Morning Markets
March E-Mini S&P 500 futures (ESH24) are up +0.84%, and March Nasdaq 100 E-Mini futures (NQH24) are up +1.11%.
Stock index futures this morning are moderately higher as they rebound from Wednesday’s decline. Some positive corporate news is fueling gains in stock indexes today, with Micron Technology up more than +5% in pre-market trading after reporting better-than-expected Q1 revenue and forecasting Q2 revenue above consensus. Also, Boeing is up more than +2% after China approved its first 787 jet delivery since April 2021.
Stock index futures extended their gains after bond yields fell on this morning’s U.S. economic reports that showed a downward revision to U.S. Q3 GDP, an unexpected decline in the Dec Philadelphia Fed business outlook survey, and an easing of price pressures, all dovish factors for Fed policy.
On the negative side, energy stocks are moving lower in pre-market trading, with the price of WTI crude down more than -1% after Angola announced it is leaving OPEC amid a dispute over oil production quotas.
U.S. weekly initial unemployment claims rose +2,000 to 205,000, showing a stronger labor market than expectations of an increase to 215,000. Weekly continuing claims unexpectedly fell -1,000 to 1.865 million, showing a stronger labor market than expectations of an increase to 1.880 million.
The U.S. Dec Philadelphia Fed business outlook survey unexpectedly fell -4.6 to -10.5, weaker than expectations of an increase to -3.0.
U.S. Q3 GDP was revised downward by -0.3 points to 4.9% (q/q annualized), weaker than expectations of no change at 5.2%, as Q3 personal consumption was revised downward to 3.1% from the previously reported 3.6%.
U.S. Q3 price data was revised lower as the Q3 GDP price index was revised to 3.3% from 3.6%, and the Q3 core PCE price index was revised lower to 2.0% from 2.3%.
The markets are discounting the chances for a -25 bp rate cut at 12% at the next FOMC meeting on Jan 30-31 and 87% at the following meeting on March 19-20.
U.S. and European government bond yields today are lower. The 10-year T-note yield dropped to a 4-3/4 month low of 3.829% and is down -1.1 bp at 3.836%. The 10-year German bund yield dropped to a 9-month low of 1.942% and is down -2.3 bp at 1.948%. The 10-year UK gilt yield fell to an 8-1/4 month low of 3.481% and is down -1.0 bp at 3.518%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.44%. China’s Shanghai Composite Index closed up +0.57%. Japan’s Nikkei Stock Index closed down -1.59%.
The Euro Stoxx 50 today fell to a 1-1/2 week low and is moderately lower, tracking Wednesday’s losses in U.S. equity markets. Losses in automakers, real estate stocks, and consumer product makers are weighing on the overall market. Also, hawkish comments from ECB Vice President Guindos weighed on stocks when he said Eurozone inflation must converge toward 2% before the ECB can cut interest rates. On the positive side, Vodafone Group Plc is up more than +2% after Bloomberg reported Swisscom AG is weighing an offer for its Italian operations.
ECB Vice President Guindos said, "Once we see inflation is clearly converging in a stable manner to our target of 2%, monetary policy might then start to ease. But it's still too early for that to happen."
Swaps tied to ECB meeting dates are pricing in a 48% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting.
China’s Shanghai Composite index today recovered from a 19-1/2 month low and closed moderately higher. Property stocks rallied today and boosted the overall market on signs of improvement in the sector after two of China’s largest cities posted a jump in home transactions. The average daily sale of new home units in Shanghai rose nearly 41% from Dec 15 to Dec 18, and rose +122% in Beijing, following the latest easing efforts to improve sector sentiment. HSBC said in a report today that new home sales in 30 major Chinese cities last week increased by +6% compared with the previous week. Chinese agriculture-related stocks also rallied today after the government vowed to focus on the production of grains and other important agricultural products.
Japan’s Nikkei Stock Index today closed moderately lower, following Wednesday’s losses in U.S. stocks. Toyota Motor slumped more than -4% to lead automakers lower after its subsidiary Daihatsu Motor Co’s offices were raided over a safety scandal following an investigation that found most of its vehicles weren’t properly tested for collision safety. Toyota Motor also recalled about one million vehicles sold in the U.S. on an air bag sensor glitch. Also, Honda Motor closed down more than -2% after it said it will expand its recall in relation to a fuel pump issue to more than 2.5 million cars sold in the U.S. In addition, strength in the yen today against the dollar undercut Japanese exporter stocks.
Pre-Market U.S. Stock Movers
Micron Technology (MU) jumped more than +5% in pre-market trading after reporting Q1 revenue of $4.73 billion, better than the consensus of $4.54 billion, and forecasting Q2 revenue of $5.1 billion-$5.5 billion, above the consensus of $4.99 billion.
Boeing (BA) rose more than +2% in pre-market trading after China approved its first 787 jet delivery since April 2021.
CarMax (KMX) climbed more than +5% in pre-market trading after reporting Q3 EPS of 52 cents, stronger than the consensus of 42 cents.
Salesforce (CRM) climbed more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $350.
Spotify Technology (SPOT) rose more than +3% in pre-market trading after Pivotal Research Group upgraded the stock to buy from hold with a price target of $265.
Immunovant (IMVT) jumped more than +9% in pre-market trading after Phase 2 trial results showed its batoclimab exceeded 50% in treating patients with Graves’ disease.
Energy stocks and energy service providers are under pressure in pre-market trading, with the price of WTI crude down more than -1%. As a result, ConocoPhillips (COP), Devon Energy (DVN), Diamondback Energy (FANG), Haliburton (HAL), Marathon Oil (MRO), Occidental Petroleum (OXY), and Valero Energy (VLO) are down more than 1%.
Earnings Reports (12/21/2023)
AAR Corp (AIR), Apogee Enterprises Inc (APOG), CarMax Inc (KMX), Carnival Corp (CCL), Cintas Corp (CTAS), Infinera Corp (INFN), Limoneira Co (LMNR), Mission Produce Inc (AVO), NIKE Inc (NKE), Paychex Inc (PAYX), Worthington Steel Inc (WS).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
