March S&P 500 E-Mini futures (ESH24) are up +0.24%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.10% this morning as market participants looked ahead to the release of a fresh slew of U.S. housing market data and the Fed’s favorite inflation gauge later in the week.
In Friday’s trading session, Wall Street’s major averages closed mixed, with the blue-chip Dow notching a new record high and the tech-heavy Nasdaq 100 posting a 2-year high. Costco Wholesale Corp (COST) gained over +4% after the discount retailer topped Q1 profit estimates and announced a special cash dividend of $15 per share. Also, DocuSign Inc (DOCU) surged more than +12% following a report from the Wall Street Journal stating that the e-signature software company is working with advisors to explore a sale, potentially marking one of the largest leveraged buyouts in recent memory. On the bearish side, Exelon Corporation (EXC) fell over -6% and was the top percentage loser on the benchmark S&P 500 after Bank of America Global Research and Guggenheim Securities downgraded the stock to Neutral from Buy. In addition, Scholastic Corporation (SCHL) slid more than -11% after the company reported downbeat Q2 results and cut its full-year adjusted EBITDA forecast.
Economic data on Friday showed that the U.S. December S&P Global manufacturing PMI unexpectedly fell to 48.2, weaker than expectations of 49.3. Also, the New York Fed’s Empire State manufacturing index fell to a 4-month low of -14.50 in December, weaker than expectations of +2.00. In addition, U.S. November industrial production rose +0.2% m/m, weaker than expectations of +0.3% m/m. At the same time, the U.S. S&P Global services PMI came in at 51.3 in December, stronger than expectations of 50.6.
Chicago Fed President Austan Goolsbee stated on Sunday that it is an overstatement to contemplate rate cuts until officials are convinced that inflation is on a path lower toward its target. Also, New York Fed President John Williams said Friday that it would be “premature” for officials to start considering a reduction in its key interest rate in March. “We aren’t really talking about rate cuts,” he said in an interview on CNBC. In addition, Atlanta Fed President Raphael Bostic told Reuters Friday he was only penciling in two quarter-percentage-point rate cuts in the latter half of 2024.
“Despite some pushback from Fed officials, interest rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week,” SPI Asset Management said.
Meanwhile, U.S. rate futures have priced in a 10.3% chance of a 25 basis point rate cut at the next central bank meeting in January and a 67.5% probability of a 25 basis point rate cut at the March meeting.
On the economic data front, the November reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. Building Permits (preliminary), Housing Starts, CB Consumer Confidence, Existing Home Sales, Crude Oil Inventories, GDP, GDP Price Index, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Durable Goods Orders, Core Durable Goods Orders, Personal Income, Personal Spending, Michigan Consumer Sentiment, and New Home Sales.
On the earnings front, notable companies like FedEx (FDX), Accenture (ACN), Micron (MU), General Mills (GIS), Nike (NKE), Carnival Corp (CCL), CarMax (KMX), and BlackBerry (BB) are set to report their quarterly figures this week.
The U.S. economic data slate is mainly empty on Monday.
In the bond markets, United States 10-year rates are at 3.898%, down -0.77%.
The Euro Stoxx 50 futures are down -0.52% this morning as sentiment took a hit after officials from the Federal Reserve and European Central Bank downplayed the likelihood of aggressive interest rate cuts next year. Losses in automobile and luxury stocks are leading the overall market lower. A survey showed on Monday that German business morale unexpectedly fell in December. Meanwhile, Reuters reported that ECB policymakers were inclined to maintain the message of higher-for-longer interest rates until their March meeting, making any cuts before June challenging. According to sources speaking to Reuters, policymakers would require an assessment of the data up to, at the earliest, their March 7th meeting before contemplating a potential “dovish” pivot. In corporate news, Vodafone Group Plc (VOD.LN) gained over +6% following Iliad’s proposal to merge their Italian businesses. Also, Oci N.V. (OCI.NA) soared more than +14% after the Dutch chemicals maker announced it had agreed to sell its stake in Iowa Fertilizer Company for $3.6 billion.
Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.
The German December Ifo Business Climate Index has been reported at 86.4, weaker than expectations of 87.8.
The German December Business Expectations arrived at 84.3, weaker than expectations of 85.8.
The German December Current Assessment came in at 88.5, weaker than expectations of 89.5.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.40% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.64%.
China’s Shanghai Composite today closed lower as risk sentiment remained subdued following recent data indicating a sluggish economic recovery, and policy signals from a top meeting failed to ignite investor enthusiasm. Semiconductor, new energy, and media stocks led the declines on Monday. Tech giants and mainland developers listed in Hong Kong also slumped. Meanwhile, state media, citing a government readout, stated that China’s economy is anticipated to encounter more favorable conditions and opportunities than challenges in 2024. According to a detailed readout of the annual Central Economic Work Conference held from December 11th to 12th, as reported by the official Xinhua, macroeconomic policies will persist in offering support for economic recovery. In other news, China’s Hywin Wealth Management announced that it is conducting a review of its outstanding business and intends to present resolution plans to investors by the end of the month, prompted by missed payments on certain investment products amid challenges in the Chinese property sector. On the ground of this, shares of Shanghai Guijiu Co Ltd, a spirit maker linked to distressed wealth manager Hywin, plunged about -10%. In other corporate news, SenseTime Group Inc. tumbled over -11% after the artificial intelligence software developer’s founder, Tang Xiaoou, passed away late on Friday.
“The tone of the highly anticipated annual Central Economic Work Conference last week remained pro-growth, but there was not much detail on specific easing measures, especially in the property market. Recent economic data are mixed, but the macro picture of a weak property market and reluctant policy easing remains unchanged,” Goldman Sachs said.
Japan’s Nikkei 225 Stock Index closed lower today as cautious investors braced for the Bank of Japan’s monetary policy decision scheduled for the following day. Real estate and utilities stocks led the declines on Monday. Chip stocks also underperformed, with chip-testing equipment maker Advantest Corp falling over -1%. The Bank of Japan commences a closely watched two-day policy meeting on Monday. Investors are looking for clues from BOJ Governor Kazuo Ueda regarding the timing of the policy shift despite the prevailing consensus that the BOJ will maintain its policy unchanged at this meeting. Meanwhile, according to a Bloomberg survey, economists anticipate that April is the most likely timing for the policy change. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +6.75% to 18.51.
“The BOJ has little need to rush into making policy changes. But markets will be watching for any sign the board is willing to end negative rates or yield curve control,” Societe General economists led by Wei Yao wrote in a note.
Pre-Market U.S. Stock Movers
United States Steel Corporation (X) surged over +28% in pre-market trading after Nippon Steel Corp agreed to buy the steelmaker in a deal valued at $14.9 billion including debt.
Apple Inc (AAPL) fell about -0.7% in pre-market trading following a report from Bloomberg News stating that various Chinese government agencies and state-backed companies are reportedly advising their employees against bringing Apple iPhones and other foreign devices to work.
Welltower Inc (WELL) gained over +1% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $99.
Illumina Inc (ILMN) climbed more than +6% in pre-market trading after the company announced it would divest cancer tester developer Grail following a ruling by the U.S. Fifth Circuit Court of Appeals on Friday.
Roku Inc (ROKU) slid over -2% in pre-market trading after Seaport Research downgraded the stock to Sell from Neutral with a $75 price target.
Prologis Inc (PLD) rose more than +1% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $148.
Archer-Daniels-Midland Company (ADM) fell over -1% in pre-market trading after BMO Capital downgraded the stock to Market Perform from Outperform with an $80 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - December 18th
Heico (HEI), Quipt Home Medical (QIPT), GEE Group (JOB).
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