Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.34%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.45%.
Stock index futures this morning are moderately higher after a smaller-than-expected increase in Nov ADP employment bolstered speculation the Fed is done raising interest rates. Stock index futures extended their gains after U.S. Q3 nonfarm productivity was revised higher and Q3 unit labor costs were revised lower, dovish factors for Fed policy.
On the positive side for stocks, SentinelOne surged more than +18% in pre-market trading after reporting Q3 revenue above consensus and raising its 2024 revenue forecast. Also, Avis Budget Group is up more than +3% after it declared a special cash dividend of $10 per share. In addition, Discover Financial Services and Capital One Financial are up more than +2% after Bank of America Global Research upgraded the stocks to buy.
On the negative side, Box Inc is down more than -12% in pre-market trading after reporting weaker-than-expected Q3 adjusted EPS and cutting its 2024 adjusted EPS forecast. Also, Imode Ltd is down more than -8% after cutting its full-year revenue forecast. In addition, Palantir Technologies is down more than -3% after an SEC filing showed president and co-founder Cohen sold $13 million of shares last Friday and Monday.
The U.S. Nov ADP employment change rose +103,000, weaker than expectations of +130,000.
U.S. Q3 nonfarm productivity was revised upward to 5.2% from 4.7%, better than expectations of 4.9% and the highest in three years. Q3 unit labor costs were revised downward to -1.2% from the previously reported -0.8%, a bigger decline than expectations of -0.9%.
The markets are discounting a 1% 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 71% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (144%) 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 dropped to a 3-month low of 4.155% and is down -0.6 bp at 4.159%. The 10-year German bund yield fell to a 6-3/4 month low of 2.226% and is down -1.9 bp at 2.228%. The 10-year UK gilt yield fell to a 6-1/2 month low of 3.974% and is down -4.2 bp at 3.983%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.66%. China’s Shanghai Composite Index closed down -0.11%. Japan’s Nikkei Stock Index closed up +2.04%.
The Euro Stoxx 50 today rallied to a 4-month high and is moderately higher. European mining and travel stocks outperformed, while food and beverage stocks were laggards. Stocks saw support after the 10-year German bund yield fell to a 6-3/4 month low today. However, bond yields recovered their decline and rose after ECB Governing Council member Kazaks said there's no need for ECB rate cuts in the first half of 2024. On the negative side for stocks was today’s news that Eurozone Oct retail sales and German Oct factory orders reports were weaker than expected. Also, energy stocks are under pressure as crude prices tumbled to a 5-month low.
Swaps tied to ECB meeting dates have now priced in a 78% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have priced in a 59% chance of -50 bp of rate cuts by the April 11 ECB meeting.
ECB Governing Council member Kazaks said given the current economic outlook and medium-term projection baseline, there is no need for ECB rate cuts in the first half of 2024.
Eurozone Oct retail sales rose +0.1% m/m, weaker than expectations of +0.2% m/m.
German Oct factory orders unexpectedly fell -3.7% m/m, weaker than expectations of +0.2% m/m.
The German Nov S&P construction PMI fell -2.1 to 36.2, the weakest level since the data series began in 2020.
China’s Shanghai Composite today fell to a 1-1/4 month low and closed slightly lower. Weakness in bank stocks weighed on the overall market after Moody’s Investors Service changed the outlook on eight Chinese banks to negative from stable. China’s weak economy has weighed on corporate earnings and is negative for stocks. According to Morgan Stanley, 30% of MSCI China stocks reported earnings in Q3 that fell short of consensus compared to 18% in Q2. A rally in Chinese stocks tied to lithium and EV batteries pulled the market up from its worst levels after analysts said expectations demand and prices are poised to rise from current levels. Also, Lenovo jumped more than +8% after HSBC raised its target price on the stock by 15% and said it sees potential upside in commercial PCs in 2024.
Japan’s Nikkei Stock Index closed sharply higher. Today's fall in bond yields sparked a rally in Japanese technology stocks after the 10-year JGB bond yield tumbled to a 4-month low of 0.622%. The decline in Japanese bond yields also weighed on the yen, which sparked gains in exporter stocks. Today's comments from BOJ Deputy Governor Himino were also positive for stocks when he said the BOJ will patiently continue its easy monetary policy until a stable inflation target is in sight.
Pre-Market U.S. Stock Movers
SentinelOne (S) surged more than +18% in pre-market trading after reporting Q3 revenue of $164.2 million, better than the consensus of $156 million, and raising its 2024 revenue forecast to $616 million from a prior estimate of $605 million, stronger than the consensus of $605.4 million.
Builders FirstSource (BLDR) climbed more than +3% in pre-market trading after B Riley Securities upgraded the stock to buy from neutral with a price target of $177.
Avis Budget Group (CAR) rose more than +3% in pre-market trading after it declared a special cash dividend of $10 per share.
Discover Financial Services (DFS) and Capital One Financial (COF) rose more than +2% in pre-market trading after Bank of America Global Research upgraded the stocks to buy.
Toll Brothers (TOL) rose more than +2% in pre-market trading after reporting Q4 revenue of $3,02 billion, stronger than the consensus of $2.78 billion and forecasting 2024 home deliveries between 9,850-10,350, above the consensus of 9,705.
Thor Industries (THO) gained more than +1% in pre-market trading after reporting Q1 EPS of 99 cents, above the consensus of 98 cents. Moody’s Investors Service cut the company’s senior unsecured debt rating to junk or Ba1 from Baa3.
Shake Shack (SHAK) climbed more than +3% in pre-market trading after Raymond James upgraded the stock to strong buy from outperform.
Signet Jewelers (SIG) gained more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral with a price target of $119.
Box Inc (BOX) dropped more than -12% in pre-market trading after reporting Q3 adjusted EPS of 36 cents, weaker than the consensus of 38 cents, and cutting its 2024 adjusted EPS forecast to $142-$1.43 from a previous forecast of $1.46-$1.50, below the consensus of $1.49.
Asana (ASAN) sank more than -10% in pre-market trading after HSBC downgraded the stock to reduce from hold with a price target of $18.
Palantir Technologies (PLTR) fell more than -3% in pre-market trading on signs of insider trading after an SEC filing showed president and co-founder Cohen sold $13 million of shares last Friday and Monday.
Imode Ltd (IMND) tumbled more than -8% in pre-market trading after cutting its full-year revenue forecast to $485 million-$495 million from a previous forecast of $500 million-$510 million, below the consensus of $504.6 million.
PayPal Holdings (PYPL) slid more than -1% in pre-market trading after Bank of America downgraded the stock to neutral from buy.
Earnings Reports (12/6/2023)
Brown-Forman Corp (BF/B), Campbell Soup Co (CPB), ChargePoint Holdings Inc (CHPT), GameStop Corp (GME), Ollie's Bargain Outlet Holding (OLLI), Thor Industries Inc (THO), Veeva Systems Inc (VEEV).
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.
