Morning Markets
March E-Mini S&P 500 futures (ESH24) are down -0.09%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.49% at a 3-week low.
Stock index futures this morning gave up overnight gains and turned lower after stronger-than-expected U.S. labor market news pushed bond yields higher and reduced expectations for Fed interest rate cuts. On the positive side, Walgreens Boot Alliance is up more than +3% in pre-market trading after reporting better-than-expected Q1 sales.
U.S. weekly initial unemployment claims fell -18,000 to a 2-1/2 month low of 202,000, showing a stronger labor market than expectations of 216,000.
The U.S. Dec ADP employment change rose +164,000, showing a stronger labor market than expectations of +125,000 and the biggest increase in 4 months.
The markets are discounting the chances for a -25 bp rate cut at 7% at the next FOMC meeting on Jan 30-31 and 69% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +7.5 bp at 3.991%. The 10-year German bund yield rose to a 2-1/2 week high of 2.120% and is up +9.2 bp at 2.116%. The 10-year UK gilt yield climbed to a 2-1/2 week high of 3.725% and is up +7.7 bp at 3.716%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.17%. China’s Shanghai Composite Index closed down -0.43%. Japan’s Nikkei Stock Index closed down -0.53%.
The Euro Stoxx 50 today is moderately higher. The 4% rally in crude prices in the past two sessions is pushing energy stocks higher. Stocks also received a boost today after the Eurozone S&P Dec composite PMI was revised higher. Also, a slower-than-expected increase in German Dec CPI was supportive of stocks. Next Plc jumped more than +5% to a record high to lead retailer stocks higher after raising its full-year sales and profit forecasts.
The Eurozone S&P Dec composite PMI was revised upward by +0.6 to 47.6 from the previously reported 47.0.
The German Dec CPI (EU harmonized) rose +0.2% m/m and +3.8% y/y, weaker than expectations of +0.3% m/m and +3.9% y/y.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 6% for its next meeting on January 25 and at 53% for the following meeting on March 7.
China’s Shanghai Composite Index today posted moderate losses. Deflationary concerns weighed on stocks after Bloomberg reported that data from online recruitment platform Zhaopin Ltd showed average salaries offered by companies to new hires in 38 major Chinese cities fell -1.3% to 1,420 yuan ($1,458) in Q4, the third straight quarter of decline and the biggest drop since 2016. The weakness in wages may curb consumer spending and negatively affect China’s slumping property market. Losses in the overall market were limited after the China Dec Caixin services PMI rose more than expected to a 5-month high. Also, Chinese bond yields are falling on hopes of more easing by the PBOC as the yield on the 10-year China sovereign note fell to 2.54%, a 3-year low. In addition, Chinese sports apparel and equipment makers rallied after Xinhua reported that winter sports venues saw a surge in demand during the New Year holidays.
The China Dec Caixin services PMI rose +1.4 to a 5-month high of 52.9, stronger than expectations of 51.6.
Japan’s Nikkei Stock Index fell to a 2-week low and closed moderately lower as it reopened from its extended New Year holiday break. Losses in technology stocks led the overall market lower on negative carryover from Wednesday’s slide in the Nasdaq 100 to a 3-week low. Also, Japanese airline stocks retreated after a Japan Airlines flight collided with a coast guard plane at Tokyo Haneda airport on January 2. The overall market recovered from its worst level as exporter stocks gained after the yen fell to a 2-week low against the dollar. The yen is under pressure on speculation the economic impact of the Noto Peninsula earthquake will delay the ending of negative interest rates by the BOJ.
Pre-market U.S. Stock Movers
Conagra Brands (CAG) tumbled more than -4% in pre-market trading after reporting Q2 organic net sales fell -3.40%, weaker than the consensus of -2.26%, and cut its full-year organic net sales forecast to down -1% to -2% from a previous forecast of up +0.09%.
Cal-Maine Foods (CALM) dropped more than -3% in pre-market trading after reporting Q2 EPS of 35 cents, well below the consensus of 83 cents.
Mobileye Global (MBLY) plunged more than -20% in pre-market trading after forecasting 2024 revenue of $1.83 billion-$1.96 billion, well below the consensus of $2.58 billion.
AbbVie (ABBV) slid nearly -2% in pre-market trading after CVS Health dropped the company’s Humira drug from most of its plans and replaced it with cheaper versions.
Apple (AAPL) slid nearly -1% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight.
Ilumina (ILMN) fell more than -2% in pre-market trading after Cowen downgraded the stock to market perform from outperform.
Mattel (MAT) dropped more than -2% in pre-market trading after Roth MKM downgraded the stock to neutral from buy.
Walgreens Boots Alliance (WBA) climbed more than +3% in pre-market trading after reporting Q1 sales of $36.71 billion, better than the consensus of $35.04 billion.
Callon Petroleum (CPE) jumped more than +6% in pre-market trading after APA Corp acquired the company for $2.6 billion.
Home Depot (HD) rose more than +1% in pre-market trading after Barclays upgraded the stock to overweight equal weight with a price target of $372.
Dollar General (DG) gained more than +1% in pre-market trading after Barclays upgraded the stock to overweight equal weight with a price target of $154.
Merck & Co (MRK) is up more than +1% in pre-market trading after Cowen upgraded the stock to outperform from market perform with a price target of $135.
Comerica (CMA) climbed more than +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $70.50.
Earnings Reports (1/4/2024)
Conagra Brands Inc (CAG), Lamb Weston Holdings Inc (LW), RPM International Inc (RPM), and Walgreens Boots Alliance Inc (WBA).
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.
