Pre-Market Brief: Stocks Slide As Growth Fears Deepen

December S&P 500 futures (ESZ22) are trending down -0.16% this morning after three major US benchmark indices finished the regular session in the red as market participants fretted over Federal Reserve rate increases and further talk of an oncoming recession. Three major U.S. stock indexes were weighed down primarily by losses in the Oil & Gas, Technology, and Consumer Services sectors.

In Tuesday’s trading session, Meta Platforms Inc (META) plunged over -6% amid increased regulatory scrutiny after European Union regulators ruled that the company should not require users to agree to personalized ads based on their digital activity.

Future economic growth prospects took center stage on Tuesday following comments from the biggest U.S. banks about uncertain times ahead. Bank of America's (BAC) CEO told investors that the bank's research showed three quarters of mild negative growth next year. At the same time, JPMorgan Chase and Co's (JPM) chief executive Jamie Dimon said inflation would “erode consumer spending power and cause a mild or hard recession that people worry about.”

“There's a general expectation of a contraction in the economy in the first couple of quarters and it's going to have an impact on earnings, which is what investors are focused on,” said Hugh Johnson, a chief economist of Hugh Johnson Economics in Albany, New York.

Meanwhile, U.S. rate futures have priced in a 77.0% chance of a 50 basis point rate increase and a 23.0% chance of a 75 basis point hike at December's monetary policy meeting. 

Today, all eyes are focused on the U.S. Nonfarm Productivity preliminary data in a couple of hours. Economists, on average, forecast that Nonfarm Productivity will stand at +0.6% q/q in Q3, compared to the second-quarter figure of -4.1% q/q.

Also, investors are likely to focus on the Bank of Canada's interest rate decision. The BoC is expected to hike the key interest rate by 50 bps to 4.25%.

U.S. Unit Labor Costs preliminary data will be reported today. Economists foresee this figure to stand at +3.1% q/q in the third quarter, compared to the second-quarter number of +10.2% q/q.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -3.305M, compared to last week’s value of -12.580M.

In the bond markets, United States 10-Year rates are at 3.529%, up +0.47%.

The Euro Stoxx 50 futures are down -0.28% this morning as investors digested the further easing of COVID restrictions in China and recessionary concerns in the region. European investors are currently focused on anemic growth and tightening monetary policy to combat high inflation. The European Central Bank is widely anticipated to hike interest rates again next week even if they are now “very near” their neutral level.

“We are very near the neutral rate. There will be, I think, another hike or hikes,” said ECB policymaker Constantinos Herodotou on Tuesday.

At the same time, analysts at Goldman Sachs expect European stocks to have a tough start to 2023, falling in the first half before recovering in the second.

“We expect 2023 to prove tougher after the resilience in earnings this year,” said Goldman analysts. 

Switzerland's Unemployment Rate n.s.a., U.K. Halifax House Price Index, Germany's Industrial Production, France's Trade Balance, Italy's Retail Sales, and Eurozone’s GDP (preliminary) data were released today.

Switzerland's Unemployment Rate n.s.a. stood at 2.0% in November, in line with expectations.

U.K. November Halifax House Price Index came in at -2.3% m/m, weaker than expectations of -0.2% m/m.

The German October Industrial Production stood at -0.1% m/m, stronger than expectations of -0.6% m/m.

The French October Trade Balance was at -12.2B, stronger than expectations of -16.0B.

The Italian October Retail Sales came in at -0.4% m/m, stronger than expectations of -0.6% m/m.

Eurozone third-quarter GDP has been reported at +0.3% q/q and +2.3% y/y, stronger than expectations of +0.2% q/q and +2.1% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.40%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.72%.

China’s Shanghai Composite today closed lower as concerns over a global recession and interest rate hikes by the Federal Reserve eroded sentiment. However, the relaxation of some anti-COVID curbs in China helped limit losses. The Chinese government announced a further scaling back of COVID-related curbs on Wednesday, including eased restrictions on movement and business activities. At the same time, the consequences of the zero-COVID policy continued to weigh on the economy, with Chinese exports and imports dropping to their weakest level since mid-2020.

Japan’s Nikkei 225 Stock Index closed lower today. The index's downward momentum was fueled by losses in the Mining, Transportation Equipment, and Precision Instruments sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 21.97% and hit a new 1-month high of 22.43.

Pre-Market U.S. Stock Movers

MongoDB (MDB) jumped over +26% in pre-market trading after the company reported better-than-expected Q2 results and provided strong Q3 and FY23 guidance.

Meta Materials Inc (MMAT) climbed more than +14% in pre-market trading after the company announced the results of the Annual Meeting of Shareholders. 

Smith & Wesson Brands Inc (SWBI) tumbled over -6% in pre-market trading after the company reported downbeat Q2 results.

Ibio Inc (IBIO) plunged over -49% in pre-market trading after the company announced the $3.5M offering of common stock and warrants. 

Airbnb Inc (ABNB) slid about -3% in pre-market trading after Morgan Stanley downgraded the stock from equalweight to underweight with a price target of $80, down from $110.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - December 7th

Brown Forman (BFb), Brown Forman A (BFa), Campbell Soup (CPB), Siemens Gamesa ADR (GCTAY), GameStop Corp (GME), Descartes Systems (DSGX), Hashicorp (HCP), Coupa Software (COUP), Thor Industries (THO), Academy Sports (ASO), Greif Bros B (GEFb), Ollies Bargain Outlet Holdings Inc (OLLI), Aurubis ADR (AIAGY), Greif Bros (GEF), United Natural Foods (UNFI), John Wiley&Sons B (WLYB), John Wiley&Sons (WLY), Verint (VRNT), GMS Inc (GMS), Weber (WEBR), Duckhorn Portfolio (NAPA), Oxford Industries (OXM), C3 Ai (AI), Argan (AGX), Domo (DOMO), Mitek (MITK), Sportsmans (SPWH), Lovesac (LOVE), Star Gas Partners LP (SGU), VersaBank (VBNK), Daktronics (DAKT), Vera Bradley (VRA), Ihuman (IH), Rent the Runway (RENT), AstroNova (ALOT), 17 Education Tech (YQ), Culp (CULP), 36Kr Holdings (KRKR).

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