Today’s Big Picture

Asia-Pacific equity markets finished the day mixed as China’s Shanghai Composite fell 1.03% and India’s SENSEX declined 1.30% while Taiwan’s TAIEX gained 0.33%, Australia’s ASX All Ordinaries and Hong Kong’s Hang Seng added 0.62% and 0.66%, respectively and Japan’s Nikkei extended gains an additional 1.37%. South Korea’s KOSPI closed 1.78% higher in a broad rally led by Transportation names. European markets are mixed in midday trading, and U.S. equity futures point to a lower open.

Following the Fed’s dovish tilt last week, the subsequent march higher has pushed the stock market further into overbought territory, placing it once again in “priced to perfection” territory. As that descriptor suggests, everything has to go right for the market to chug higher. Oftentimes, developments seemingly out of nowhere can knock the market off that course. We are seeing that this morning following back to back disappointing guidance from Accenture (ACN) and FedEx (FDX) over the last two days and a continued rebound in oil prices.

The dollar is also rebounding following its drop last week and investors are starting to question the timing and number of interest rate cuts in 2024. While the market consensus depicted by the CME FedWatch Tool continues to see 6 or more rate cuts on tap for next year, recent Fed official comments have pushed back hard on that expectation, saying there is no rush to begin cutting rates. Yesterday, Federal Reserve Bank of Atlanta President Raphael Bostic said he doesn’t expect there will be urgency to lower rates next year. Dovish Bostic reiterated recent comments that he expects the U.S. central bank will cut rates twice in 2024 — in the second half of the year — as inflation continues to decline slowly.

Data Download

International Economy

After medium-term lending facility rates, which act as a guide to loan prime rates, were maintained at 2.50% last week, the People’s Bank of China maintained its one-year loan prime rate (LPR) was kept at 3.45% for the fourth consecutive month and kept the five-year LPR at 4.20% for the sixth straight month.

Passenger car registrations in the European Union advanced 6.7% YoY to 855.6K units in November, marking the 16th consecutive monthly increase.

The GfK Consumer Climate Indicator for Germany rose to -25.1 heading into January from a marginally revised -27.6 in December. This latest figure was above market forecasts of -27.0 and pointed to the highest figure since August. Producer prices in Germany dropped by 7.9% YoY in November compared with market consensus of a 7.5% fall and following an 11% tumble in October. The November print was the fifth consecutive month of YoY declines.

The annualized inflation rate in the UK slowed to 3.9% in November 2023, the lowest since September 2021, from 4.6% in October and well below forecasts of 4.4%.

At 10 AM the Flash December reading for Consumer Confidence will be released, the consensus vies for which calls for a modest improvement to -16.4 from -16.9 in November.

Oil prices are continuing to move higher for the seventh consecutive session today amid Red Sea tensions following attacks by Iran-aligned Yemeni Houthi militants. Both benchmarks rose more than 1% on Tuesday on concerns over global trade disruption, as the biggest shipping companies avoid one of the world’s busiest shipping lanes by going the long way around Africa, adding up to $1 million in cost and 7-10 days for each voyage. About 12% of world shipping traffic passes up the Red Sea and through the Suez Canal and estimates suggest that so far shippers have diverted more than $30 billion worth of cargo away from the Red Sea. U.S. Defense Secretary Lloyd Austin announced the formation of an international task force to address security issues. Details of that operation have yet to be confirmed.

Domestic Economy

Ahead of today’s economic data, the Atlanta Fed GDPNow model estimate for real GDP growth in the current quarter was revised to 2.7% from 2.6%. Today’s data includes the next round of weekly data for the MBA Mortgage Applications Index and crude oil inventory data from the Energy Information Administration. At 10 AM ET, November Existing Home Sales data will be released, and the consensus sees a very modest dip to 3.77 million units compared to 3.79 million in October.

Markets

Equities picked up steam yesterday with all sectors posting gains. Leadership came from Energy (1.20%) and Communication Services (1.02%) while the remaining sectors rose between 0.20% (Consumer Staples) and 0.92% (Materials). The S&P 500 added 0.59%, the Nasdaq Composite and the Dow rose 0.66% and 0.68%, respectively and the Russell 2000 closed 1.94% higher.

Shares of Pfizer (PFE) had a relatively strong day yesterday, up 4.07%. The company and its development partner Astellas Pharma (ALPMF) announced that the FDA had approved a bladder cancer therapy that combines a jointly developed drug (Padcev) with Merck’s (MRK) Keytruda.

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

Dow Jones Industrial Average: 13.31%
S&P 500: 24.19%
Nasdaq Composite: 43.35%
Russell 2000: 14.75%
Bitcoin (BTC-USD): 154.67%
Ether (ETH-USD): 81.67%
Stocks to Watch

Before U.S. equity markets begin trading today, General Mills (GIS), Toro (TTC), and Winnebago (WGO) are expected to report quarterly results.

Pre-market breadth is slightly lower again today as 231 names of the S&P 500 have traded hands so far this morning with 60 gainers and 171 decliners. Shares looking to open down sharply include Argenx (ARGX) following news of a failed phase 3 trial, FedEx Corporation (more below), and Steelcase (SCS), after the company reported a mixed quarter and offered below estimate range guidance. Names catching a bid include General Mills on reporting a strong quarter and Paramount Global (PARA) after it was reported board chair Shari Redstone is talking to Skydance Media and Redbird Capital regarding a potential sale.

Shares of FedEx fell in aftermarket trading after the company reported November quarter results that missed consensus expectations and set revenue guidance below expectations. Revenue for the November quarter fell 2.6% YoY and management guided 2024 revenue down low single digits compared to its prior outlook for flat revenue growth next year.

The U.S. Federal Trade Commission said Rite Aid (RADCQ) will not be allowed to use facial recognition technology for surveillance purposes for five years settling allegations the drugstore chain falsely tagged consumers as shoplifters.

The patent dispute between Apple (AAPL) and Masimo (MASI) over sales of the Apple Watch is going to be decided by the U.S. Trade Representative. On Monday, Apple said it was halting sales of the Apple Watch Series 9 and Apple Watch Ultra 2 from its own retail and digital channels starting this week after the International Trade Commission ruled in favor of Masimo on an intellectual property dispute between the two companies over blood oxygen sensing in October.

Shares of Telefónica (TEF) are moving higher this morning after the Spanish government announced plans to acquire a stake that could be worth more than $2.2 billion.

ING (ING) shared it will phase out financing of upstream oil and gas activities by 2040 and will aim to triple the financing of renewable power generation to €7.5 billion annually by 2025.

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

Blackberry (BB) and Micron (MU) 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

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

“A lovely thing about Christmas is that it’s compulsory, like a thunderstorm, and we all go through it together.” –Garrison Keillor

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: Will Red-Hot Stocks Take a Breather?