December S&P 500 futures (ESZ23) are up +0.06%, and December Nasdaq 100 E-Mini futures (NQZ23) are up +0.11% this morning as investors geared up for the Federal Reserve’s last interest rate decision of the year while also awaiting the release of key U.S. PPI data.
In Tuesday’s trading session, the benchmark S&P 500 posted a 20-month high, and the blue-chip Dow and tech-heavy Nasdaq 100 notched 1-3/4 year highs. Centene Corp (CNC) climbed over +2% after the healthcare insurer offered an above-consensus FY24 revenue outlook and authorized a $4 billion increase to its stock buyback program. Also, Take-Two Interactive Software Inc (TTWO) rose more than +3% after Wolfe Research initiated coverage of the stock with an Outperform rating. In addition, Icosavax Inc (ICVX) surged about +50% after AstraZeneca Plc agreed to acquire the vaccine developer for about $1.1 billion. On the bearish side, Oracle Corporation (ORCL) tumbled more than -12% after the cloud services provider reported weaker-than-expected Q2 revenue. Also, Johnson Controls (JCI) plunged about -6% after the company posted downbeat Q4 results and provided a soft FY24 adjusted EPS forecast.
The Labor Department’s report on Tuesday showed consumer prices rose +0.1% m/m in November, exceeding the 0.0% consensus. On an annual basis, headline inflation eased to +3.1% in November from +3.2% in October, right on expectations. In addition, core CPI, which excludes volatile food and fuel prices, came in at +4.0% y/y in November, unchanged from October and in line with expectations.
“After all the hopes and chatter around near-term rate cuts, CPI report is a little bit of a ‘mood dampener.’ Simply put, this isn’t enough inflation deceleration to reassert or justify the market’s policy-easing expectations, particularly at a time when the labor market is still so solid,” said Seema Shah, a chief global strategist at Principal Asset Management.
Meanwhile, U.S. Treasury Secretary Janet Yellen said Tuesday she doesn’t believe the “last mile” in bringing inflation back to the Federal Reserve’s 2% target will be particularly challenging. Inflation is “certainly meaningfully coming down,” Yellen said.
Today, all eyes are focused on the U.S. Federal Reserve’s monetary policy decision later in the day. U.S. rate futures have priced in a 98.2% probability for the Fed to keep its federal funds rate range unchanged at 5.25-5.50%. Also, investors will closely monitor the post-decision press conference by Fed Chair Jerome Powell and the release of the Fed’s Summary of Economic Projections, with particular attention to the quarterly dot plot.
On the earnings front, notable companies like Adobe (ADBE) and ABM Industries (ABM) are set to report their quarterly figures today.
On the economic data front, investors will likely focus on the U.S. Producer Price Index, due later in the day. Economists, on average, forecast that the U.S. November PPI will stand at +0.1% m/m and +1.0% y/y, compared to the previous values of -0.5% m/m and +1.3% y/y.
The U.S. Core PPI reading will also be closely watched today. Economists expect November figures to be +0.2% m/m and +2.2% y/y, compared to the previous numbers of 0.0% m/m and +2.4% y/y.
U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -0.650M, compared to last week’s value of -4.632M.
In the bond markets, United States 10-year rates are at 4.190%, down -0.41%.
The Euro Stoxx 50 futures are up +0.29% this morning as investors digested U.K. growth data while adopting a cautious stance in anticipation of the U.S. Federal Reserve’s interest rate decision. Chemical and healthcare stocks gained ground on Wednesday, while energy stocks underperformed. Data from the Office for National Statistics showed on Wednesday that Britain’s economy contracted in October. Separately, Eurostat said on Wednesday that industrial production in the Eurozone fell more than anticipated in October. Meanwhile, the European Central Bank and the Bank of England are scheduled to announce their policy verdicts on Thursday. In corporate news, Basf Se (BAS.D.DX) gained over +4% after UBS upgraded the stock to Buy from Sell. Also, Industria DE Diseno Textil Sa (ITX.E.DX) rose more than +1% after the Zara owner raised its annual margin guidance.
U.K.’s GDP, U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Eurozone’s Industrial Production data were released today.
U.K. October GDP has been reported at -0.3% m/m and +0.3% y/y, weaker than expectations of 0.0% m/m and +0.6% y/y.
U.K. October Industrial Production stood at -0.8% m/m and +0.4% y/y, weaker than expectations of -0.1% m/m and +1.1% y/y.
U.K. October Manufacturing Production came in at -1.1% m/m and +0.8% y/y, weaker than expectations of 0.0% m/m and +1.9% y/y.
U.K. October Monthly GDP 3M/3M Change was at 0.0%, weaker than expectations of +0.1%.
Eurozone October Industrial Production arrived at -0.7% m/m and -6.6% y/y, weaker than expectations of -0.3% m/m and -4.6% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.15% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.25%.
China’s Shanghai Composite today closed lower after a top leadership meeting left investors disappointed due to the absence of strong economic support measures. Liquor and real estate stocks led the declines on Wednesday. Tech giants listed in Hong Kong also slumped. The losses came after China’s annual Central Economic Work Conference this week prioritized industrial policy and showed limited inclination for large-scale stimulus measures. The language regarding housing remained largely unchanged from previous statements, with a focus on social housing, and no new solutions were presented for the struggling property sector. Meanwhile, a top Chinese housing official committed to preventing a chain reaction of debt defaults among property developers, marking one of the most robust statements aimed at mitigating the escalating real estate liquidity crisis. State broadcaster China Central Television reported that Dong Jianguo, Vice Minister of Housing and Urban-Rural Development, stated during an event on Wednesday that China will “forcefully prevent developers from defaulting on their debts all at once.” In other news, Fitch Ratings on Wednesday indicated a neutral outlook for China in 2024, highlighting ongoing challenges stemming from subdued external demand, issues in the property sector, and local government debt. Investor attention is currently centered on the upcoming release of Chinese data for November, including fixed asset investment, unemployment, industrial production, and retail sales, scheduled for Friday.
“While policymakers acknowledged economic challenges and maintained pro-growth tone, there is no new statement around property in the readout,” Goldman Sachs analysts said in a note.
Japan’s Nikkei 225 Stock Index closed slightly higher today, tracking Wall Street’s gains overnight, yet the looming Federal Reserve policy decision capped risk appetite. Chip-related stocks led the gains on Wednesday, with chip-making equipment maker Advantest climbing over +5% and chip-testing equipment maker Tokyo Electron rising more than +4%. The Bank of Japan’s closely watched tankan quarterly business survey showed on Wednesday that sentiment among large Japanese manufacturers reached its highest level since March 2022 during the three months to December, buoyed by a robust recovery in the automotive sector. Meanwhile, Japanese government bond yields fell for the third consecutive day on Wednesday, mirroring the decline in their U.S. counterparts ahead of a 20-year JGB auction. In corporate news, Ushio, Inc. soared over +12% following the announcement that the LED chip manufacturer would collaborate with Applied Materials to develop technology for the advanced semiconductor packaging market. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -4.48% to 17.28.
The Japanese Tankan Large Manufacturers Index stood at +12 in the fourth quarter, stronger than expectations of +10.
The Japanese Tankan Large Non-Manufacturers Index came in at +30 in the fourth quarter, stronger than expectations of +27.
Pre-Market U.S. Stock Movers
C4 Therapeutics Inc (CCCC) surged about +34% in pre-market trading after announcing positive data from the CFT7455 Phase 1 trial in relapsed/refractory multiple myeloma.
Nuzee Inc (NUZE) soared over +27% in pre-market trading following the announcement of Randell Weaver’s appointment as the company's President and COO.
Blend Labs Inc (BLND) climbed more than +5% in pre-market trading after Keefe Bruyette raised its price target on the stock to $1.85 from $1.50 and kept a Market Perform rating.
Johnson & Johnson (JNJ) fell about -0.6% in pre-market trading after Wells Fargo downgraded the stock to Equal Weight from Overweight with a price target of $163.
Take-Two Interactive Software Inc (TTWO) gained over +4% in pre-market trading after Nasdaq announced that the stock would be added to the Nasdaq-100 Index, effective December 18th.
Ford Motor Company (F) dropped about -0.7% in pre-market trading after Exane BNP Paribas downgraded the stock to Neutral from Outperform with a $12 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - December 13th
Adobe (ADBE), Nordson (NDSN), ABM Industries (ABM), Photronics (PLAB), Rev Group (REVG), Cognyte Software (CGNT), VersaBank (VBNK).
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