Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.17%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.31%.
Stock index futures this morning are moderately higher after the U.S. Nov CPI report matched expectations and eased slightly, bolstering speculation the Fed will start cutting interest rates in the first half of 2024. The markets now await the outcome of the 2-day FOMC meeting that begins today.
The U.S. Nov CPI eased to +3.1% y/y from +3.2% y/y in Oct, right on expectations and the smallest increase in 5 months. The Nov CPI ex-food and energy rose +4.0% y/y, unchanged from Oct and right on expectations.
M&A activity is also supportive of stocks. Wyndham Hotels & Resorts is up more than +3% in pre-market trading after Choice Hotels International began an exchange offer to buy the company. Also, Icosavax is up more than +40% after AstraZeneca Plc agreed to buy the company for about $1.1 billion. In addition, Seagen is up more than +3% after Pfizer said it had received all required regulatory approvals to close its acquisition of the company on December 14.
On the bearish side for stocks, Oracle is down more than -8% in pre-market trading after reporting Q2 adjusted revenue below consensus. Also, Hasbro is down more than -6% after it said it was cutting 1,100 positions, or 20% of its staff, following an additional strategic review as a pickup in sales failed to materialize. In addition, Johnson Controls is down nearly -2% after forecasting 2024 adjusted EPS below consensus.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting 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 54% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and have more than fully discounted (122%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -1.2 bp at 4.222%. The 10-year German bund yield is down -4.4 bp at 2.226%. The 10-year UK gilt yield is down -9.7 bp at 3.981%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.11%. China’s Shanghai Composite Index closed up +0.40%. Japan’s Nikkei Stock Index closed up +0.16%.
The Euro Stoxx 50 today rose to a new 16-year high and is moderately higher. Optimism in the economic outlook is supporting stocks today after a gauge of German investor expectations unexpectedly rose for the fifth month when the German Dec ZEW survey expectations of economic growth climbed to a 9-month high. Also, European government bond yields are falling today on signs of slowing wage growth in the UK after average earnings, including bonuses, slowed more than expected in the three months through October. The markets are awaiting central bank results this week from the FOMC on Wednesday and the ECB and BOE on Thursday.
The German Dec ZEW survey expectations of economic growth index unexpectedly rose +4.0 to a 9-month high of 12.8, stronger than expectations of -0.3 to 9.5.
UK Oct average weekly earnings ex-bonus eased to +7.3% in the three months through Oct from +7.8% in the three months through Sep, better than expectations of +7.4%.
Swaps tied to ECB meeting dates have now priced in a 59% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have fully priced in that -25 bp of rate cuts by the April 11 ECB meeting.
China’s Shanghai Composite index today closed moderately higher on hopes a meeting of Chinese economic policymakers will lead to additional stimulus measures to boost the economy. Reuters reported that Chinese President Xi Jinping and other top leaders have started the annual Central Economic Work Conference to discuss China’s 2024 growth target and plans. Strength in Chinese property stocks today led the overall market higher on optimism that the government will prioritize reviving China’s ailing property market.
Japan’s Nikkei Stock Index today closed slightly higher. Strength in chip-related stocks led the overall market higher today on carryover support from Monday’s rally in U.S. chip stocks that pushed the Philadelphia Semiconductor index up to a 23-month high. Also, Japanese government bond yields retreated today to boost stocks as price pressures eased after Japan’s Nov PPI rose at the slowest pace in 2-3/4 years. Gains in the overall market were muted today as strength in the yen undercut exporter stocks.
Japan Nov PPI eased to +0.3% y/y from +0.9% y/y in Oct, the slowest pace of increase in 2-3/4 years.
Pre-Market U.S. Stock Movers
Wyndham Hotels & Resorts (WH) climbed more than +3% in pre-market trading after Choice Hotels International began an exchange offer to buy the company.
Seagen (SGEN) climbed more than +3% in pre-market trading after Pfizer said it had received all required regulatory approvals to close its acquisition of the company on December 14.
Zillow Group (ZG) rose more than +2% in pre-market trading after JMP Securities upgraded the stock to market outperform from market perform with a price target of $60.
Icosavax (ICVX) surged more than +40% in pre-market trading after AstraZeneca Plc agreed to buy the company for about $1.1 billion.
Amgen (AMGN) gained more than +1% in pre-market trading after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $300.
HubSpot (HUBS) rose more than +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $610.
Oracle (ORCL) tumbled more than -8% in pre-market trading after reporting Q2 adjusted revenue of $12.90 billion, weaker than the consensus of $13.05 billion.
Alphabet (GOOGL) fell more than -1% in pre-market trading after losing an antitrust case to Epic Games, who claimed Alphabet monopolized the Android app distribution market.
Johnson Controls (JCI) fell nearly -2% in pre-market trading after forecasting 2024 adjusted EPS of $3.65-$3.80, weaker than the consensus of $3.96.
Hasbro (HAS) tumbled more than -6% in pre-market trading after it said it was cutting 1,100 positions, or 20% of its staff, following an additional strategic review after recent sales disappointed.
Macy’s (M) dropped more than -2% in pre-market trading after Citigroup downgraded the stock to sell from neutral.
Illumina (ILMN) fell more than -2% in pre-market trading after Bank of America downgraded the stock to underperform from neutral with a price target of $100.
RingCentral (RNG) slid more than -1% in pre-market trading after Jeffries downgraded the stock to hold from buy.
Earnings Reports (12/12/2023)
Johnson Controls International (JCI), Loop Media Inc (LPTV), Value Line Inc (VALU).
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.
