Today’s Big Picture

Asia-Pacific equity markets finished the day higher except for China’s Shanghai Composite, which fell 0.56% after retail sales growth figures came short of expectations. Taiwan’s TAIEX rose 0.12%, South Korea’s KOSPI gained 0.76%, Australia’s ASX All Ordinaries and Japan’s Nikkei added 0.82% and 0.87%, respectively and India’s SENSEX closed 1.37% higher. Hong Kong’s Hang Seng had a strong showing, up 2.38% on a broad rally led by Transportation and Non-Energy Minerals names. European markets are tracking higher in midday trading, and U.S. equity futures point to a positive open.

Stock index futures pointing to the fourth straight session of gains, as investor sentiment remained upbeat in the wake of the Federal Reserve’s dovish pivot this week. The Fed’s dovish pivot, December Flash PMI data, and the falling dollar once again make U.S. equities the best house on the stock market block. While seasonal strength for stocks is expected by many to continue through the end of 2023, the increasingly overbought S&P 500 and Nasdaq Composite could face setbacks as traders and shorter-term investors book profits and lighter year-end trading volumes emerge. 

Data Download

International Economy

The au Jibun Bank Japan Flash Manufacturing PMI declined to 47.7 in December from 48.3 in the previous month, pointing to the seventh straight month of contraction in factory activity. The latest reading also marked the steepest contraction in the manufacturing sector since February, as output and new orders shrank faster, with new export orders falling at a stronger rate. The Flash Services PMI rose to 52 in December from 50.8 in November, signaling a modest increase in activity that was the quickest since September. 

China’s industrial production advanced by 6.6% YoY in November, following a 4.6% gain in the previous month and beating market forecasts of 5.6%. It was the fastest pace of growth in industrial production since February 2022, mainly boosted by faster gains in mining, manufacturing, and utilities (9.9% vs 1.5%). China’s retail sales expanded by 10.1% YoY in November, much faster than the 7.6% increase posted for October but below the market consensus of 12.5%. 

The HCOB Eurozone Flash Manufacturing PMI was unchanged at 44.2 in December, the same as in November, and below forecasts of 44.6. Manufacturers cut their purchasing activity at one of the steepest rates recorded since the global financial crisis, resulting in the largest fall in inventories of inputs since November 2009. The Flash Services PMI fell to 48.1 in December from 48.7 in the previous month, the fifth consecutive month of contraction. New orders for service providers fell for a sixth consecutive period at around the fastest pace in three years. 

The S&P Global/CIPS United Kingdom Flash Manufacturing PMI fell to 46.4 in December, down from 47.2 in the prior month and missing market expectations of 47.5. Production declines reflected reduced demand both at home and abroad amidst challenging economic conditions, as well as destocking activities and tighter inventory policies. The S&P Global/CIPS UK Services PMI rose to 53.7 in December of 2023 from 50.9 in the previous month, above expectations of 51, marking the second consecutive expansion in the British services sector. However, wage pressures underpinned the sharpest rise in input cost inflation since August, which translated to lower employment levels and higher output charges.

Domestic Economy

At 8:30 AM ET, the New York Empire Manufacturing Index for December will be published, and the market expects it to fall to a reading of 2, down from 9.1 the prior month. 

At 9:15 AM ET, November Industrial Production will be released and the consensus view calls for a rebound to +0.3% from October’s -0.6% print. We’d remind readers to parse the underlying data between manufacturing, mining, and utilities to determine areas of strength and weakness.

At 9:45 AM ET, S&P Global will publish its December Flash Manufacturing and Services PMIs for the U.S. The market expects the manufacturing figure will inch lower to 49.3 from 49.4 in November, while the initial service PMI dips to 50.6 from 50.8. Following the Fed’s updated comments and projections this week, we can bet the market will be looking to see what the report says about new order activity and input cost inflation as well.

Markets

Broad indexes extended Wednesday’s gains with the Nasdaq Composite gaining 0.19%, the S&P 500 adding 0.26% the Dow up 0.43%, and the Russell 2000 closing 2.72% higher. Looking at sector returns it was clear that the post-Fed meeting euphoria had subsided. Consumer Staples (-1.47%) and Utilities (-1.30%) pulled back and Healthcare and Technology fell 0.49% and 0.25%, respectively although Technology’s move was driven mostly by Adobe Corp (ADBE) falling 6.35% and Microsoft (MSFT) shedding 2.25%. Both of these names combined to contribute to just over 293% of the sector’s results.

Energy and Real Estate were still riding high, gaining 2.94% and 2.77% on visions of rate cut fairies dancing in their heads. Consumer Discretionary added 1.34% helped along by homebuilders as D.R. Horton (DHI), Lennar Corporation (LEN) gained 6.21% and 6.65%, and Pulte Group (PHM) closed 7.01% higher. Here’s how the major market indicators stack up year-to-date:

Dow Jones Industrial Average: 12.37%
S&P 500: 22.92%
Nasdaq Composite: 41.04%
Russell 2000: 13.59%
Bitcoin (BTC-USD): 158.97%
Ether (ETH-USD): 93.13%
Stocks to Watch

Before U.S. equity markets begin trading today, Darden Restaurants (DRI) will report its quarterly results. 

Pre-market breadth remains strong as 287 names in the S&P 500 have traded hands so far this morning with 234 gainers and 53 decliners. Renewable energy names are seeing a boost this morning as Enphase Energy (ENPH), First Solar (FSLR), and Solar Edge (SEDG) are all seeing a healthy bid while a mix of names are coming under some pressure, including Lennar Corp (more below), Monster Beverage (MNST), Cummins Inc (CMI), and Northrop Grumman (NOC).

Costco (COST) reported November quarter EPS of $3.48 per share, nicely ahead of the consensus forecast. Revenue for the period rose 8.2% YoY to $57.8 billion, matching the consensus forecast. Comparable sales, excluding changes in gasoline prices and FX, rose +3.8% YoY and its eCommerce same-store sales climbed +6.3%. Membership fee income was $1.08 billion, up from $1.00 billion in the year-ago quarter. Costco also announced a special cash dividend on Costco’s common stock of $15 per share, payable on January 12 to shareholders of record as of the close of business on December 28.

Homebuilder Lennar handily beat consensus expectations for its November quarter. EPS came in at $4.82 compared to the $4.59 consensus on revenue that rose 7.8% YoY to $10.97 billion, topping the $10.22 billion consensus. New orders increased 32% to 17,366 homes versus guidance of 16,200-17,200 and Lennar delivered 23,795 homes during the quarter, up 19% and ahead of its 21,500-22,500 guidance. The company’s backlog exiting the quarter stood at 14,892 homes with a dollar value of $6.6 billion. For the current quarter, Lennar targets deliveries of 16,500-17,000 homes, and for its fiscal 2024 guided total deliveries to 80,000 compared to 73,087 this past year. 

Scholastic Corp. (SCHL) missed consensus expectations for its November quarter and cut its fiscal 2024 outlook. Management now sees revenue for the fiscal year coming in flat compared to its prior forecast of up 3%-5%, suggesting $1.70 billion vs. the $1.77 billion consensus. 

Global Payments (GPN) said it isn’t in talks with Shift4 Payments (FOUR) about any transaction following an earlier report it was evaluating a purchase of Shift4.

General Motors (GM) plans to lay off about 1,300 workers in Michigan starting early next year due to vehicles they produce ending production.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Once again, we’ve reached the end of the trading week, and no companies are expected to report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Monday, December 18

Germany: Ifo Business Climate and Expectations – December
US: NAHB Housing Market Index – December 

Tuesday, December 19

Japan: Bank of Japan Interest Rate Decision
Eurozone: Inflation Rate – November
US: Housing Starts & Building Permits – November

Wednesday, December 20

Eurozone: New Car Registrations – November
Germany: GfK Consumer Confidence, Producer Price Index – November
UK: Inflation Rate – November
Eurozone: Consumer Confidence (Flash) – December
US: Weekly MBA Mortgage Applications 
US: Existing Home Sales – November 
US: Weekly EIA Crude Oil Inventories

Thursday, December 21

US: Weekly Initial & Continuing Jobless Claims 
US: GDP (Third Estimate) – 3Q 2023 
US: Philadelphia Fed Index – December
US: Leading Indicators – November 
US: Weekly EIA Natural Gas Inventories

Friday, December 22

Japan: Inflation Rate – November
UK: Retail Sales – November
UK: GDP Growth Rate, Business Investment – 3Q 2023
US: Durable Orders – November 
US: Personal Income & Spending, PCE Price Index November 
US: New Home Sales – November 
US: The University of Michigan Consumer Sentiment Index (Final) – December 
Thought for the Day

“Don’t try to squeeze into a glass slipper. Instead, shatter the glass ceiling.” ~ Priyanka Chopra

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: Earnings Feed: Daily Markets: Rally Continues, Stretching Valuations