March S&P 500 E-Mini futures (ESH25) are up +0.35%, and March Nasdaq 100 E-Mini futures (NQH25) are up +0.48% this morning, pointing to a positive opening on Wall Street as Treasury yields edged lower, while investors awaited fresh data on the U.S. housing market and manufacturing sector.
Investors are also focusing on President-elect Donald Trump’s inauguration on Monday and how his plans for higher tariffs, tax cuts, and stringent measures on undocumented migrants will impact equities.
In yesterday’s trading session, Wall Street’s major indices closed in the red. UnitedHealth Group (UNH) slid over -6% and was the top percentage loser on the S&P 500 and Dow after reporting weaker-than-expected Q4 revenue. Also, Texas Instruments (TXN) slumped more than -5% and was the top percentage loser on the Nasdaq 100 after Bloomberg reported that China is probing allegations of the U.S. dumping lower-end chips and unfairly subsidizing its chipmakers. In addition, U.S. Bancorp (USB) fell over -5% after the bank reported weaker-than-expected Q4 total average deposits. On the bullish side, chip stocks advanced after Taiwan Semiconductor Manufacturing Co. reported a record quarterly profit and provided strong Q1 revenue guidance, with Applied Materials (AMAT) and KLA Corp (KLAC) climbing more than +4%.
Economic data released on Thursday showed that U.S. retail sales grew +0.4% m/m in December, missing the +0.6% m/m consensus, while core retail sales, which exclude motor vehicles and parts, increased +0.4% m/m, weaker than expectations of +0.5% m/m. Also, the number of Americans filing for initial jobless claims in the past week rose by 14K to 217K, compared with the 210K expected. At the same time, the U.S. January Philadelphia Fed manufacturing index jumped to a 3-3/4 year high of 44.3, stronger than expectations of -5.0. Also, the U.S. import price index unexpectedly rose +0.1% m/m in December, stronger than expectations of -0.1% m/m.
“In the coming weeks, the fourth-quarter earnings season will provide investors with an opportunity to shift some attention from macro to micro data,” said David Lefkowitz at UBS Global Wealth Management. Fed Governor Christopher Waller said on Thursday that the U.S. central bank might cut interest rates again in the first half of 2025 if inflation data remain favorable. “The inflation data we got [on Wednesday] was very good,” Waller said in an appearance on CNBC. “If we continue getting numbers like this, it’s reasonable to think rate cuts could happen in the first half of the year,” he said, noting that he wouldn’t completely dismiss the possibility of a cut in March.
Meanwhile, U.S. rate futures have priced in a 97.3% chance of no rate change and a 2.7% chance of a 25 basis point rate cut at January’s monetary policy meeting.
On the earnings front, notable companies like Truist Financial (TFC), Schlumberger (SLB), Fastenal (FAST), State Street (STT), and Regions Financial (RF) are scheduled to report their quarterly figures today. According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.5% increase in quarterly earnings for Q4 compared to the previous year.
On the economic data front, investors will focus on U.S. Building Permits (preliminary) and Housing Starts data. Economists expect December Building Permits to be 1.460M and Housing Starts to be 1.330M, compared to the prior figures of 1.493M and 1.289M, respectively.
U.S. Industrial Production and Manufacturing Production data will be released today as well. Economists forecast December Industrial Production at +0.3% m/m and Manufacturing Production at +0.2% m/m, compared to November’s figures of -0.1% m/m and +0.2% m/m, respectively.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.596%, down -0.22%.
The Euro Stoxx 50 Index is up +0.88% this morning, on track for a weekly gain, as falling government bond yields and solid economic data from China lifted sentiment. Mining stocks led the gains on Friday after Bloomberg News reported that Glencore and Rio Tinto held early-stage talks about combining their businesses. Market sentiment also got a boost after China met its 2024 growth target of around 5%, with China-focused European sectors such as retail and automobile advancing. Data from the Office for National Statistics showed on Friday that Britain’s monthly retail sales unexpectedly fell in December, influenced by weak food sales, which dropped to their lowest level since 2013. Separately, final data from Eurostat confirmed that the Eurozone annual inflation rate rose to 2.4% in December from 2.2% in November. Meanwhile, long-dated European government bond yields retreated for the third consecutive day, offering some relief to investors. Still, investors remained cautious ahead of Donald Trump’s inauguration as U.S. President on January 20th amid worries about possible tariffs that could affect European economies. In corporate news, AstraZeneca Plc (AZN.LN) gained nearly +1% after the pharmaceutical giant announced that the U.S. FDA had approved its drug for treating previously untreated mantle cell lymphoma in adults ineligible for a stem cell transplant.
U.K.’s Retail Sales, U.K.’s Core Retail Sales, Eurozone’s CPI, and Eurozone’s Core CPI data were released today.
U.K. December Retail Sales arrived at -0.3% m/m and +3.6% y/y, weaker than expectations of +0.4% m/m and +4.2% y/y.
U.K. December Core Retail Sales came in at -0.6% m/m and +2.9% y/y, weaker than expectations of +0.1% m/m and +3.6% y/y.
Eurozone December CPI has been reported at +0.4% m/m and +2.4% y/y, in line with expectations.
Eurozone December Core CPI stood at +0.5% m/m and +2.7% y/y, in line with expectations.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.18%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.31%.
China’s Shanghai Composite Index closed higher today, reversing earlier losses as a raft of better-than-expected economic data from the country boosted sentiment. Semiconductor and tech hardware stocks led the gains on Friday. At the same time, consumer stocks underperformed. The benchmark index notched a weekly gain. Data released Friday by the National Bureau of Statistics showed that China achieved its 2024 growth target of around 5% in a challenging year, buoyed by a stimulus blitz and an export boom that supercharged activity, though looming U.S. tariffs pose a threat to a key expansion driver. Separately, data showed that industrial production and retail sales also exceeded forecasts in December, while the decline in new home prices slowed. Meanwhile, China has pledged additional monetary easing and stronger public spending this year, as the economy prepares for Donald Trump’s return to the White House. The U.S. President-elect has threatened tariffs of as high as 60% on Chinese goods, which could severely impact trade with the Asian nation. State media recently reported that China’s central bank might reduce banks’ reserve requirement ratio before the Spring Festival at the end of this month. In corporate news, China’s real estate giant Vanke dropped over -3% after reports emerged that authorities had detained its chief executive.
The Chinese GDP has been reported at +1.6% q/q and +5.4% y/y in the fourth quarter, compared to expectations of +1.6% q/q and +5.0% y/y.
The Chinese December Industrial Production arrived at +6.2% y/y, stronger than expectations of +5.4% y/y.
The Chinese December Retail Sales stood at +3.7% y/y, stronger than expectations of +3.5% y/y.
The Chinese Fixed Asset Investment came in at +3.2% y/y in the January-December period, weaker than expectations of +3.3% y/y.
The Chinese December Unemployment Rate was 5.1%, weaker than expectations of 5.0%.
Japan’s Nikkei 225 Stock Index closed lower today amid caution ahead of the Bank of Japan’s policy meeting next week. Automobile and game stocks led the declines on Friday. The benchmark index posted its third consecutive weekly decline. Data from Japan’s Ministry of Finance showed that foreign investors bought a net 313.3 billion yen ($2.02 billion) worth of Japanese stocks in the week ending January 11th, driven by a surge in chip-related stocks and positive sentiment towards the domestic corporate outlook. Meanwhile, investors are looking ahead to the Bank of Japan’s policy meeting next week, with a rate hike widely anticipated. Overnight index swaps on Friday showed as much as a 99% probability of a rate increase by the BOJ next week, up from 71% on Wednesday. In other news, a quarterly central bank survey released on Friday revealed that approximately 85.7% of Japanese households anticipate price increases a year from now, nearly unchanged from 85.6% in the previous survey in September. In corporate news, Nintendo slid over -4% after the announcement of Switch 2 lacked crucial details and left investors unimpressed. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.09% to 22.62.
Pre-Market U.S. Stock Movers
J.B. Hunt Transport Services (JBHT) plunged over -10% in pre-market trading after reporting weaker-than-expected Q4 EPS.
Applied Materials (AMAT) rose more than +2% in pre-market trading after KeyBanc upgraded the stock to Overweight from Sector Weight with a $225 price target.
Snowflake (SNOW) gained over +1% in pre-market trading after Cantor Fitzgerald initiated coverage of the stock with an Overweight rating and a $201 price target.
Qorvo (QRVO) climbed more than +7% in pre-market trading after the Wall Street Journal reported that activist investor Starboard Value had built a 7.7% stake in the chip maker.
Cloudflare (NET) advanced over +3% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $145.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - January 17th
Truist Financial Corp (TFC), Schlumberger (SLB), Fastenal (FAST), State Street (STT), Huntington Bancshares (HBAN), Regions Financial (RF), Citizens Financial Group Inc (CFG), Webster Financial (WBS), BOK Financial (BOKF).
