Morning Markets
December E-Mini S&P 500 futures (ESZ23) are down -0.48%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.64%.
Stock index futures this morning are lower as higher bond yields weigh on stocks. T-note yields are higher today as they rebounded from last Friday’s 3-month low on concern that the markets might be overly optimistic about the odds for the Fed to cut interest rates by Q2 2024.
The markets are awaiting reports this week on JOLTS job openings, ADP National Employment, and monthly U.S. payrolls report to gauge the strength of the U.S. labor market to see if additional monetary tightening is appropriate.
On the negative side for stocks, energy stocks and energy service providers are falling in pre-market trading, with the price of WTI crude oil down more than -1% at a 2-week low. Also, Alaska Air Group is down more than -12% after it agreed to purchase Hawaiian Holdings for $1.9 billion and after it was replaced in the S&P 500 Index.
On the positive side, Science Applications International is up more than +9% after reporting Q3 revenue above consensus and raising its 2024 revenue forecast. Also, cryptocurrency-related stocks are climbing in pre-market trading, with the price of Bitcoin up more than +7% at a 19-1/2 month high.
The markets are discounting a 0% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 68% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are fully discounting (a 140% chance) for that same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is up +5.6 bp at 4.251%. The 10-year German bund yield fell to a 4-1/2 month low of 2.344% and is down -0.7 bp at 2.355%. The 10-year UK gilt yield is up +3.9 bp at 4.179%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.11%. China’s Shanghai Composite Index closed down -0.29%. Japan’s Nikkei Stock Index closed down -0.60%.
The Euro Stoxx 50 today fell back from a 4-month high and is slightly lower. European stocks gave up early gains today and are slightly lower on some weaker-than-expected economic news. The Eurozone Dec Sentix investor confidence index rose less than expected, and German trade news for October was worse than expected. Also, hawkish comments from ECB Vice President Guindos weighed on stocks when he said the ECB cannot yet say inflation is in check due to “very big” wage increases in the Eurozone.
However, European government bond yields gave up an early increase and turned lower today, with the 10-year German bund yield falling to a 4-1/2 month low after ECB Governing Council member Centeno warned that too much monetary tightening could hurt the labor market. Also, an increase in M&A activity is positive for stocks after Roche Holding AG agreed to buy Carmot Therapeutics for $3.1 billion. In addition, Rolls-Royce Holdings Plc gained more than +3% after being upgraded to a buy at JPMorgan Chase and Goldman Sachs.
ECB Vice President Guindos said the ECB can't yet say inflation is in check as "we are seeing very big wage increases" in parts of the Eurozone."
ECB Governing Council member Centeno warned that labor market fallout from too much monetary tightening could be precipitous when the economy turns.
The Eurozone Dec Sentix investor confidence index rose +1.8 to -16.8, weaker than expectations of -15.6.
German trade news was weaker than expected as Oct exports unexpectedly fell -0.2% m/m, weaker than expectations of +1.1% m/m. Also, Oct imports fell -1.2% m/m, weaker than expectations of +0.8 % m/m.
China’s Shanghai Composite today posted moderate losses. Chinese stocks today were under pressure on concerns that a protracted slump in the country’s property market will hamper recovery in the broader economy. Preliminary data from the China Real Estate Information Corp late last Friday showed the value of new home sales among the 100 biggest Chinese real estate companies fell -29.6% y/y in Nov, accelerating from a -27.5% y/y decline in Oct. Losses in the overall market were limited by signs of more state-fund buying of stocks. Turnover in the China Southern CSI Guoxin Technology ETF rose to 320 million yuan ($44.8 million) today, the most in five months, signaling a state-owned institution ramped up purchases in the EFT as part of the government’s efforts to boost markets.
Japan’s Nikkei Stock Index today closed moderately lower. Losses in exporter stocks today led the overall market lower after the Japanese yen rallied to a 2-3/4 month high against the dollar, curbing exporters' earnings prospects. Japanese advertising stocks retreated today, led by a fall of more than -2% in Dentsu Group after Mizuho Securities downgraded the stock on a weak advertisement demand outlook. Also, chemical makers were under pressure as Kumiai Chemical dropped more than -4% after forecasting weaker-than-expected full-year operating profit.
Pre-Market U.S. Stock Movers
Alaska Air Group (ALK) sank more than -12% in pre-market trading after it agreed to purchase Hawaiian Holdings for $1.9 billion and after it was replaced in the S&P 500 Index.
Energy stocks and energy service providers are falling in pre-market trading, with the price of WTI crude oil down more than -1% at a 2-week low. As a result, ConocoPhillips (COP), Devon Energy (DVN), Haliburton (HAL), Occidental Petroleum (OXY), Schlumberger (SLB), and Valero Energy (VLO) are down more than -1%.
Lululemon Athletica (LULU) is down nearly -2% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight and removed it from its Top Picks list.
SharkNinja (SN) tumbled more than -3% in pre-market trading after holders affiliated with Xuning Wang offered shares via Goldman Sachs, JPMorgan Chase, and Morgan Stanley.
Cryptocurrency-related stocks are climbing in pre-market trading, with the price of Bitcoin up more than +7% at a 19-1/2 month high. As a result, Marathon Digital (MARA) is up more than+14%. Also, Riot Platforms (RIOT), Coinbase Global (COIN), and MicroStrategy (MSTR) are up more than +8%.
Uber Technologies (UBER), Jabil (JBL), and Builders FirstSource (BLDR) climbed more than +4% in pre-market trading after S&P Dow Jones Indices said the stocks will replace Sealed Air Corp, Alaska Air Group, and SolarEdge Technologies in the S&P 500 prior to trading on December 18.
Science Applications International (SAIC) rallied more than +9% in pre-market trading after reporting Q3 revenue of $1.90 billion, stronger than the consensus of $1.79 billion, and raised its 2024 revenue forecast to $7.33 billion-$7.35 billion from a previous forecast of $7.20 billion-$7.25 billion, better than the consensus of $7.23 billion.
Spotify (SPOT) rose more than +1% in pre-market trading after saying it will reduce its total headcount by 17% across the company.
General Motors (GM) gained more than +1% in pre-market trading after Mizuho Securities upgraded the stock to buy from neutral with a price target of $42.
Hawaiian Holdings (HA) surged more than +180% in pre-market trading after Alaska Air Group agreed to buy the company for $1.9 billion.
Carvana (CVNA) jumped more than +4% in pre-market trading after JPMorgan Chase upgraded the stock to neutral from underweight.
Earnings Reports (12/4/2023)
Gitlab Inc (GTLB), IDT Corp (IDT), Science Applications International (SAIC), Urban One Inc (UONEK), 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.
