March S&P 500 E-Mini futures (ESH24) are trending up +0.04% this morning as investors exercised caution and refrained from taking large positions in anticipation of Thursday’s U.S. inflation report and the start of the earnings season on Friday.
In Tuesday’s trading session, Wall Street’s major indexes ended mixed. MSC Industrial Direct Company Inc (MSM) fell over -3% after the company reported weaker-than-expected Q1 results. Also, Unity Software Inc (U) plunged more than -7% after the company disclosed in an SEC filing on Monday its intention to reduce approximately 1,800 employee roles, constituting about 25% of its current workforce. In addition, Boeing Co (BA) dropped over -1%, extending losses after Monday’s -7% slide after the National Transportation Safety Board said it is contemplating widening the probe into other Boeing 737 Max jets. On the bullish side, Juniper Networks Inc (JNPR) soared over +21% and was the top percentage gainer on the benchmark S&P 500 following a Wall Street Journal report indicating that Hewlett Packard Enterprise is in advanced talks to acquire the company for around $13 billion. In addition, CrowdStrike Holdings Inc (CRWD) climbed more than +4% and was the top percentage gainer on the tech-heavy Nasdaq 100 after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $304.
Economic data on Tuesday showed that the U.S. goods and services trade deficit unexpectedly narrowed to -$63.20 billion in November from -$64.50 billion in October, better than expectations of a widening to -$65.00 billion.
Investor attention is directed towards Thursday’s U.S. inflation figures as the market looks for indications regarding the timing of Federal Reserve interest-rate cuts.
“It’s all speculation on what the Fed may or may not do, and the bond market clearly got ahead of itself in anticipating rate cuts starting in March,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder.
U.S. rate futures have priced in a 4.7% probability of a 25 basis point rate cut at the January FOMC meeting and a 62.7% chance of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.
Meanwhile, major lenders, such as JPMorgan (JPM), Bank of America (BAC), and Citigroup (C), are slated to announce their results on Friday, along with leading U.S. carrier Delta Air Lines (DAL) and health insurance giant UnitedHealth (UNH).
On the economic data front, investors will likely focus on U.S. Wholesale Inventories data due later in the day. Economists foresee this figure to stand at -0.2% m/m in November, compared to -0.4% m/m in October.
U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -0.675M, compared to last week’s value of -5.503M.
In the bond markets, United States 10-year rates are at 3.984%, down -0.85%.
The Euro Stoxx 50 futures are up +0.20% this morning as investors geared up for the crucial U.S. inflation report, scheduled for Thursday, for insights into the potential trajectory of Federal Reserve interest rate cuts. Real estate and consumer stocks gained ground on Wednesday, while commodities and construction stocks underperformed. Data on Wednesday showed that French industrial output rebounded in November compared to the previous month. Meanwhile, European Central Bank Vice President Luis de Guindos said Wednesday that the Eurozone might have experienced a recession last quarter, adding that the recent sharp deceleration in inflation is expected to pause now. In corporate news, Greggs Plc (GRG.LN) climbed more than +7% after the U.K.’s biggest bakery chain posted a bigger-than-expected rise in like-for-like sales in Q4.
France’s Industrial Production and Italy’s Retail Sales data were released today.
The French November Industrial Production arrived at +0.5% m/m, stronger than expectations of 0.0% m/m.
The Italian November Retail Sales came in at +0.4% m/m, stronger than expectations of +0.2% m/m.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.54% and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.01%.
China’s Shanghai Composite today dropped to its lowest level since May 2020 as sentiment towards the country remained weak. Investors also took note of uncertainties surrounding the upcoming Taiwan election. On Tuesday, a mistaken air raid alert was issued by the Taiwan government after the Chinese rocket carrying a science satellite flew over southern Taiwan. China stated on Wednesday that the satellite launch was a routine annual arrangement. Meanwhile, Xie Feng, Beijing’s top envoy in Washington, said the country had no room to compromise with those advocating for Taiwan’s independence. In corporate news, Shanghai Bolong Equipment Technology soared about +17% compared to its initial public offering price of 72.46 yuan on the first day of trading on the Shanghai Stock Exchange’s main board. Investor attention is currently centered on the upcoming release of Chinese trade and inflation figures scheduled for Friday.
Japan’s Nikkei 225 Stock Index closed sharply higher today, crossing the 34,000 level for the first time since March 1990. Real estate and healthcare stocks led the gains on Wednesday. Export-heavy automobile stocks also advanced as the yen weakened against the dollar, with Toyota Motor Corp and Honda Motor Co Ltd rising over +1%. The yen extended its weakness against the dollar due to a significant slowdown in Japanese worker wage growth, which is expected to limit the Bank of Japan’s ability to move away from its ultra-loose policy stance. Inflation-adjusted real wages declined -3.0% in November compared to the previous year, a faster rate of decrease than the -2.3% observed in October, as per data from the labor ministry. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.19% to 19.62.
“With the market’s expectation of an early Federal Reserve rate cut receding after the start of the new year, Japanese stocks remained firm on the back of expectations that the yen’s depreciation against the dollar will support corporate earnings,” JPMorgan chief Japan equity strategist Rie Nishihara wrote in a note.
Pre-Market U.S. Stock Movers
Intuitive Surgical Inc (ISRG) climbed more than +4% in pre-market trading after the medical device maker issued better-than-expected preliminary Q4 and FY23 revenue figures.
Aehr Test Systems (AEHR) plunged over -15% in pre-market trading after the company lowered its FY24 revenue guidance.
Etsy Inc (ETSY) dropped more than -2% in pre-market trading after Goldman Sachs downgraded the stock to Neutral from Buy with a price target of $80.
Dow Inc (DOW) fell over -1% in pre-market trading after Deutsche Bank downgraded the stock to Hold from Buy with an unchanged price target of $58.
United Airlines Holdings Inc (UAL) gained about +0.8% in pre-market trading after Susquehanna upgraded the stock to Positive from Neutral with a price target of $60.
Virgin Galactic Holdings Inc (SPCE) rose more than +3% in pre-market trading after Truist upgraded the stock to Hold from Sell with a price target of $3.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - January 10th
KB Home (KBH), Richardson Electronics (RELL).
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