Today’s Big Picture

Asia-Pacific equity markets finished the day lower except for India’s SENSEX, which rose 0.63% on continued optimism over the recent election results. Taiwan’s TAIEX fell 0.54%, South Korea’s KOSPI declined 0.82%, Australia’s ASX All Ordinaries shed 0.90%, Japan’s Nikkei gave back 1.37% and China’s Shanghai Composite closed 1.67% lower. Hong Kong’s Hang Seng dropped 1.91% in a broad decline led by Electronic Technology names like Lenovo Group Limited which was bid down 10.22%. European markets are mixed in midday trading, and U.S. equity futures point to a lower open.

The market surge in recent weeks has been fueled by speculation the Fed will be cutting rates sooner than previously expected. Some are starting to think forecasts calling for as much as 100 basis points (1%) in 2024 rate cuts point to the Fed potentially battling a hard economic landing, not the soft landing that has been part of the market’s Goldilocks narrative. The next and final Fed meeting of 2023 is scheduled for December 12 and 13, and not only will we get an update on any rate actions (spoiler alert, the futures curve has priced in a 99.9% chance of no change) but we will also hear the Fed’s thoughts regarding their current economic projections as they do every quarter.

While the market will be watching for another shift in the Fed’s tone to more dovish from Fed Chair Powell’s more recent balanced monetary policy position, it will be looking for the introduction of rate cuts in the Fed’s policy statement. Between now and that meeting, investors will receive ample economic data that could add further support to the Goldilocks narrative or raise even more questions about the vector and velocity of the economy in the first half of 2024.

Data Download

International Economy

Overnight saw the release of November’s final Services PMI figures for Japan and China. The Jibun Bank Services PMI came in at 50.8, almost a point lower than both expectations and the previously reported 51.6 while the Caixin Services PMI was 51.5, surprising 0.80 against estimates and just over a point higher than October’s 50.4.

Final November figures for Eurozone Services PMI were released earlier this morning with the HCOB Services PMI coming in at 48.7, 0.50 higher than both estimates and the previously reported 48.2. Germany, France, Italy, and Spain also reported Services PMI figures, and all were above estimates and previous releases although Spain was the only country coming in above 50. Final November UK Services PMI was also released, and the S&P Global/CIPS Services PMI was 50.9, 0.40 above both estimates and the previously reported 50.5.

The October Eurozone Producer Price Index showed a continued decline of 9.40%, slightly below expectations but slower than the 12.40% decline reported in September. In any event, it was a welcome relief for the region.

The European Commission said it approved up to €1.2 billion ($1.30 billion) of state aid for a European cloud computing project called, Important Project of Common European Interest, (IPCEI), Next Generation Cloud Infrastructure and Services (IPCEI CIS). The project will support research, development, and industrial deployment of advanced cloud and edge computing technologies.

Domestic Economy

This morning brings us November final updates from both the S&P Global Services PMI and ISM Non-Manufacturing PMI, with results expected to align with previous estimates. More importantly, both figures are expected to stay above 50, the dividing line between an expansion of activity and a decline.

The October JOLTs Job Openings Report will be released at 10:00 AM ET and expectations are that job openings will have decreased to 9.30 million from the previously reported 9.55 million.

Markets

Yesterday equities took a breather after the recent rally. Technology (-1.22%), Materials (1.16%), and Communication Services (-1.00%) led the way lower while Real Estate was one of the few sectors that did what it could to hold its ground, up 0.55%. Aside from the Russell 2000 which gained 1.04%, broad indexes ended the day lower with the Dow down 0.11%, the S&P 500 declining 0.54%, and the Nasdaq Composite falling 0.84%.

Not everything was shaky as shares of Bath & Body Works (BBWI) were bid up 8.88% as traders reacted to the company’s most recent 10-Q filing, in which management discussed the company’s improving margin rate and the expectation that they continue to see margins expand in 2024.

Here’s how the major market indicators stack up year-to-date:

Dow Jones Industrial Average: 9.22%
S&P 500: 19.02%
Nasdaq Composite: 35.53%
Russell 2000: 6.86%
Bitcoin (BTC-USD): 152.73%
Ether (ETH-USD): 86.95%
Stocks to Watch

Before U.S. equity markets begin trading today, AutoZone (AZO), Designer Brands (DBI), NIO Inc (NIO), Signet Jewelers (SIG), and J. Jill (JILL) are scheduled to report their latest quarterly results.

Pre-market breadth is lighter this morning as 207 of the 503 names in the S&P 500 have traded hands so far this morning with 45 gainers and 162 decliners. Names seeing a strong bid include Kenvue Inc. (KVUE) and J.M. Smucker (SJM) while Take-Two Interactive (TTWO) seems to be giving back some of its recent gains.

Meta Platforms (META) and IBM (IBM) formed a coalition of over 50 artificial intelligence firms and research institutes, advocating for an open source model for AI development. Companies in the new alliance include AMD (AMD), Dell (DELL), Oracle (ORCL), Intel (INTC), Sony (SONY), Fast.ai, and the Mass Open Cloud Alliance operated by Boston University, Harvard, and others.

AT&T (T) will buy up to $14 billion of cell tower equipment in a five-year deal with Ericsson (ERIC) to deploy its commercial-scale open radio access network (Open RAN).

Ahead of its Investor Day, CVS Health (CVS) reaffirmed its 2023 guidance and initiated 2024 guidance while unveiling new products, CostVantage and TrueCost, aimed at simplifying drug pricing and pharmacy benefits management (PBM). The company continues to expect $351.5B–$357.3 billion in revenue and $8.50–$8.70 in adjusted EPS this year and anticipates its 2024 revenue and adjusted EPS to reach at least $366.0 billion and $8.50.

Pilot Travel Centers, General Motors (GM), and EVgo Inc. (EVGO) announced the opening of the first 17 locations of their previously announced national electric vehicle fast charging network.

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

Mongo DB (MDB), Toll Brothers (TOLL), SentinelOne Inc (S), and Dave & Buster’s Entertainment (PLAY) are slated 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

Wednesday, December 6

Germany: Factory Orders – October
Eurozone: Retail Sales – October
US: Weekly MBA Mortgage Applications
US: ADP Employment Change Report – November
US: Productivity – 3Q 2023
US: Weekly EIA Crude Oil Inventories

Thursday, December 7

China: Imports/Exports – November
Japan: Leading Economic Index (Preliminary) – October
Germany: Industrial Production – October
Eurozone: 3Q 2023 GDP (3rd Estimate)
US: Challenger Job Cuts Report – November
US: Weekly Initial & Continuing Jobless Claims
US: Wholesale Inventories – October
US: Weekly EIA Natural Gas Inventories
US: Consumer Credit – October

Friday, December 8

Japan: GDP (Final) – 3Q 2023
Germany: Inflation Rate (Final) – November
US: Employment Report – November (8:30 AM ET)
US: The University of Michigan Consumer Sentiment Index (Preliminary) – December
US: Used Car Prices – November
Thought for the Day

“Take care of your body. It’s the only place you have to live” ~ Jim Rohn

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: Stocks Take a Breather