, a strategist at Deutsche Bank AG.
Meanwhile, U.S. rate futures have priced in an 8.3% chance of a 25 basis point rate cut at the January FOMC meeting and a 66.7% probability of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.
On the earnings front, notable companies like Accenture (ACN), FedEx (FDX), FactSet Research (FDS), and FuelCell Energy (FCEL) are set to report their quarterly results today.
Today, all eyes are focused on the U.S. Building Permits preliminary data in a couple of hours. Economists, on average, forecast that November Building Permits will stand at 1.470M, compared to the previous value of 1.498M.
U.S. Housing Starts data will be reported today as well. Economists foresee this figure to come in at 1.360M in November, compared to the previous figure of 1.372M.
In addition, investors will likely focus on a speech from Atlanta Fed President Raphael Bostic for additional insights into the potential trajectory of future Fed monetary policy.
In the bond markets, United States 10-year rates are at 3.909%, down -1.19%.
The Euro Stoxx 50 futures are up +0.22% this morning as investors digested the Eurozone’s final inflation report for November while also awaiting the U.S. core personal consumption expenditure data later this week. Real estate and technology stocks gained ground on Tuesday, while automobile and energy stocks underperformed. Eurostat reported Tuesday that both the Eurozone’s annual headline and underlying inflation matched the preliminary figures. Meanwhile, Bank of France Governor and European Central Bank member Francois Villeroy de Galhau mentioned on Tuesday that the reduction of interest rates is anticipated to occur sometime in 2024. In corporate news, Covestro Ag (1COV.D.DX) rose over +2% following a report that the Abu Dhabi National Oil Co was considering increasing its offer for the German chemicals maker. Also, UBS Group Ag (UBSG.Z.IX) gained more than +2% following the acquisition of a 1.3% stake in the bank by activist investor Cevian Capital.
Eurozone’s CPI and Eurozone’s Core CPI data were released today.
Eurozone November CPI has been reported at -0.6% m/m and +2.4% y/y, compared to expectations of -0.5% m/m and +2.4% y/y.
Eurozone November Core CPI came in at -0.6% m/m and +3.6% y/y, in line with expectations.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.05%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.41%.
China’s Shanghai Composite closed just above the flatline today as investor sentiment stayed muted between economic data and a summary of an agenda-setting meeting among the country’s top leaders. Semiconductor stocks advanced on Tuesday, while healthcare and real estate stocks underperformed. Hong Kong-listed technology stocks also lost ground on Tuesday, with Chinese food delivery giant Meituan plummeting over -5% to reach a nearly 4-year low. Meanwhile, state media reported that China’s economy is anticipated to encounter more favorable conditions and opportunities than challenges in 2024, based on a detailed readout of the Central Economic Work Conference held last week. At the same time, the ongoing weakness among developers continues to weigh on the country’s struggling economic recovery. Country Garden Services Holdings Co. tumbled more than -11% and reached an all-time low after the company announced that it had set aside some funds as impairment.
“Chinese markets could not shake their funk following last week’s mixed economic data and mild response to the Central Economic Work Conference readout,” said Brendan Ahern, chief investment officer at KraneShares, in a note.
Japan’s Nikkei 225 Stock Index closed sharply higher today, hitting a 2-week high after the Bank of Japan kept its policy rate unchanged and offered no hints of an imminent end to the world’s last negative-rate regime. Real estate and technology stocks led the gains on Tuesday. The Japanese central bank on Tuesday decided to maintain short-term interest rates at -0.1%. The BOJ indicated that 1% would remain its reference point for the upper bound on the 10-year Japanese government bond yield, although that isn’t a hard limit. The central bank also maintained its forward guidance, affirming its commitment to implement additional monetary easing steps “without hesitation” if necessary. Meanwhile, BOJ Governor Kazuo Ueda pushed back against bets for an imminent interest rate hike, stating that it is challenging to outline a plan for an exit. The Japanese yen fell to its lowest level in nearly a week following the BOJ’s decision and Ueda’s comments. On the ground of this, export-heavy automobile stocks climbed, with Honda Motor Co Ltd climbing over +1%, Nissan Motor Co Ltd rising nearly +1%, and Toyota Motor Corp gaining +0.8%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -7.73% to 17.08.
Pre-Market U.S. Stock Movers
Infobird Co Ltd (IFBD) spiked over +132% in pre-market trading following the announcement of a new business contract, valued at $1.8 million, aiming to cooperate in software and IT system development.
PepsiCo Inc (PEP) fell about -0.7% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight with a price target of $176.
Chewy Inc (CHWY) climbed more than +2% in pre-market trading after Jefferies initiated coverage of the stock with a Buy rating and a $27 price target.
Plug Power Inc (PLUG) slid over -3% in pre-market trading after Piper Sandler downgraded the stock to Underweight from Neutral with a price target of $2.30.
Amgen Inc (AMGN) gained more than +1% in pre-market trading after BMO Capital upgraded the stock to Outperform from Market Perform with a price target of $326.
Mama’s Creations Inc (MAMA) plunged over -8% in pre-market trading after announcing a proposed underwritten public offering of 5.63M shares by certain selling stockholders.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - December 19th
Accenture (ACN), FedEx (FDX), FactSet Research (FDS), Worthington Industries (WOR), Enerpac Tool Group (EPAC), Steelcase (SCS), FuelCell Energy (FCEL).
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