March S&P 500 E-Mini futures (ESH24) are down -0.16%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.17% this morning as market participants looked ahead to the release of U.S. inflation data while also bracing for the start of earnings season later in the week.
Boeing Co (BA) plunged over -8% in pre-market trading after the U.S. Federal Aviation Administration ordered a temporary grounding of 171 Boeing 737 MAX 9 jets following an incident where a fuselage section on a new Alaska Airlines jet blew out during flight.
In Friday’s trading session, Wall Street’s major averages closed in the green. Elanco Animal Health (ELAN) climbed over +6% after Stifel upgraded the stock to Buy from Hold with a price target of $20. Also, regional bank stocks advanced, with Zions Bancorporation (ZION) and Citizens Financial Group Inc (CFG) rising more than +3%. In addition, Carnival Corporation (CCL) gained over +2% after Wells Fargo Securities upgraded the stock to Overweight from Equal Weight with a price target of $22. On the bearish side, International Business Machines (IBM) dropped about -1% after Jefferies initiated coverage of the stock with a Hold rating and a $180 price target.
The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose by 216K jobs last month, exceeding the 170K expected figure and increasing from the 173K jobs added in November. Also, the U.S. December unemployment rate was unchanged at 3.7%, stronger than expectations of 3.8%. In addition, U.S. average hourly earnings came in at +0.4% m/m and +4.1% y/y in December, stronger than expectations of +0.3% m/m and +3.9% y/y. At the same time, the U.S. December ISM services index fell to a 7-month low of 50.6, weaker than expectations of 52.6.
“The overall picture is of a steady job market that is gradually cooling off. But the rise in average hourly earnings could keep the Fed on hold longer than the market is pricing in,” said Kathy Jones, Charles Schwab’s chief fixed-income strategist.
Richmond Fed President Thomas Barkin stated on Friday that the central bank could lower interest rates as the economy normalizes and confidence builds regarding the downward trajectory of inflation. “I don’t have any objection conceptually to toggling rates back toward normal levels as you build increasing conviction and confidence that inflation is on a convincing path back to your target,” Barkin said.
U.S. rate futures have priced in a 4.7% probability of a 25 basis point rate cut at the Fed’s monetary policy committee meeting later this month and a 61.8% chance of a 25 basis point rate cut at the March meeting.
In other news, the top Democrat and Republican in the U.S. Congress on Sunday agreed on a roughly $1.6 trillion spending deal, yet the pact faced swift criticism from some conservatives.
On the economic data front, the U.S. consumer inflation report for December will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. Core CPI, PPI, Core PPI, Exports, Imports, Trade Balance, Crude Oil Inventories, and Initial Jobless Claims.
In addition, several Fed officials will be making appearances this week, including Bostic, Williams, and Kashkari.
Meanwhile, the fourth-quarter earnings season kicks off this week, with big banks such as JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) scheduled to release their earnings reports. UnitedHealth (UNH), BlackRock (BLK), Bank of NY Mellon (BK), and Delta Air Lines (DAL) will also report earnings.
“The bar ahead of 4Q results is higher than in recent quarters, but we expect S&P 500 firms in aggregate will beat analyst forecasts,” Goldman said in a note.
Today, investors will likely focus on U.S. Consumer Credit data. Economists, on average, forecast that November Consumer Credit will stand at 9.00B, compared to the previous value of 5.13B.
In the bond markets, United States 10-year rates are at 4.022%, down -0.37%.
The Euro Stoxx 50 futures are down -0.11% this morning, with risk appetite subdued at the beginning of a week that incorporates the release of crucial inflation readings from the U.S., Japan, and China. Losses in energy stocks are leading the overall market lower as oil prices fell by more than -2% after Saudi Arabia cut official selling prices for all regions. Eurostat reported on Monday that Eurozone retail sales unexpectedly fell in November, pointing to a bleak conclusion of the year for the bloc’s consumer economy. Separately, data showed on Monday that German factory orders rose much less than expected in November, marking a discouraging sign for Europe’s largest economy. In corporate news, Pandora A/S (PNDOR.C.DX) rose over +1% after the Danish jewelry maker topped quarterly sales expectations.
Germany’s Factory Orders, Eurozone’s Consumer Confidence, and Eurozone’s Retail Sales data were released today.
The German November Factory Orders stood at +0.3% m/m, weaker than expectations of +1.0% m/m.
Eurozone December Consumer Confidence came in at -15.0, stronger than expectations of -15.1.
Eurozone November Retail Sales arrived at -0.3% m/m and -1.1% y/y, compared to expectations of -0.3% m/m and -1.5% y/y.
China’s Shanghai Composite Index (SHCOMP) closed down -1.42%, while Japanese financial markets were closed for a holiday.
China’s Shanghai Composite closed sharply lower today amid concerns that the government’s efforts to boost the economy are insufficient, with rising geopolitical tensions also weighing on sentiment. Technology stocks led the declines on Monday. Mainland developers listed in Hong Kong also slumped. Meanwhile, Taiwan’s defense ministry reported the detection of three additional Chinese balloons flying over the Taiwan Strait on Sunday. The ministry on Saturday accused China of endangering aviation safety and engaging in psychological warfare against the island’s people with the balloons, just days before key Taiwanese elections. At the same time, China’s foreign ministry announced Sunday that the country would impose sanctions on five U.S. military manufacturers in response to the latest round of U.S. arms sales to Taiwan. In other news, China’s securities regulator is permitting mutual fund managers to sell more shares than they buy each day, lifting a ban implemented late last year to support a struggling stock market, three sources told Reuters. In corporate news, China Evergrande New Energy Vehicle Group, the electric vehicle arm of the embattled property developer China Evergrande Group, plunged over -6% following the announcement that its vice chairman, Liu Yongzhuo, had been detained by authorities “on suspicion of illegal activities.” Investor focus is currently squarely on Chinese inflation and trade data scheduled for release on Friday.
“Investor sentiment remains quite negative in China despite a rally in global stocks during the past two months of 2023. In China, there have been more signs of support for the economy, but equity investors still do not appear convinced,” Nomura Group analysts, including Chetan Seth in Singapore, wrote in a client note.
Pre-Market U.S. Stock Movers
Harpoon Therapeutics Inc (HARP) spiked about +101% in pre-market trading after Bloomberg News reported on Sunday that Merck is in advanced talks to acquire the immuno-oncology company for around $700 million.
Boeing Co (BA) plunged over -8% in pre-market trading after the U.S. Federal Aviation Administration ordered a temporary grounding of 171 Boeing 737 MAX 9 jets following an incident where a fuselage section on a new Alaska Airlines jet blew out during flight.
First Solar Inc (FSLR) dropped more than -1% in pre-market trading after Wells Fargo downgraded First Solar to Equal Weight from Overweight with a price target of $187.
Toll Brothers Inc (TOL) rose about +0.8% in pre-market trading after Wolfe Research upgraded the stock to Outperform from Peer Perform with a $118 price target.
Dell Technologies Inc (DELL) gained over +2% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $90.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - January 8th
Jefferies Financial (JEF), Helen of Troy Ltd (HELE), Accolade (ACCD).
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