Morning Markets
March E-Mini S&P 500 futures (ESH24) are down -0.35%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.51% at a 3-week low.
Stock index futures this morning extended Tuesday’s losses as higher bond yields are weighing on interest rate-sensitive technology stocks. The 10-year T-note yield rose to a 2-1/2 week high today.
Stock index futures recovered from their worst levels, and bond yields fell back from their highs, on this morning’s comments from Richmond Fed President Barkin, who said, "A soft landing is increasingly conceivable but in no way inevitable. Demand, employment, and inflation all surged but now seem to be on a path back to normal."
The markets are awaiting today’s Dec ISM manufacturing and Nov JOLTS job openings reports, along with the minutes of the Dec 12-13 FOMC meeting that may provide clues as to the future path of interest rates.
Weekly MBA mortgage applications fell -10.7% in the week ended December 29. The purchase mortgage application sub-index fell by -7.6%, and the refinancing sub-index fell by -18.1%. The average 30-year fixed rate mortgage rose 5 bp to 6.76% from 6.71% the prior week.
The markets are discounting the chances for a -25 bp rate cut at 11% at the next FOMC meeting on Jan 30-31 and 79% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are mixed. The 10-year T-note yield rose to a 2-1/2 week high of 3.986% and is up +3.7 bp at 3.967%. The 10-year German bund yield is down -1.9 bp at 2.048%. The 10-year UK gilt yield is up +1.6 bp at 3.654%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -1.05%. China’s Shanghai Composite Index closed up +0.17%. Japan’s Nikkei Stock Index was closed for the New Year’s holiday.
The Euro Stoxx 50 today extended Tuesday’s losses and dropped to a 3-1/2 week low. Losses in energy stocks and miners are leading the overall market lower, with crude prices falling to a 3-week low and copper prices sliding to a 2-week low. Also, concern about China’s economy is weighing on luxury goods makers. On the positive side, German Dec unemployment rose less than expected, a sign of labor market strength. Also, European pharmaceutical stocks rose following Jeffries' supportive comments on the sector.
The German Dec unemployment change rose by +5,000, showing a stronger labor market than expectations of +20,000. The Dec unemployment rate rose +0.1 to a 2-1/2 year high of 5.9%, right on expectations.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 7% for its next meeting on January 25 and at 61% for the following meeting on March 7.
China’s Shanghai Composite Index today recovered from early losses and posted modest gains on a rebound in technology stocks. Tencent Holdings and NetEase recovered early losses and moved higher after a report from Reuters said the Chinese government removed a top official who oversaw China’s gaming industry, suggesting the government is trying to contain the damage from the unexpected new gaming regulations announced days before Christmas that sparked a sell-off in gaming stocks. Chinese stocks also found support from a report in the Economic Daily that said the government will issue more policies to stabilize expectations, growth, and employment to ensure a synchronized impact on the economy.
Japan’s stock market is closed through Wednesday for the New Year’s holiday.
Pre-market U.S. Stock Movers
Wendy’s (WEN) slid more than -1% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.
Ambarella (AMBA) dropped more than -3% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.
Mercury Systems (MRCY) fell more than -2% in pre-market trading after Jeffries downgraded the stock to underperform from hold.
Apple (AAPL) slid nearly -1% in pre-market trading, adding to Tuesday’s -3% fall, after Barclays downgraded the stock to underweight with a price target of $160, citing soft iPhone demand.
CME Group (CME) fell more than -1% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral with a price target of $195.
Rocket Companies (RKT) dropped more than -3% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.
Sofi Technologies (SOFI) tumbled more than -4% in pre-market trading after Kefe, Bruyette & Woods downgraded the stock to underperform from market perform.
Verizon Communications (VZ) rose more than +1% in pre-market trading after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $45.
Discover Financial Services (DFS) gained nearly +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $129.
Dyne Therapeutics (DYN) soared up more than +80% in pre-market trading after it announced an increase in muscle delivery in its Achieve trial in DM1 patients and Deliver trial in Duchenne muscular dystrophy patients.
Unum Group (UNM) rose more than +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral.
Vinfast Auto Ltd (VFS) jumped more than +4% in pre-market trading after BTIG initiated coverage of the stock with a buy recommendation and a price target of $10.
Earnings Reports (1/3/2024)
Cal-Maine Foods Inc (CALM), Resources Connection Inc (RGP), Simulations Plus Inc (SLP), UniFirst Corp/MA (UNF), Veradigm Inc (MDRX).
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.
