Pre-Market Brief: Stocks Mixed As Hawkish Fed Signals Weigh On Sentiment

December S&P 500 futures (ESZ22) are trending up +0.28% this morning after three major US benchmark indices closed lower in a choppy session on Thursday as hawkish signals from the Federal Reserve official and robust job market data led some market participants to worry about the path of interest rate hikes. Three major U.S. stock indexes were weighted down primarily by losses in the Utilities, Consumer Services, and Basic Materials sectors.

St. Louis Fed President James Bullard said the Fed needs to keep hiking rates as its tightening till now "had only limited effects on observed inflation," suggesting the central bank's benchmark rate would need to rise to a 5% to 7% range. In addition, weekly jobless claims data fell short of expectations, indicating the prospect of a more aggressive Fed amid the strength in the labor market.

"The Fed is still talking up, generally, interest rate. There might be some disagreement about the pace. But interest rates are not coming down anytime soon," said Paul Nolte, a portfolio manager at Kingsview Investment Management in Chicago. 

Meanwhile, U.S. rate futures have priced in an 80.6% chance of a 50 basis point rate increase and a 19.4% chance of a 75 basis point hike at December's monetary policy meeting. 

Today, all eyes are focused on the U.S. Existing Home Sales data in a couple of hours. Economists, on average, forecast that the October Existing Home Sales figure will stand at 4.38M, compared to the previous value of 4.71M.

Also, investors are likely to focus on the U.S. Leading Index, which was at -0.4% m/m in September. Economists foresee the October value to be -0.4% m/m.

In the bond markets, United States 10-Year rates are at 3.810%, up +0.98%

The Euro Stoxx 50 futures are up +0.88% this morning after U.K. consumer confidence unexpectedly rose in the wake of the country’s Autumn Statement. However, those gains are likely to be fragile as the regional economic outlook remains weak. U.K. Chancellor Jeremy Hunt confirmed that the country was in recession while announcing £55 billion worth of tax rises and spending cuts as Britons face a record hit to living standards. 

In addition, European Central Bank President Christine Lagarde said at the European Banking Congress in Frankfurt that the ECB would keep raising interest rates and might even need to restrict economic activity to cool inflation.

U.K. Retail Sales, U.K. Core Retail Sales, and U.K. GfK Consumer Confidence data were released today.

U.K. October Retail Sales stood at +0.6% m/m and -6.1% y/y, stronger than expectations of +0.3% m/m and -6.5% y/y.

U.K. October Core Retail Sales came in at +0.3% m/m and -6.7% y/y, compared to expectations of +0.6% m/m and -6.9% y/y.

U.K. November GfK Consumer Confidence has been reported at -44, stronger than expectations of -52.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.58%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.11%.

China’s Shanghai Composite today closed lower but ended the week slightly higher amid some optimism over the relaxation of the country’s zero-COVID strategy. At the same time, sentiment towards China worsened as the country notched its biggest daily jump in COVID cases in seven months, raising concerns over renewed lockdown measures in the country. Also, weak economic readings released this week showed that Chinese economic activity had been hit hard by Covid-related curbs.

At the same time, Japan’s Nikkei 225 Stock Index closed lower today as consumer inflation in the country surged to a 40-year high in October. The Japanese October CPI came in at +3.6% y/y, stronger than expectations of +3.5% y/y, boosting concerns that the Bank of Japan may eventually tighten its stimulative monetary policy. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.44% and hit a 1-month low of 18.50.

Pre-Market U.S. Stock Movers

Ross Stores Inc (ROST) jumped over +16% in pre-market trading after the company posted a stronger-than-expected Q3 report and raised full-year forecasts. 

Palo Alto Networks Inc (PANW) gained more than +8% in pre-market trading after the company's first-quarter earnings topped analyst consensus expectations.

StoneCo Ltd (STNE) climbed about +18% in pre-market trading after the company's Q3 revenue and MSMB total payment volume exceeded the management's guidance.

Gap Inc (GPS) rose about +7% in pre-market trading after the company reported stronger-than-anticipated Q3 earnings results.

Farfetch Ltd Class A (FTCH) plunged about -11% in pre-market trading after the company announced a downbeat third-quarter report.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - November 18th

JD.com Inc Adr (JD), Tokio Marine Holdings Inc (TKOMY), Li Auto (LI), MS&AD Insurance Group Holdings PK (MSADY), Atkore Intl (ATKR), Foot Locker (FL), Spectrum Brands (SPB), Buckle (BKE), NV Bekaert ADR (BEKAY), Twist Bioscience (TWST), Hibbett Sports (HIBB), QIWI (QIWI), PrimeEnergy (PNRG), Motorsport Gaming Us LLC (MSGM), So-Young (SY), WVS Financial (WVFC), Equus Total Return Closed Fund (EQS), Emerson Radio (MSN), Xenetic Biosciences (XBIO).

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