Pre-Market Brief: Stocks Mixed After FOMC Minutes Temper Policy Pivot Hopes

March S&P 500 futures (ESH23) are trending down -0.07% this morning after three major U.S. benchmark indices finished higher in volatile trading on Wednesday as investors digested the release of the Federal Reserve December meeting minutes, which showed that policymakers remained committed to higher rates for some time to come. Three major U.S. stock indexes were fueled primarily by gains in the Telecoms, Financials, and Basic Materials sectors.

Federal Reserve policymakers at the Fed’s December 13th-14th policy meeting agreed to slow the pace of interest rate increases to limit the risks to economic growth. At the same time, “participants generally observed that maintaining a restrictive policy stance for a sustained period until inflation is clearly on a path toward 2 percent is appropriate from a risk-management perspective,” according to the minutes of the Fed’s December meeting released on Wednesday. The minutes bolstered fears of higher for longer rates just as data pointed to a still-tight labor market.

The U.S. Labor Department's latest JOLTs report showed job openings in November dropped less than expected to 10.458M, compared to expectations of 10.000M, giving the central bank reason to stick to its campaign of monetary tightening for longer. On the flip side, U.S. manufacturing PMI contracted to 48.4 in December, the lowest level since February 2016, discounting the drop early in the COVID-19 pandemic.

Also, Minneapolis Federal Reserve President Neel Kashkari said on Wednesday that while there were signs of easing inflation, the Fed still has more work to do.

After the release of Fed minutes, U.S. rate futures have priced in a 62.2% chance of a 25 basis point rate increase and a 37.8% chance of a 50 basis point hike at February’s monetary policy meeting. 

"This market wants to go higher, but it just needs some good news at some point. Investors are reacting to the past and ignoring the present," said Jake Dollarhide, a chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

Today, all eyes are focused on the U.S. ADP Nonfarm Employment Change data in a couple of hours. Economists, on average, forecast that December ADP Nonfarm Employment Change will stand at 150K, compared to the previous value of 127K.

Also, investors are likely to focus on the U.S. S&P Global Composite PMI, which was at 46.4 in November. Economists foresee the new figure to be 44.6.

U.S. Initial Jobless Claims data will be reported today. Economists foresee this figure to stand at 225K, compared to last week’s number of 225K.

U.S. Services PMI data will come in today. Economists expect December's figure to be 44.4, compared to the previous number of 46.2.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be +1.154M, compared to last week’s value of +0.718M.

In the bond markets, United States 10-Year rates are at 3.711%, up +0.04%.

The Euro Stoxx 50 futures are down -0.28% this morning as market participants digested the latest signals from the minutes of the last Federal Reserve meeting and key Eurozone inflation data. The major European stock indices started the new year on a positive note, with the release of better-than-anticipated inflation data from Germany and France boosting market sentiment. Also, shares of Next Plc (NXT.LN) jumped over +7% today after the British clothing retailer reported better-than-expected Q4 sales and lifted its FY22-23 profit forecast.

Germany’s Trade Balance, U.K. Composite PMI, U.K. Services PMI, Italy’s CPI (preliminary), and Eurozone’s PPI data were released today.

The German November Trade Balance has been reported at 10.8B, stronger than expectations of 7.5B.

U.K. December Composite PMI stood at 49.0, in line with expectations.

U.K. December Services PMI came in at 49.9, weaker than expectations of 50.0.

The Italian December CPI stood at +0.3% m/m and +11.6% y/y, compared to expectations of +0.1% m/m and +11.6% y/y.

Eurozone November PPI came in at -0.9% m/m and +27.1% y/y, compared to expectations of -0.9% m/m and +27.5% y/y.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.01%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.40%.

China’s Shanghai Composite today closed higher amid speculation over an imminent border reopening with the mainland. Economic data this week indicated that China’s manufacturing and services sectors shrank in December. However, the pace of contraction slowed from November as the country eased severe anti-COVID curbs, boosting optimism among businesses over an economic recovery. Still, China faces a massive surge in COVID infections after it relaxed restrictions, threatening to cause near-term volatility and delay a full reopening. 

At the same time, Japan’s Nikkei 225 Stock Index closed higher amid speculation that the Bank of Japan could lift its quarterly inflation forecasts amid increasing price pressures in the county. The index’s upward momentum was fueled by gains in the Banking, Insurance, and Finance & Investment sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.36% to 20.19.

Pre-Market U.S. Stock Movers

Vyant Bio Inc (VYNT) spiked over +102% in pre-market trading after the company announced that it had engaged LifeSci Capital as its financial advisor to assist in exploring a range of strategic alternatives focused on enhancing shareholder value.

Geron Corporation (GERN) slid about -13% in pre-market trading after the company announced its plans to offer and sell $175M shares of its common stock in an underwritten public offering.

Amazon.com Inc (AMZN) gained more than +2% in pre-market trading after the company’s CEO said job cuts to exceed 18,000 roles.

Simulations Plus Inc (SLP) plunged about -5% in pre-market trading after the company reported downbeat Q1 results and provided a soft FY2023 outlook.

Luminar Technologies (LAZR) climbed more than +2% in pre-market trading after the company updated production wins for multiple consumer vehicle models with leading automakers.

T-Mobile US Inc (TMUS) rose about +0.5% in pre-market trading after the company announced postpaid net customer additions of 6.4M, above the high end of guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - January 5th

Constellation Brands A (STZ), Walgreens Boots (WBA), ConAgra Foods (CAG), RPM (RPM), Lamb Weston Holdings (LW), MSC Industrial Direct (MSM), Simply Good Foods (SMPL), Neogen (NEOG), Helen of Troy Ltd (HELE), Lindsay (LNN), Duck Creek (DCT), Schnitzer (SCHN), Chase (CCF), Franklin Covey (FC), AngioDynamics (ANGO), Oramed (ORMP), Aehr Test Systems (AEHR), Kura Sushi (KRUS), Blade Air Mobility (BLDE), Park Electrochemical (PKE), Lifecore Biomedical (LFCR), Byrna Technologies (BYRN), Eaco (EACO).

• The US Economy and Words that Start with R
• Stocks Finish Higher on Positive Global News and Lower Bond Yields
• Unusual Options Activity With Archer-Daniels Midland Shows Income Play
• 3 Reasons Jeff Bezos Should NOT Return as Amazon CEO