Five things you need to know before the market opens on Wednesday December 7:
1. -- Stock Futures Lower As Growth, Inflation Worries Mount
U.S. equity futures edged lower Wednesday as investors looked to extend the S&P 500's four-day losing streak amid growing concerns for a near-term recession pared with a hawkish Federal Reserve and slowing corporate earnings.
The S&P 500 benchmark closed below the 4,000 point mark last night, extending its four-day decline to around 3.7%, as big bank CEOs warned of an impending U.S. slowdown and interest rate traders continued to price in more Fed rate hikes, and a marginally higher terminal level, following data earlier this week that suggested price pressures remain deeply imbedded in the world's biggest economy.
The CME Group's FedWatch continues to suggest next week's rate move will be a 50 basis point rate hike, taking the Fed Funds benchmark to between 4.25% and 4.5%, with betting on a terminal rate of between 5% and 5.25% by spring largely cemented in futures trading.
That hawkish tilt, however, could tip the economy into recession as global headwinds from China and elsewhere combine with slowing domestic investment and a pullback in consumer spending linked to a weakening job market.
Bond yields, which have been flashing recession warnings for several months, continue to signal that same risk, with benchmark 2-year Treasury note yields trading at 4.347%, some 83 basis point higher than 10-year notes yields.
The gloomy prognosis, expressed by several big bank CEOs -- including JPMorgan's Jamie Dimon -- during an investment conference in New York yesterday, added to bids for the safe-haven greenback in overnight trading, taking the U.S. dollar index 0.1% higher to 105.662.
Global stocks were also moving lower thanks to the new U.S. pessimism, with Beijing's further loosening of Covid restrictions brushed aside amid the weaker close on Wall Street and data the biggest year-on-year decline in China exports since February of 2020 last month.
The region-wide MSCI ex-Japan index was marked 1.57% lower heading into the close of trading, while Japan's Nikkei 225 fell 0.72% to close a four-week low. Europe's Stoxx 600 fell 0.35% in early trading in Frankfurt.
On Wall Street, futures contracts tied to the S&P 500 are priced for a 12 point opening bell decline while those linked to the Dow Jones Industrial Average are indicating a 65 point dip. Futures tied to the tech-heavy Nasdaq are priced for a 50 point decline.
2. -- Toll Brothers Gains After Solid Q4 Earnings, Home Building Outlook
Toll Brothers (TOL) shares moved higher in pre-market trading after the biggest U.S. luxury home builder posted better-than-expected fourth quarter earnings
Toll Brothers said sales for the three months ending in October, the group's fiscal fourth quarter, rose 21% from last year to $3.6 billion, firmly topping Street forecasts and helping deliver pre-tax profits of $841.1 million as margins expanded to 26.9%.
Looking into the coming fiscal year, Toll Brothers said it sees 2023 deliveries in the region of 8,000 to 9,000 units, around 20% of which will come in the first quarter, suggesting solid demand throughout what is expected to be another weaker year for the broader U.S. housing market.
Tol shares were marked 1.22% higher in pre-market trading at $46.50 each.
3. -- BlackRock Edges Lower As Activist Investor Targets CEO Larry Fink
BlackRock (BLK) edged lower in pre-market trading following a report late Tuesday that suggested an activist investor is looking to replace longtime CEO Larry Fink from the helm of the world's biggest asset manager.
Bluebell Capital Partners, which owns a 0.01% stake in BlackRock, says the group needs to push harder on environmental, social and corporate governance (ESG) drive, and criticized Fink for "alienating clients and attracting an undesired level of negative publicity" with the firm's ESG strategy and its ongoing investments in coal and fossil fuels.
London-based Bluebell, which has launched activist campaigns against Danone, GlaxoSmithKline and Glencore in recent years, has asked for a company wide strategic review at BlackRock, including a CEO succession plan to replace Fink, who has run the group since he co-founded it in 1988.
BlackRock shares were marked 0.32% lower in pre-market trading to indicate an opening bell price of $708.00 each.
4. -- GameStop Higher Ahead Of Q3 Earnings With Costs In Focus
GameStop (GME) shares bumped higher in pre-market trading ahead of the video game retailer's third quarter earnings after the close of trading.
GameStop is expected to post another quarterly loss of 28 cents per share over the three months ending in October, with overall revenues falling to around $1.355 billion. Analysts are likely to keep a keen eye on expenses, as well, following a big jump in SG&A last quarter to $378.9 million, nearly a third of overall sales.
To that end, reports this week suggest GameStop is paring staff with another round of layoffs, this time focused on the group's blockchain and NFT unit, which began expanding earlier this year following a deal with now-bankrupt crypto trading platform FTX.
GameStop shares were marked 0.77% higher in pre-market trading to indicate an opening bell price of $183.32 each.
5. -- Raphael Warnock Wins Georgia Senate Runoff Over Herschel Walker
Georgia Senator Raphael Warnock was re-elected to the Senate late Tuesday following a runoff victory over his Republican challenger Herschel Walker.
Warnock, who gathered 50.8% of the votes in the special election -- called after neither candidate topped the 50% vote threshold in early November -- narrowly beat Walker, a former professional football player who was hand-picked for the seat by former President Donald Trump, following a tight race that saw the two candidates clash over their loyalties to party and state leaders.
The win bumped the number of Democrats in the upper chamber to 51, compared to 49 for the Republicans, and will likely test the political influence of former President Trump as he prepares to launch a third run for the White House late next year.
“Raphael Warnock’s victory shows once again that Democrats are in sync with America and MAGA Republicans are not,” said Senate Majority Leader Chuck Schumer in a statement following his colleague's Georgia win.
