March S&P 500 E-Mini futures (ESH25) are up +0.12%, and March Nasdaq 100 E-Mini futures (NQH25) are up +0.48% this morning, extending Friday’s solid gains after muted U.S. inflation data helped reignite Federal Reserve rate cut bets, while investors also awaited a fresh batch of U.S. economic data this week.
In Friday’s trading session, Wall Street’s major equity averages closed in the green. Enphase Energy (ENPH) climbed over +8% and was the top percentage gainer on the S&P 500 after OTR Global upgraded its view on the stock to Mixed from Negative. Also, chip stocks gained ground, with Micron Technology (MU) and Nvidia (NVDA) advancing more than +3%. In addition, Mission Produce (AVO) soared over +17% after the company reported better-than-expected FQ4 results. On the bearish side, U.S. Steel (X) slumped about -5% after cutting its Q4 adjusted EBITDA guidance.
Data from the U.S. Department of Commerce released on Friday showed that the core PCE price index, a key inflation gauge monitored by the Fed, came in at +0.1% m/m and +2.8% y/y in November, weaker than expectations of +0.2% m/m and +2.9% y/y. Also, U.S. November personal spending rose +0.4% m/m, weaker than expectations of +0.5% m/m, while personal income grew +0.3% m/m, weaker than expectations of +0.4% m/m. In addition, the University of Michigan’s U.S. December consumer sentiment index was left unrevised at an 8-month high of 74.0, weaker than expectations of 74.1.
“I don’t know why we always have to be reminded that the Fed not cutting rates - or not cutting rates as fast - is actually good news if it’s driven by stronger economic data, and that’s exactly what the Fed is telling us,” said Art Hogan, chief market strategist at B. Riley Wealth.
San Francisco Fed President Mary Daly stated on Friday that the U.S. central bank’s decision to cut interest rates by a quarter percentage point at the December meeting was a “close call.” Daly noted she is “very comfortable” with policymakers’ median forecast of two interest rate cuts next year, highlighting that the Fed can adopt a more measured pace. “My projection is that it will take many fewer rate cuts next year than we thought but I’ll watch the economy and see if that works out,” Daly said.
U.S. rate futures have priced in a 91.4% probability of no rate change and an 8.6% chance of a 25 basis point rate cut at January’s monetary policy meeting.
Meanwhile, a U.S. government shutdown was averted. The U.S. Senate voted 85 to 11 on Saturday to approve a spending bill that will fund the government until mid-March. The deal provides for spending until March 14th, extends the farm bill, grants extra aid to farmers, and delivers disaster relief to victims of hurricanes. U.S. President Joe Biden signed the legislation into law on Saturday morning, avoiding the year-end shutdown.
The U.S. stock markets will close early at 1 p.m. Eastern Time on Tuesday for Christmas Eve and remain closed on Wednesday for Christmas Day.
In this holiday-shortened week, investors will be monitoring several economic data releases, including U.S. Durable Goods Orders, Core Durable Goods Orders, Building Permits, New Home Sales, the Richmond Manufacturing Index, Initial Jobless Claims, Crude Oil Inventories, the S&P/CS HPI Composite - 20 n.s.a., and Wholesale Inventories (preliminary).
Today, investors will focus on the U.S. Conference Board’s Consumer Confidence Index, which is set to be released in a couple of hours. Economists, on average, forecast that the December CB Consumer Confidence index will stand at 112.9, compared to last month’s figure of 111.7.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.549%, up +0.55%.
The Euro Stoxx 50 futures are down -0.25% this morning, starting a holiday-shortened week on a negative note. Travel and leisure as well as media stocks led the declines on Monday. Final data from the Office for National Statistics released Monday showed that the U.K. economy stagnated in the third quarter, a reduction from the initial estimate of a 0.1% increase. Separately, final data from the National Statistics Institute confirmed that Spain’s quarterly gross domestic product grew 0.8% in the third quarter. Meanwhile, market participants continued to assess the monetary policy outlook in the region. European Central Bank President Christine Lagarde said in an FT podcast released Monday, “We’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%.” In corporate news, Novo Nordisk A/S (NOVOB.C.DX) surged over +9% after the U.S. Food and Drug Administration approved the drugmaker’s bleeding disorder drug Alhemo.
U.K.’s GDP and Spain’s GDP data were released today.
U.K. GDP has been reported at 0.0% q/q and +0.9% y/y in the third quarter, weaker than expectations of +0.1% q/q and +1.0% y/y.
The Spanish GDP arrived at +0.8% q/q and +3.3% y/y in the third quarter, compared to expectations of +0.8% q/q and +3.4% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.50% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.19%.
China’s Shanghai Composite Index gave up earlier gains and closed lower today. Semiconductor and technology stocks weighed on the index on Monday. At the same time, energy stocks outperformed. Investor sentiment stayed cautious in anticipation of the People’s Bank of China’s decision on the one-year Medium-Term Lending Facility rate later this week. Meanwhile, Goldman Sachs strategists noted that Chinese stocks are likely to see limited downside next year, given that trade tension risks have been priced in and domestic stimulus measures provide a buffer against any additional selloff. Earlier this month, Chinese policymakers indicated a transition to a “moderately loose” monetary policy next year, marking a shift from the current “prudent” stance. Investors are also looking for hints of additional stimulus measures before year-end, though the likelihood remains low. In corporate news, CNOOC gained more than +3% following news that its Suizhong 36-2 oilfield block development project had started production.
Japan’s Nikkei 225 Stock Index closed higher today, buoyed by a rally on Wall Street on Friday as softer-than-expected U.S. inflation data fueled optimism for further Fed rate cuts next year. Automobile and electronics stocks led the gains on Monday. Meanwhile, Japan’s 10-year government bond yield rose on Monday, while the yen hovered near a 5-month low as investors continued to evaluate the Bank of Japan’s monetary policy outlook. BOJ Governor Kazuo Ueda signaled last week that the central bank would monitor Japanese wage trends and U.S. President-elect Donald Trump’s policies before making a decision on an interest rate hike. In other news, Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management, stated that the conditions are favorable for the Nikkei to reach 40,500 by the end of March and close 2025 at 45,400. In corporate news, Honda Motor rose over +3%, and Nissan Motor gained more than +1% after Japanese media reported that the two companies are aiming to finalize a merger agreement as soon as June and may combine in 2026. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -5.78% to 21.84.
Pre-Market U.S. Stock Movers
Rumble (RUM) spiked about +46% in pre-market trading after announcing a strategic investment of $775 million from cryptocurrency company Tether.
Despegar.com (DESP) surged more than +31% in pre-market trading after Prosus agreed to acquire the online travel agency for $1.7 billion.
Qualcomm (QCOM) gained over +3% in pre-market trading after a U.S. federal jury ruled that the company’s central processors are correctly licensed under its agreement with Arm Holdings.
Palantir Technologies (PLTR) rose more than +2% in pre-market trading following a Financial Times report that the data analytics firm and defense tech company Anduril Industries are in discussions with around a dozen competitors to create a consortium that will jointly bid for U.S. government contracts.
Eli Lilly (LLY) advanced over +1% in pre-market trading after the FDA approved the company’s weight-loss drug Zepbound for moderate-to-severe obstructive sleep apnea in adults with obesity.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - December 23rd
Anavex Life Sciences (AVXL), Limoneira (LMNR), Bridgeline Digital (BLIN).
