Saturday, December 2, 2023

Stocks Set to Open Lower as Investors Await FOMC Minutes and Nvidia Earnings

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December S&P 500 futures (ESZ23) are down -0.10%, and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.07% this morning as market participants looked ahead to the release of the minutes of the Federal Reserve’s latest policy meeting as well as earnings from semiconductor stalwart Nvidia later in the week.

In Friday’s trading session, Wall Street’s major averages ended in the green. Gap Inc (GPS) soared over +30% after the mall retailer reported better-than-expected Q3 results. Also, Ross Stores Inc (ROST) gained more than +7% after the off-price retailer posted upbeat Q3 results. In addition, energy stocks gained ground as the price of WTI crude rose more than +4%. On the bearish side, Applied Materials Inc (AMAT) fell about -4% following a Reuters report stating that the Department of Justice is reviewing the company for allegedly sending “hundreds of millions” of dollars worth of equipment to Semiconductor Manufacturing International Corporation without the required export licenses.

Economic data on Friday showed that U.S. October Housing Starts unexpectedly rose +1.9% m/m to 1.372M, stronger than expectations of 1.345M. Also, U.S. Building Permits came in at 1.487M in October compared to the forecasted 1.450M.

Fed Vice Chair for Supervision Michael Barr expressed his belief on Friday that the Fed is at or near the peak of interest rate hikes, while San Francisco Fed President Mary Daly and Boston Fed President Susan Collins emphasized the necessity for more evidence of cooling inflation.

“While it is unlikely the Fed will raise rates, investors are jumping ahead too quickly embracing rate cuts. Some time in 2024, the Fed will start to lower rates. But we are in a waiting game,” said David Donabedian, chief investment officer of CIBC Private Wealth U.S.

Meanwhile, U.S. rate futures have priced in a 99.8% probability of no hike at the December FOMC meeting and a 97.8% chance of no hike at January’s monetary policy meeting. Also, U.S. rate futures have priced in a 29.4% probability of a 25 basis point rate cut at the March meeting.

In the coming week, investors will be monitoring a spate of economic data, including the U.S. Existing Home Sales, Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Michigan Consumer Sentiment, Crude Oil Inventories, S&P Global Composite PMI (preliminary), S&P Global Manufacturing PMI (preliminary), and S&P Global Services PMI (preliminary).

In addition, investors will be paying close attention to the release of the Federal Reserve’s minutes from the November meeting on Tuesday for any new insights into the future trajectory of interest rates.

On the earnings front, several prominent companies like NVIDIA (NVDA), Zoom Video (ZM), Baidu (BIDU), and HP Inc (HPQ), along with retailers including Lowe’s (LOW), Urban Outfitters (URBN), Dick’s Sporting Goods (DKS), and Best Buy (BBY), are scheduled to release their quarterly results this week.

The U.S. economic data slate is mainly empty on Monday.

In the bond markets, United States 10-year rates are at 4.448%, up +0.11%.

The Euro Stoxx 50 futures are down -0.05% this morning as investors digested a slew of negative corporate news while awaiting the release of FOMC and ECB minutes later in the week. Energy stocks gained ground on Monday, while healthcare stocks underperformed. The Federal Statistics Office said Monday that German producer prices stayed sharply negative for a fourth consecutive month in October. Meanwhile, Moody’s Investors Service lifted its outlook on Italy’s debt to stable, eliminating the imminent risk of a downgrade to junk status. ECB Governing Council member Pierre Wunsch said on Monday that the European Central Bank might need to raise borrowing costs once more if investor expectations for monetary easing undermine the institution’s policy stance. In corporate news, Bayer Ag (BAYN.D.DX) plunged over -19% after the German pharmaceutical giant stopped a large late-stage trial testing a new anti-clotting drug. Also, Ashtead Group Plc (AHT.LN) slumped more than -9% after the U.K. equipment rental company said its full-year profit would come in below market expectations. In addition, Julius Baer Group Ltd (BAER.Z.IX) slid over -10% following the Swiss bank’s warning of a profit decline.

Germany’s PPI data was released today.

The German October PPI has been reported at -0.1% m/m and -11.0% y/y, in line with expectations.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.46%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.59%.

China’s Shanghai Composite today closed higher. China kept benchmark lending rates unchanged at a monthly fixing on Monday, matching market expectations. In a statement on Monday, the People’s Bank of China announced the retention of the one-year loan prime rate at 3.45% and the five-year LPR at 4.20%. Also, the offshore yuan strengthened after the People’s Bank of China boosted its daily reference rate for the currency to the highest level since August. Meanwhile, International Monetary Fund Managing Director Kristalina Georgieva stated on Friday that last week’s meeting between U.S. President Joe Biden and Chinese President Xi Jinping is a crucial signal indicating the necessity for increased global cooperation. In corporate news, Hong Kong-listed property stocks climbed on Monday, with Sunac China Holdings Ltd rising over +5% after the company’s offshore debt restructuring became effective. Tech stocks listed in Hong Kong also gained ground. In other news, James Wang, head of China strategy at UBS, expressed optimism about China’s equity market in 2024, anticipating a 15% upside to the MSCI China index due to the current market’s trough valuation, low investor positioning, and increasing policy support.

Japan’s Nikkei 225 Stock Index closed lower today after briefly touching a fresh 33-year high. The Nikkei has gained about 28% this year, driven by a prolonged period of weakness in the yen, robust corporate earnings, and corporate governance reforms. Meanwhile, export-oriented stocks led the declines on Monday as the yen strengthened slightly after hitting its 2023 low earlier this month, while financial stocks outperformed. In corporate news, Tokio Marine Holdings Inc. climbed over +5% after the casualty insurer boosted its full-year profit guidance and announced plans to buy back up to 2% of its shares. Also, Panasonic Holdings Corp gained about +5%, extending Friday’s gains following its announcement of the sale of a stake in its automotive systems business to funds managed by U.S. private equity firm Apollo Global Management. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.64% to 18.58.

“Investors sold stocks as they became cautious about recent sharp gains of the Nikkei. There are more positive cues for the Nikkei than negative cues, with robust corporate outlook and share buybacks from the latest earnings season, and U.S. interest rates seem to have hit their peak,” said Takehiko Masuzawa, trading head at Phillip Securities Japan.

Pre-Market U.S. Stock Movers

Microsoft Corporation (MSFT) gained over +2% in pre-market trading after appointing Sam Altman, the co-founder of OpenAI who was ousted from his startup last week, to lead its in-house artificial intelligence team.

MediciNova Inc (MNOV) surged about +18% in pre-market trading after announcing positive results from a Phase 2 clinical study of MN-166 in glioblastoma patients.

Full Truck Alliance Co Ltd ADR (YMM) climbed over +4% in pre-market trading after the company reported upbeat Q3 results.

Boeing Co (BA) rose more than +1% in pre-market trading after Deutsche Bank upgraded the stock to Buy from Hold.

Chegg Inc (CHGG) slid over -3% in pre-market trading after Morgan Stanley downgraded the stock to Underweight from Equal Weight.

Dutch Bros Inc (BROS) gained more than +3% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday – November 20th

Agilent Technologies (A), Keysight Technologies (KEYS), Symbotic (SYM), Zoom Video (ZM), Legend Bio (LEGN), Bellring (BRBR), Golub (GBDC), Central Garden&Pet (CENT), Mueller Water Products (MWA), Enlight Energy (ENLT), Fidelis Insurance Holdings (FIHL), FinVolution Group (FINV).
More Stock Market News from Barchart

On 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 solely for informational purposes. For more information please view the Barchart 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.

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