Pre-Market Brief: Stocks Plunge On Hawkish Fed Signals, ECB Decision In Focus

March S&P 500 futures (ESH23) are trending down -1.04% this morning after three major U.S. benchmark indices pared early gains and finished the regular session lower as the Federal Reserve moved to an expected slower pace of rate hikes but also signaled higher rates for a longer period. Three major U.S. stock indexes were weighed down primarily by losses in the Financials, Basic Materials, and Technology sectors.

The Federal Reserve hiked interest rates by 50 basis points on Wednesday, marking a slowdown from the 0.75% rate increases seen at the prior four meetings. Also, the Fed projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023, as well as a rise in unemployment and a near-stalling of economic growth. At the same time, the central bank lifted its projection for the benchmark rate to peak at 5.1% and remain at that level through 2023, up from the 4.6% forecast in September. 

“Once again, it is hard to believe that the Fed is capable of pulling off such a delicate landing of the economy onto a gradual glidepath towards somewhat lower growth, only mildly higher unemployment, and on-target inflation,” Jefferies said in a note.

Today, all eyes are focused on the U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that November Retail Sales will stand at -0.1% m/m, compared to the previous value of +1.3% m/m.

Also, investors are likely to focus on the U.S. Philadelphia Fed Manufacturing Index, which was at -19.4 in November. Economists foresee the new figure to be -10.0.

U.S. Core Retail Sales data will come in today. Economists expect November's figure to be +0.2% m/m, compared to the previous number of +1.3% m/m.

U.S. Industrial Production data will be reported today. Economists foresee this figure to stand at +0.1% m/m in November, compared to the previous number of -0.1% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 230K, compared to the last week’s value of 230K.

In the bond markets, United States 10-Year rates are at 3.484%, down -0.53%.

The Euro Stoxx 50 futures are down -1.33% this morning as hawkish rhetoric from the U.S. Federal Reserve weighed on sentiment, with investors remaining cautious ahead of more central banks meetings in Europe and the U.K. Today, investors globally are focused on interest rate decisions from the Bank of England and the European Central Bank due later in the session, with both central banks expected to hike rates by 50 basis points to curb historically high levels of inflation. In addition, the Swiss National Bank hiked the key policy rate by 50 basis points to 1.00% in the fourth quarter, in line with expectations.

France CPI, France HICP, and France Business Survey data were released today.

The French November CPI has been reported at +0.3% m/m and +6.2% y/y, compared to expectations of +0.4% m/m and +6.2% y/y.

The French November HICP stood at +0.4% m/m and +7.1% y/y, compared to expectations of +0.5% m/m and +7.1% y/y.

The French December Business Survey came in at 101, stronger than expectations of 100.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.25%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.37%.

China’s Shanghai Composite today closed lower, tracking significantly weaker-than-anticipated industrial production and retail sales data. China's November industrial production stood at +2.2% y/y, weaker than expectations of +3.6% y/y, as rising COVID-19 cases and increased curbs weighed heavily on the second-largest economy in the world. While the authorities scaled back some COVID-related restrictions this month, the country is still grappling with a surge in COVID-19 cases, brewing further uncertainty over a Chinese economic recovery.

At the same time, Japan’s Nikkei 225 Stock Index closed lower as the country logged a larger-than-anticipated trade deficit in November. The index's downward momentum was fueled by losses in the Transport, Warehousing, and Railway & Bus sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 9.71% and hit a new 52-week low of 17.11.

Pre-Market U.S. Stock Movers

Core Scientific Inc (CORZ) jumped over +53% in pre-market trading, adding to 70% intra-day gains after B. Riley Financial Inc proposed a debt restructuring to avoid bankruptcy.

Novavax Inc (NVAX) plunged more than -9% in pre-market trading after the company announced a proposed underwritten public offering to sell up to $125 million of its common stock and reaffirmed its FY22 revenue guidance.

Lennar Corporation (LEN) dropped about -2% in pre-market trading after the company reported upbeat Q4 results but issued disappointing guidance for new orders in Q1. 

New Fortress Energy LLC (NFE) slid over -4% in pre-market trading after the company filed to sell 6.9M shares of common stock for holders.

Western Digital Corporation (WDC) dropped more than -4% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral with a price target of $31, down from $43.

Abcellera Biologics Inc (ABCL) climbed about +7% in pre-market trading after Goldman Sachs initiated the coverage of the stock with a buy rating.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - December 15th

Adobe (ADBE), Jabil Circuit (JBL), Sprott Physical Gold and Silver Trust (CEF), EVN ADR (EVNVY), Scholastic (SCHL), Uranium Energy (UEC), Quanex Building Products (NX), Urstadt Biddle Properties (UBA), Mitek (MITK), GoGold Resources Inc. (GLGDF), Oramed (ORMP), Mesabi Trust (MSB), Byrna Technologies (BYRN), Citius Pharma (CTXR), Gencor (GENC), Inotiv (NOTV), Steel Connect (STCN), Live Ventures (LIVE), Trinity (TRIB).

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