March S&P 500 E-Mini futures (ESH24) up +0.02%, and March Nasdaq 100 E-Mini futures (NQH24) is down -0.12% this morning as market participants digested the minutes of the latest Federal Reserve meeting and prepared for a slew of US economic data, with a particular focus on the ADP National Employment report.
The minutes of the December 12-13 meeting of the Federal Open Market Committee revealed that Federal Reserve policymakers agreed that it would be appropriate to maintain a restrictive stance “for some time,” acknowledging that they are likely to the highest rate and will begin to cut in 2024. The minutes signaled growing optimism among participants about the trajectory of inflation, highlighting “clear progress.” The committee expressed readiness to reduce the benchmark lending rate in 2024 if that trend continues, although the timing of such a move remained uncertain. “In their presented projections, almost all participants indicated that, reflecting the improvements in their inflation outlook, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024,” according to the FOMC minutes released. wednesday
In Wednesday’s trading session, the benchmark S&P 500 fell to a 2-week low, the blue-chip Dow fell to a 1-week low, and the tech-heavy Nasdaq 100 slipped to a 3-week low. SoFi Technologies Inc. (SOPHIE) fell more than -13% after Keefe Bruyette downgraded the stock to Underperform from Market Perform with a price target of $6.50. Also, Tesla Inc (TSLA) slipped around -4% after China-based automaker BYD overtook Tesla as the world’s largest seller of electric cars in the last three months of 2023. In addition, Walgreens Boots Alliance Inc (WBA) fell more than -4% and was the top percentage loser on the Dow after Barclays initiated coverage of the stock with an Underweight rating and a price target of $21. On the bullish side, Eli Lilly (LLY) gained more than +4% after Bank of America named the stock as its top pick for 2024 among large-cap biopharmaceutical companies.
A report from the Labor Department on Wednesday showed that US JOLT jobs unexpectedly fell to a 2-1/2-year low of 8.790M in November, weaker than expectations of 8.850M. At the same time, the US December ISM manufacturing index came in at 47.4, stronger than expectations of 47.1.
“Overall, the labor market remains strong, but demand is cooling, better balanced with supply. These data will be welcome news for policymakers and support the Fed’s view that the next move in rates will be lower, likely in Q2,” Wrote Rubeela Farooqi, chief US economist at High Frequency Economics.
Richmond Fed President Thomas Barkin said Wednesday that the U.S. central bank is “making real progress” in its efforts to curb inflation without causing significant damage to the labor market, and the anticipated soft landing is becoming “increasingly conceivable.” “Demand, employment and inflation have all increased, but now appear to be on a path back to normal,” he said in prepared remarks.
Meanwhile, US exchange rates were priced at a 6.7% probability of a 25 basis point rate cut at the January monetary policy meeting and a 67.3% probability of a 25 basis point rate cut at the conclusion of the March Fed meeting.
Today, all eyes are focused on US ADP Nonfarm Employment Change data in a few hours. Economists, on average, expect December ADP Nonfarm Employment Change to stand at 115K, compared to the previous value of 103K.
Also, investors will likely focus on US Initial Job Claims, which came in at 218K last week. Economists predict that the new figure will be 216K.
The US S&P Global Composite PMI is due today. Economists expect December’s figure to be 51.0, compared to November’s figure of 50.7.
The US S&P Global Services PMI will also be closely watched today. Economists expect the S&P Global Services PMI to come in at 51.3 in December, compared to 50.8 in November.
The US crude oil inventories data will also be reported today. Economists estimate this figure at -3.200M, compared to last week’s value of -7.114M.
In the bond markets, US 10-year yields are at 3.946%, up +1.00%.
The Euro Stoxx 50 futures are higher +0.31% this morning, staging a partial rebound after a bruising two-day selloff. Gains in health care and energy stocks are driving the overall market higher. A survey showed on Thursday that the contraction in the Eurozone’s business activity continued at the end of 2023, mainly driven by a continued decline in the dominant services industry, signaling that the bloc’s economy is in recession. Separately, preliminary data revealed on Thursday that French inflation rose in December as service prices rose faster and energy costs rose. In corporate news, Next Plc (NXT.LN) climbed over +5% after the British home and clothing retailer raised its profit forecast for the fifth time since June. At the same time, Jd Sports Fashion Plc (JD-.LN) fell more than -21% after a surprise profit warning.
The CPI of France (preliminary), the PMI of Services of France, the PMI of Services of Spain, the PMI of Services of Italy, the PMI of Services of Germany, the Composite PMI of Eurozone, the PMI of Services of Eurozone and the UK Services PMI was released today.
The French December CPI was reported at + 0.1% m / m and + 3.7% y / y, weaker than expectations of + 0.2% m / m and + 3.8% y / y.
The French December Services PMI stood at 45.7, stronger than expectations of 44.3.
The Spanish December Services PMI arrived at 51.5, stronger than expectations of 51.2.
The Italian December Services PMI came in at 49.8, in line with expectations.
The German December Services PMI was at 49.3, stronger than expectations of 48.4.
Eurozone December Composite PMI was reported at 47.6, stronger than expectations of 47.0.
Eurozone December Services PMI stood at 48.8, stronger than expectations of 48.1.
UK December Services PMI arrived at 53.4, stronger than expectations of 52.7.
Asian stock markets settled in the red today. China’s Shanghai Composite Index (SHCOMP) closed down -0.43% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.53%.
China’s Shanghai Composite closed lower today after a report showed wages offered to Chinese workers in major cities experienced the worst decline on record. Average salaries offered by companies to new hires in 38 major Chinese cities fell by -1.3% to 10,420 yuan ($1,458) in the fourth quarter of 2023 compared to the previous year, marking the biggest drop since at least 2016, according to data from online recruitment platform Zhaopin Ltd. compiled by Bloomberg. Also, Fitch downgraded the ratings of four Chinese state-owned asset managers by one level and put three of these firms on watch for possible further downgrades amid expectations of weaker government support and headwinds from a downturn in the property market. The rating agency lowered the IDRs of China Cinda Asset Management and China Orient Asset Management Co to A- from A, while the ratings of China Huarong Asset Management Co Ltd and China Great Wall Asset Management were downgraded to BBB from BBB+. On the positive side, a private sector survey showed on Thursday that China’s service activity experienced the fastest expansion in five months in December, driven by solid growth in new business. The nation’s finance minister also announced that Chinese government spending will increase this year. “We will ensure that the overall size of fiscal spending increases,” Finance Minister Lan Fo’an said in an interview published Thursday by the People’s Daily, the mouthpiece of the Communist Party. In other news, foreign capital recorded a net outflow of 3.9 billion yuan ($545.47 million) through the northbound trade link on Thursday.
China’s December Caixin Services PMI arrived at 52.9, stronger than expectations of 51.6.
Japan’s Nikkei 225 Stock Index closed lower today in catch-up trade after an extended New Year’s holiday. Technology stocks led decliners on Thursday, tracking overnight weakness in U.S. peers after the release of Fed meeting minutes gave no indication that easing could begin as soon as March. Also, airlines and utilities were responding to the plane crash on Tuesday and the powerful earthquake that struck western Japan earlier this week. On the positive side, export-heavy auto stocks gained ground as the yen weakened against the dollar, with Toyota Motor Corp rising over +1%. In addition, construction stocks advanced amid expectations that demand for reconstruction will increase after the earthquake. Meanwhile, a private sector survey showed on Thursday that Japan’s manufacturing activity experienced the most significant contraction in 10 months in December, with output and new orders falling due to market uncertainty. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed +7.04% to 18.69.
The Japanese December au Jibun Bank Japan Manufacturing PMI came in at 47.9, stronger than expectations of 47.7.
Premarket US stock transferors
Arena Group Holdings Inc (AREN) rose about +38% in premarket trading following a report from the New York Post stating that James Heckman and Brock Pierce were offering about $4.50 per share for a 45% stake in Arena.
Fubotv Inc (FOOB) climbed more than +5% in premarket trading after announcing a new multi-year distribution deal with Nexstar Media Group.
MongoDB (MDB) fell more than -1% in premarket trading after UBS downgraded the stock to Neutral from Buy with a price target of $410.
Verizon Communications Inc (VZ) gained about +1% in premarket trading after Wolfe Research upgraded the stock to Outperform from Peer Perform with a $46 price target.
Cal-Maine Foods Inc (take it easy) plunged more than -5% in premarket trading after the company reported unfavorable Q2 results.
Apple Inc (AAPL) fell about -0.6% in premarket trading after Piper Sandler downgraded the stock to Neutral from Overweight with a price target of $205.
You can see more premarket stocks here
Today’s US Earnings Spotlight: Thursday – January 4th
Walgreens Boots (WBA), Lamb Weston Holdings (LW), Conagra Brands (CAG), RPM (RPM), Simply Good Foods (SMPL), Lindsay (LNN), Schnitzer Steel Industries (RDUS), Kura Sushi (KRUS), Franklin Covey (FC).
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As of the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.