Pre-Market Brief: Stocks Move Higher Ahead of Key U.S. PPI Data

December S&P 500 futures (ESZ22) are trending up +0.23% this morning after three major US benchmark indices snapped a losing streak and closed higher on Thursday as market participants cheered a rise in weekly jobless claims ahead of crucial U.S. PPI data. Three major U.S. stock indexes were fueled primarily by gains in the Technology, Consumer Services, and Healthcare sectors.

The Labor Department report on Thursday showed claims for state unemployment benefits increased moderately to 230K, in line with expectations, while unemployment rolls hit a 10-month high toward the end of November. The data eased investors’ worries about job market strength, signaling that the Fed might ease its aggressive stance soon.

Today, all eyes are focused on the U.S. PPI data in a couple of hours, which is expected to shed more light on the potential path of monetary policy. Economists, on average, forecast that November U.S. PPI will stand at +0.2% m/m and +7.2% y/y, compared to the previous values of +0.2% m/m and +8.0% y/y.

“A continued retreat in producer price pressures will increasingly secure a smaller rate hike of 50bps come Wednesday, however, a larger-than-expected rise, or worse, a reversal in the downward trend could undermine the Fed’s plans for a pivot to a less aggressive policy,” Stifel said in a note ahead of the PPI report.

Meanwhile, U.S. rate futures have priced in a 74.7% chance of a 50 basis point rate increase and a 25.3% chance of a 75 basis point hike at December's monetary policy meeting. 

Also, investors are likely to focus on the U.S. Michigan Consumer Sentiment Index, which was at 56.8 in November. Economists expect December’s preliminary figure to be 56.9.

The U.S. Michigan Consumer Expectations Index (preliminary) will be reported today. Economists foresee this figure to come in at 56.0 in December, compared to the previous number of 55.6.

U.S. Core PPI data will be reported today as well. Economists estimate U.S. Core PPI to be +0.2% m/m and +5.9% y/y in November, compared to the previous values of 0.0% m/m and +6.7% y/y.

In the bond markets, United States 10-Year rates are at 3.487%, down -0.17%.

The Euro Stoxx 50 futures are up +0.10% this morning, reversing some of the losses incurred earlier in the week. However, those gains are likely to be fragile as investors look to the release of the latest U.S. PPI report ahead of next week’s U.S. CPI data and the U.S. Federal Reserve’s interest rate decision.

The European Central Bank also meets next week and is widely expected to hike rates by 50 bps to tackle inflation still at elevated levels. At the same time, investors are worried that tightening monetary conditions would likely result in a global recession in 2023. ECB Governing Council member and French central bank governor Francois Villeroy de Galhau warned on Friday that “a temporary recession cannot be excluded.”

Spain’s Industrial Production data was released today.

The Spanish October Industrial Production has been reported at +2.5% y/y, weaker than expectations of +2.8% y/y.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.30%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.18%.

China’s Shanghai Composite closed higher today, ending the week in the green as the country scaled back several COVID-related movement restrictions and testing mandates. The move bolstered hopes over a wider reopening in the world’s second-largest economy amid increasing public unrest and worsening economic conditions. However, recent data indicated that a recovery could be long and bumpy, with Chinese inflation falling further in November amid a contraction in overall business activity.

At the same time, Japan’s Nikkei 225 Stock Index closed higher today, fueled by gains in the Transport, Shipbuilding, and Railway & Bus 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

DocuSign Inc (DOCU) jumped over +12% in pre-market trading after the company announced stronger-than-expected Q3 earnings and provided favorable Q4 and FY23 revenue guidance.

Broadcom Inc (AVGO) gained more than +3% in pre-market trading after the company reported upbeat Q4 results and guided Q1 revenue above consensus.

Lululemon Athletica Inc (LULU) plunged about -7% in pre-market trading despite a Q3 earnings beat as the midpoint of Q4 EPS guidance fell short of consensus.

Baudax Bio Inc (BXRX) climbed over +48% in pre-market trading after the company announced the initiation of a clinical study of BX1000 for neuromuscular blockade in patients undergoing elective surgery.

Jazz Pharmaceuticals PLC (JAZZ) rose about +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $190, down from $192.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - December 9th

Li Auto (LI), Siemens Gamesa ADR (GCTAY), Carl Zeiss Meditec ADR (CZMWY), Luckin Coffee (LKNCY), HeadHunter ADR (HHR), Johnson Outdoors (JOUT), Mitek (MITK), Oramed (ORMP), Mesabi Trust (MSB), Byrna Technologies (BYRN), Avaya (AVYA), Vince (VNCE), EMCORE (EMKR), Wolford ADR (WLFDY).

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