December S&P 500 futures (ESZ23) are up +0.21%, and December Nasdaq 100 E-Mini futures (NQZ23) are up +0.23% this morning as market participants looked ahead to a reading on the Federal Reserve’s preferred inflation metric.
In Wednesday’s trading session, Wall Street’s major averages ended mixed. Cigna Corp (CI) plummeted over -8% following a Wall Street Journal report stating that the health insurance giant is engaged in merger discussions with Humana, which analysts said would be challenged by antitrust regulators. Also, Hormel Foods Corporation (HRL) slid more than -4% after reporting weaker-than-expected Q4 results and issuing a soft FY24 outlook. On the bullish side, NetApp Inc (NTAP) surged over +14% and was the top percentage gainer on the benchmark S&P 500 after the data infrastructure company reported better-than-expected Q2 results and lifted its FY24 forecast. In addition, General Motors Company (GM) gained more than +9% after the carmaker said it would boost its dividend by 33% and repurchase $10 billion of shares.
The Bureau of Economic Analysis released its second estimate of U.S. Q3 GDP growth on Wednesday, revising it upward to +5.2% q/q on an annualized basis from the previous reading of +4.9% q/q.
Cleveland Fed President Loretta Mester stated Wednesday that the monetary policy is “in a good place” for policymakers to evaluate incoming information on the economy and financial conditions. Also, Atlanta Fed President Raphael Bostic said in an essay that he has more confidence that the downward trajectory of inflation is likely to continue, and economic activity will slow in the coming months. At the same time, Richmond Fed President Thomas Barkin said he was “skeptical” that inflation was on its way down to 2% and argued for maintaining the option to raise interest rates in case inflation remains persistent. “If inflation comes down naturally and smoothly, awesome. But if inflation is going to flare back up, I think you want to have the option of doing more on rates,” Barkin said.
“It is certainly likely you’ll see a little bit more division within the Fed because there are some conflicting (views). The Fed is likely to push back on market expectations for a rate cut,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.
Meanwhile, U.S. rate futures have priced in a 95.8% chance of no hike at the December FOMC meeting and a 92.0% chance of no hike at the January FOMC meeting. Also, U.S. rate futures have priced in a 44.5% probability of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.
In other news, the Federal Reserve’s Beige Book report, released on Wednesday, indicated a slowdown in U.S. economic activity in recent weeks as consumers pulled back on discretionary spending. “Sales of discretionary items and durable goods, like furniture and appliances, declined, on average, as consumers showed more price sensitivity,” according to the report released Wednesday.
Today, all eyes are focused on the U.S. core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, in a couple of hours. Economists, on average, forecast that the core PCE price index will come in at +0.2% m/m and +3.5% y/y in October, compared to the previous values of +0.3% m/m and +3.7% y/y.
Also, investors will likely focus on the U.S. Chicago PMI, which stood at 44.0 in October. Economists foresee the November figure to be 45.4.
U.S. Pending Home Sales data will be reported today. Economists foresee this figure to stand at -2.0% m/m in October, compared to the previous number of +1.1% m/m.
U.S. Personal Spending data will also be closely watched today. Economists forecast Personal Spending to be at +0.2% m/m in October, compared to the previous figure of +0.7% m/m.
U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 220K, compared to last week’s value of 209K.
In the bond markets, United States 10-year rates are at 4.291%, up +0.49%.
The Euro Stoxx 50 futures are up +0.21% this morning as investors digested fresh Eurozone inflation data while exercising caution in anticipation of a crucial U.S. inflation print. Energy and insurance stocks gained ground on Thursday, while chemical stocks underperformed. Data on Thursday showed that Eurozone headline inflation decelerated more than anticipated in November while underlying inflation moderated for a fourth month. Meanwhile, investors are anticipating an earlier commencement of European Central Bank interest-rate cuts next year and a deeper easing cycle after a series of unexpectedly low inflation readings in the region’s main economies. In corporate news, Asr Nederland (ASRNL.NA) soared over +11% after the Dutch insurance company announced a final settlement with interest groups regarding unit-linked products, with the agreed amount significantly below expectations. At the same time, Oci N.V. (OCI.NA) fell more than -6% after Jefferies downgraded the chemicals producer to Hold from Buy.
Germany’s Retail Sales, France’s CPI (preliminary), France’s GDP (preliminary), Germany’s Unemployment Rate, Germany’s Unemployment Change, Italy’s CPI (preliminary), Eurozone’s Unemployment Rate, Eurozone’s CPI (preliminary), and Eurozone’s Core CPI (preliminary) data were released today.
The German October Retail Sales stood at +1.1% m/m and -0.1% y/y, stronger than expectations of +0.4% m/m and -2.0% y/y.
The French November CPI came in at -0.2% m/m, weaker than expectations of +0.1% m/m.
The French GDP has been reported at -0.1% q/q and +0.6% y/y in the third quarter, weaker than expectations of +0.1% q/q and +0.7% y/y.
The German November Unemployment Rate was at 5.9%, weaker than expectations of 5.8%.
The German November Unemployment Change arrived at 22K, in line with expectations.
The Italian November CPI stood at -0.4% m/m, weaker than expectations of -0.2% m/m.
Eurozone October Unemployment Rate was at 6.5%, in line with expectations.
Eurozone November CPI has been reported at +2.4% y/y, weaker than expectations of +2.7% y/y.
Eurozone November Core CPI came in at +3.6% y/y, weaker than expectations of +3.9% y/y.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.26%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.50%.
China’s Shanghai Composite today closed higher as disappointing purchasing managers index data strengthened the case for near-term fiscal and monetary easing. Tourism and healthcare stocks outperformed on Thursday. An official factory survey showed Thursday that China’s manufacturing activity contracted for a second consecutive month in November and at an accelerated rate, indicating the necessity for additional government policy support measures to shore up economic growth. In another worrying sign, China’s vast services sector unexpectedly eased in November. Meanwhile, state media reported Wednesday that Chinese President Xi Jinping visited Shanghai and gained insights into the city’s endeavors to enhance its competitiveness as an international financial center. In corporate news, Powerlong Real Estate Holdings Limited plunged over -11% after the builder defaulted on a dollar bond, grappling with sluggish sales and worsening liquidity.
“Still-weak data may see authorities laying more options of policy support on the table while markets continue to seek the conviction for a sustained recovery,” said Jun Rong Yeap, market analyst at IG Asia Pte.
The Chinese November Manufacturing PMI stood at 49.4, weaker than expectations of 49.7.
The Chinese November Non-Manufacturing PMI came in at 50.2, weaker than expectations of 51.1.
Japan’s Nikkei 225 Stock Index closed higher today, booking its best month in two years, propelled by a robust corporate earnings season and optimism surrounding the belief that U.S. interest rates have reached their peak. All sectors of the Nikkei 225 ended in the green, with healthcare and energy stocks experiencing the largest gains. Government data showed on Thursday that Japan’s factory output increased for the second consecutive month in October, driven by the production of integrated circuits and automobiles. Separately, data showed that Japanese retail sales rose in October compared to the same month last year, marking a 20th consecutive month of gains. Meanwhile, Bank of Japan board member Toyoaki Nakamura advocated on Thursday for the continuation of monetary easing, citing his lack of confidence in the country’s ability to achieve a sustainable 2% inflation backed by wage growth. “We are now seeing a one-in-a-thousand chance to achieve a virtuous cycle of wages and prices,” Nakamura said. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.82% to 16.57.
The Japanese October Industrial Production arrived at +1.0% m/m, stronger than expectations of +0.8% m/m.
The Japanese October Retail Sales stood at +4.2% y/y, weaker than expectations of +5.9% y/y.
The Japanese November Household Confidence came in at 36.1, stronger than expectations of 35.6.
Pre-Market U.S. Stock Movers
Salesforce Inc (CRM) soared over +8% in pre-market trading after the company reported solid Q3 results and issued above-consensus Q4 guidance.
Snowflake Inc (SNOW) climbed more than +8% in pre-market trading after the data warehousing giant posted upbeat Q3 results and boosted its full-year product revenue forecast.
Pure Storage Inc (PSTG) slumped over -16% in pre-market trading after the maker of flash array storage products offered weaker-than-expected Q4 and FY24 revenue guidance.
Nutanix Inc (NTNX) gained more than +10% in pre-market trading after the company reported better-than-expected Q1 results and raised its FY24 revenue guidance.
Snap Inc (SNAP) rose over +3% in pre-market trading after Jefferies upgraded the stock to Buy from Hold.
Okta Inc (OKTA) fell more than -2% in pre-market trading after KeyBanc downgraded the stock to Sector Weight from Overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - November 30th
RBC (RY), Toronto Dominion Bank (TD), Canadian Imperial Bank (CM), Kroger (KR), Ulta Beauty (ULTA), UiPath (PATH), BRP Inc (DOOO), Academy Sports (ASO), Ambarella (AMBA), Pagerduty (PD), Cracker Barrel Old (CBRL), American Woodmark (AMWD), CleanSpark (CLSK), REX American Resources (REX), Movado (MOV), Titan Machinery (TITN), Zumiez (ZUMZ), Tillys (TLYS), Duluth Holdings Inc (DLTH), 111 Inc (YI), Big Lots (BIG).
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