Pre-Market Brief: Stocks Mostly Lower as Economic Outlook Darkens, BoJ Policy Shift

March S&P 500 futures (ESH23) are trending down -0.08% this morning after three major U.S. benchmark indices closed lower for a fourth straight session, with Nasdaq dropping the most as market participants' risk appetite waned amid renewed fears that the Federal Reserve's hawkish stance could push the U.S. economy into a recession. Three major U.S. stock indexes were weighed down primarily by losses in the Consumer Services, Technology, and Telecoms sectors.

In Monday’s trading session, shares of Meta Platforms Inc (META) led the drop in big tech, tumbling over -4% after the European Union charged the company with antitrust violations for limiting competition in the markets for online classified ads. The tech conglomerate faces a fine of up to $11.8 billion if found guilty. Also, consumer discretionary was among the biggest sector laggards, weighed down by casino and travel stocks amid a fresh wave of COVID infections in China.

“It looks a lot like what we saw last week, energy is following oil prices, and everyone else is worried about recession and higher rates, and there’s not a lot of news to reverse the trend. So negative sentiment is reinforcing negative sentiment, feeding on itself,” said Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management in Seattle.

Meanwhile, U.S. rate futures have priced in a 65.0% chance of a 25 basis point rate increase and a 35.0% chance of a 50 basis point hike at February’s monetary policy meeting.

Today, all eyes are focused on the U.S. Building Permits preliminary data in a couple of hours. Economists, on average, forecast that November Building Permits will stand at 1.485M, compared to the previous value of 1.512M.

Also, investors are likely to focus on the U.S. Housing Starts data, which was at 1.425M in October. Economists foresee November's figure to be 1.400M.

Canada Core Retail Sales data will be reported today as well. Economists foresee this figure to come in at +1.4% m/m in October, compared to the previous number of -0.7% m/m.

In the bond markets, United States 10-Year rates are at 3.658%, up +2.10%.

The Euro Stoxx 50 futures are up +0.05% this morning as investors assess the interest rate outlook for 2023 after the Bank of Japan unexpectedly changed its ultra-dovish stance and struck a less accommodative tone than markets expected. The European Central Bank hiked its interest rates by 50 basis points last week, as did the U.S. Federal Reserve, the Bank of England, and the Swiss National Bank. 

Also, European Union energy ministers on Monday reached an agreement on a gas price cap at 180 euros ($191.11) per megawatt hour, ending months of argument over how to handle the cost of soaring energy prices after Russia cut gas supplies to Europe.

Germany Producer Price Index (PPI) data was released today.

The German November PPI has been reported at -3.9% m/m and +28.2% y/y, weaker than expectations of -2.5% m/m and +30.6% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.07%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.46%.

China’s Shanghai Composite today closed lower after the People’s Bank of China held its benchmark lending rates at historic lows. The move shows that the Chinese government is maintaining policy at accommodative levels. However, Chinese equities were sold off on uncertainty over a Chinese economic reopening as the country faces an unprecedented surge in COVID-19 cases.

“The whole narrative of China has changed, it’s gone from COVID zero that was putting the economy under pressure, and there’s now an intention to move towards a reopening. And as that happens, we will see a recovery in China's economy and markets,” said Suresh Tantia, a senior investment strategist at Credit Suisse.

Japan’s Nikkei 225 Stock Index plunged over 2% to a two-month low after the Bank of Japan widened the range for yield fluctuations in the benchmark government bond as the country grapples with soaring inflation. The central bank said it would raise the range of 10-year Japanese Government Bond yield fluctuations to between negative 0.5% and 0.5%, from a range of negative 0.25% to 0.25%. At the same time, the BoJ maintained its 2% target for annual inflation and its quantitative easing measures on Tuesday. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 6.25% to 18.87.

Pre-Market U.S. Stock Movers

Icecure Medical (ICCM) spiked over +148% in pre-market trading after the company reported interim results from the ICESECRET study.

Lucid Group Inc (LCID) climbed more than +5% in pre-market trading after the company completed its previously announced “at-the-market” equity offering program, raising approximately $600M. 

Soleno Therapeutics Inc (SLNO) plunged about -26% in pre-market trading after the company announced a financing commitment for up to $60M. 

Terns Pharmaceuticals Inc (TERN) slid around -14% in pre-market trading after the company announced a $75M common stock offering.

Super Micro Computer Inc (SMCI) rose more than +4% in pre-market trading after the company replaced Steel Dynamics in the S&P MidCap 400.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - December 20th

Nike (NKE), General Mills (GIS), FedEx (FDX), FactSet Research (FDS), Siemens Gamesa ADR (GCTAY), Sprott Physical Gold and Silver Trust (CEF), Neogen (NEOG), Worthington Industries (WOR), BlackBerry (BB), Embecta (EMBC), AAR (AIR), Enerpac Tool Group (EPAC), Calavo Growers (CVGW), Mitek (MITK), GoGold Resources Inc. (GLGDF), Oramed (ORMP), Blade Air Mobility (BLDE), Mesabi Trust (MSB), Byrna Technologies (BYRN), Cognyte Software (CGNT), Citius Pharma (CTXR), CalAmp (CAMP), Inotiv (NOTV).

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