Pre-Market Brief: Stocks Mixed As Rising Recession Worries Weigh On Sentiment

December S&P 500 futures (ESZ22) are trending up +0.08% this morning after three major US benchmark indices finished the regular session mixed as market participants weighed growing prospects of a recession associated with the pace of the Federal Reserve's monetary policy tightening. The NASDAQ Composite and S&P 500 indexes were weighed down primarily by losses in the Technology, Utilities, and Financials sectors, while the Dow Jones Industrial Average closed flat.

In Wednesday's trading session, the Nasdaq slid for the fourth time in a row, weighed down by a fall in Apple shares (AAPL) after Morgan Stanley cut its iPhone shipment target and a drop in Tesla shares (TSLA) over production loss concerns. The S&P 500 index dropped for the fifth straight session.

Data on Wednesday showed that third-quarter productivity rebounded at a slightly faster-than-expected pace, but the trend remained weak, pointing to elevated labor costs and high inflation. 

“Slower rate hikes have been the trend globally of late, but the Fed remains a wild card. Overall, it's a fickle, anxious market ahead of next week’s Fed meeting,” said Joe Manimbo, a senior market analyst at Convera in Washington.

Meanwhile, U.S. rate futures have priced in a 79.4% chance of a 50 basis point rate increase and a 20.6% chance of a 75 basis point hike at December's monetary policy meeting. 

Today, all eyes are focused on the U.S. Initial Jobless Claims data in a couple of hours. Economists, on average, forecast that Initial Jobless Claims will stand at 230K, compared to last week's value of 225K.

Also, investors are likely to focus on the U.S. Continuing Jobless Claims data, which was at 1,608K last week. Economists foresee the new figure to be 1,600K.

U.S. Natural Gas Storage data will be reported today as well. Economists estimate this figure to be -31B, compared to last week’s value of -81B.

In the bond markets, United States 10-Year rates are at 3.446%, up +1.10%.

The Euro Stoxx 50 futures are down -0.15% this morning, with investors worrying about the state of the global economy ahead of next week’s policy-setting meetings. European investors await key meetings by the U.S. Federal Reserve and the European Central Bank next week, and these two central banks are widely expected to continue their rate-hike cycle to cool off inflation. The ECB is likely to hike the key interest rate by 50 basis points after inflation in the Eurozone fell for the first time in 18 months.

“It wouldn’t be right to slow down the monetary tightening because of a single better inflation number. I still see many reasons to continue in the set pace of policy tightening,” said Peter Kazimir, an European Central Bank Governing Council member.

The European economic data slate is mainly empty on Thursday. However, investors will likely keep an eye on speeches by ECB president Christine Lagarde for fresh cues about the likely monetary policy action in December. 

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.07%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.40%.

China’s Shanghai Composite today closed slightly lower, given that the country is still grappling with a record-high daily increase in COVID-19 cases. However, reports on further relaxation of anti-COVID curbs in Hong Kong helped limit losses. China on Wednesday announced the further easing of movement curbs and testing mandates in most major cities, indicating that Beijing plans to scale back its severe zero-COVID strategy.

“While it could be a bumpy journey over the next few weeks, China is ready to move on from COVID in one to two quarters,” said Wenli Zheng, a portfolio manager of the China Evolution Equity Strategy at T. Rowe Price. 

At the same time, Japan’s Nikkei 225 Stock Index closed lower after data revealed that the country logged an unexpected current account deficit in the third quarter. However, the country's third-quarter GDP data showed that the Japanese economy contracted slightly lesser than anticipated due to robust business and consumer spending. The index’s downward momentum was fueled by losses in the Machinery, Electrical/Machinery, and Steel sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 16.81% to 18.66.

Pre-Market U.S. Stock Movers

Rent the Runway Inc (RENT) jumped over +17% in pre-market trading after the company reported record quarterly revenue in Q3 and provided a favorable Q4 outlook.

Bilibili Inc (BILI) gained more than +11% in pre-market trading, extending yesterday's gains after JPMorgan boosted the firm's price target on the stock to $30 from $20, keeping an overweight rating.

Design Therapeutics Inc (DSGN) plunged over -26% in pre-market trading after the company reported data from a single-ascending dose trial of DT-216.

Las Vegas Sands Corp (LVS) rose about +4% in pre-market trading, extending yesterday's gains after Stifel raised the firm's price target on the stock to $55 from $50, keeping a buy rating. 

Cutera Inc (CUTR) slid about -10% in pre-market trading after the company proposed a $100M convertible notes offering.

Hashicorp Inc (HCP) climbed over +5% in pre-market trading after the company reported better-than-expected Q3 results and provided strong Q4 and FY23 guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - December 8th

Costco (COST), Broadcom (AVGO), British American Tobacco ADR (BTI), Lululemon Athletica (LULU), Chewy (CHWY), Cooper (COO), Sekisui House ADR (SKHSY), Vail Resorts (MTN), DocuSign (DOCU), Ciena Corp (CIEN), RH (RH), National Beverage (FIZZ), Korn Ferry (KFY), Phreesia (PHR), Liquidity Services (LQDT), Domo (DOMO), Torrid Holdings (CURV), Comtech (CMTL), Hovnanian Enterprises (HOV), Hooker Furniture (HOFT), Kalvista Pharma (KALV), Lee Enterprises (LEE), Lakeland Industries (LAKE), Express (EXPR).

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