March S&P 500 E-Mini futures (ESH24) are down -0.36%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.70% this morning as U.S. Treasury yields climbed at the start of a holiday-shortened week, with market participants looking ahead to the release of the minutes of the Federal Reserve’s latest policy meeting as well as Friday’s nonfarm payrolls report.
In Friday’s trading session, Wall Street’s major averages closed lower. LYFT Inc (LYFT) slid over -3% after Nomura downgraded the stock to Reduce from Neutral with a price target of $13. Also, chip stocks retreated, with ON Semiconductor Corporation (ON) and Marvell Technology Inc (MRVL) falling more than -1%. In addition, Uber Technologies Inc (UBER) dropped over -2% after Nomura downgraded the stock to Neutral from Buy with a price target of $62. On the bullish side, Boston Scientific Corp (BSX) rose more than +2% 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.
Economic data on Friday showed that the U.S. Chicago PMI unexpectedly fell to 46.9 in December, weaker than expectations of 51.0.
Former Treasury Secretary Lawrence Summers said Friday that investors may be underestimating the risk of inflation as markets move swiftly toward expectations for Federal Reserve easing. “I think there’s still a risk that the market is probably underestimating: that we’re not going to quite make as much progress on inflation as people hope and that there’s not going to be quite as much room for Fed easing as people hope,” Summers said.
Meanwhile, U.S. rate futures have priced in a 10.9% chance of a 25 basis point rate cut at January’s monetary policy meeting and an 82.2% probability of at least a 25 basis point rate cut at the March FOMC meeting.
In this holiday-shortened week, the U.S. Nonfarm Payrolls report for December will be the main highlight. Also, investors will be monitoring a spate of economic data, including the U.S. ISM Manufacturing PMI, JOLTs Job Openings, ADP Nonfarm Employment Change, Initial Jobless Claims, S&P Global Composite PMI, S&P Global Services PMI, Crude Oil Inventories, Average Hourly Earnings, Private Nonfarm Payrolls, Unemployment Rate, Factory Orders, and ISM Non-Manufacturing PMI.
In addition, market participants will closely monitor the release of the Federal Reserve’s minutes from the December meeting on Wednesday, seeking fresh insights into the timing of rate cuts.
Today, all eyes are focused on the U.S. S&P Global Manufacturing PMI in a couple of hours. Economists, on average, forecast that the December Manufacturing PMI will stand at 48.2, compared to the previous value of 49.4.
Also, investors will likely focus on U.S. Construction Spending data, which came in at +0.6% m/m in October. Economists foresee the November figure to be +0.5% m/m.
In other news, oil rose more than +2% following Iran’s deployment of a warship to the Red Sea in response to the U.S. Navy’s sinking of three Houthi boats over the weekend.
In the bond markets, United States 10-year rates are at 3.949%, up +2.46%.
The Euro Stoxx 50 futures are up +0.53% this morning as investors kicked off 2024 with unabated optimism that major central banks might finally implement interest rate cuts. Gains in energy and bank stocks are leading the overall market higher. Expectations of softer monetary policy fueled a +19.2% surge in the Euro Stoxx 50 index in 2023. Meanwhile, a survey released on Tuesday revealed that Eurozone factories concluded 2023 on a negative note, experiencing a contraction in activity for the 18th consecutive month in December. In corporate news, Danone (BN.FP) rose about +0.8% after the French food giant announced it had signed an agreement to sell its premium organic dairy units in the United States to investment firm Platinum Equity.
Spain’s Manufacturing PMI, Italy’s Manufacturing PMI, France’s Manufacturing PMI, Germany’s Manufacturing PMI, Eurozone’s Manufacturing PMI, and U.K.’s Manufacturing PMI were released today.
The Spanish December Manufacturing PMI came in at 46.2, weaker than expectations of 47.0.
The Italian December Manufacturing PMI stood at 45.3, stronger than expectations of 44.4.
The French December Manufacturing PMI was at 42.1, stronger than expectations of 42.0.
The German December Manufacturing PMI has been reported at 43.3, stronger than expectations of 43.1.
Eurozone December Manufacturing PMI came in at 44.4, stronger than expectations of 44.2.
U.K. December Manufacturing PMI arrived at 46.2, weaker than expectations of 46.4.
China’s Shanghai Composite Index (SHCOMP) closed down -0.43%, while the Japanese market was closed for a holiday.
China’s Shanghai Composite closed lower on the first trading day of the new year, driven by weaker-than-expected factory data and a speech from President Xi Jinping that flagged headwinds facing the economy. Real estate stocks led the declines on Tuesday. Hong Kong-listed tech giants also slumped. An official factory survey showed Sunday that China’s manufacturing activity contracted in December to the lowest level in six months, while a private-sector survey released Tuesday showed that China’s factory activity growth unexpectedly accelerated in December. Separately, a private survey showed on Monday that new home prices in China increased for the fourth consecutive month in December, supported by a range of government measures. Prices, on average, increased by +0.1% in December compared to the previous month, following a +0.05% rise in November, as reported by the survey conducted by real estate research firm China Index Academy. Meanwhile, in his televised annual New Year address on Sunday, President Xi Jinping pledged to enhance economic momentum and job creation while acknowledging that some “enterprises had a tough time” and “people faced difficulties in finding jobs and meeting basic needs.” In other news, foreign investors offloaded a net 5.2 billion yuan of Chinese stocks through the Stock Connect on Tuesday, the biggest daily outflow in over two weeks.
“China’s economy may face another tough year in 2024. President Xi has made it very clear that on the economic front, his priority is bringing down the size of the property sector and its importance in the economy. That process is painful,” said Mark Matthews, a head of Asia research at Julius Baer.
The Chinese December Manufacturing PMI has been reported at 49.0, weaker than expectations of 49.5.
The Chinese December Non-Manufacturing PMI arrived at 50.4, weaker than expectations of 50.5.
The Chinese December Caixin Manufacturing PMI came in at 50.8, stronger than expectations of 50.4.
Pre-Market U.S. Stock Movers
Cryptocurrency-exposed stocks are moving higher in pre-market trading, with the price of Bitcoin climbing above $45,000 for the first time in almost two years. Marathon Digital (MARA) is up more than +14%. Also, Hut 8 Mining (HUT) is up more than +13%, and Riot Blockchain (RIOT) is up more than +11%.
Boeing Co (BA) fell about -1% in pre-market trading after Goldman Sachs downgraded the stock to Buy from Conviction Buy.
Apple Inc (AAPL) dropped over -1% in pre-market trading after Barclays downgraded the stock to Underweight from Equal Weight with a price target of $160.
Unity Software Inc (U) slid more than -3% in pre-market trading after Piper Sandler downgraded the stock to Underweight from Neutral with a price target of $35.
Estee Lauder Companies Inc (EL) fell over -1% in pre-market trading after Deutsche Bank downgraded the stock to Hold from Buy with a price target of $146.
Universal Health Services Inc (UHS) gained more than +1% in pre-market trading after Wells Fargo upgraded the stock to Overweight from Equal Weight with a price target of $177.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - January 2nd
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