Pre-Market Brief: Stocks Move Higher Ahead Of Key U.S. Payrolls Data

March S&P 500 futures (ESH23) are trending up +0.13% this morning after three major U.S. benchmark indices finished the regular session in the red as stronger-than-expected U.S. labor market data stoked investors’ fears that the Federal Reserve would remain aggressive in tightening monetary policy. Three major U.S. stock indexes were weighed down primarily by losses in the Technology, Utilities, and Industrials sectors.

ADP National Employment report on Thursday showed employers added 235K jobs in December, compared to expected additions of 150K. At the same time, the Labor Department report revealed claims for state unemployment benefits dropped to a 3-1/4 month low of 204K, stronger than expectations of 225K.

“Everything else within the economy appears to be moderating except labor market demand, which is the key to the Fed stopping rate hikes,” said Brent Schutte, a chief investment officer of Northwestern Mutual Wealth Management Co.

Kansas City Fed President Esther George and Atlanta President Raphael Bostic said Thursday that the Fed’s priority was to curb inflation through policy tightening. However, St. Louis Federal Reserve President James Bullard said that 2023 could bring some welcome relief on the inflation front.

Meanwhile, U.S. rate futures have priced in a 57.6% chance of a 25 basis point rate increase and a 42.4% chance of a 50 basis point hike at February’s monetary policy meeting. 

Today, market participants will be closely eyeing the U.S. Nonfarm Payrolls data for further clues on labor demand and the rate hike trajectory. Economists, on average, forecast that December Nonfarm Payrolls will stand at 200K, compared to the previous value of 263K.

Also, investors are likely to focus on the U.S. Unemployment Rate, which was at 3.7% in November. Economists foresee the new figure to remain steady at 3.7%.

U.S. ISM Non-Manufacturing PMI data will be reported today. Economists foresee this figure to stand at 55.0 in December, compared to the previous number of 56.5.

U.S. Average Hourly Earnings data will also be closely watched today. Economists expect December’s figure to be +0.4% m/m and +5.0% y/y, compared to the previous numbers of +0.6% m/m and +5.1% y/y.

U.S. Factory Orders data will come in today. Economists forecast Factory Orders to stand at -0.8% m/m in November, compared to the previous figure of +1.0% m/m. 

U.S. Private Nonfarm Payrolls data will be reported today as well. Economists estimate this figure to be 180K in December, compared to the previous value of 221K.

In the bond markets, United States 10-Year rates are at 3.729%, up +0.19%.

The Euro Stoxx 50 futures are up +0.08% this morning as market participants digested a bigger-than-expected drop in Eurozone inflation data ahead of the release of the widely-expected U.S. jobs report. European stocks received a boost earlier this week from better-than-expected inflation reading in Germany, which bolstered hopes that the European Central Bank could curb its aggressive interest rate increases reasonably quickly. 

Germany’s Retail Sales, Germany’s Factory Orders, France’s Consumer Spending, U.K. Construction PMI, Eurozone CPI (preliminary), and Eurozone Retail Sales data were released today.

The German November Retail Sales stood at +1.1% m/m and -5.9% y/y, compared to expectations of +1.0% m/m and -2.8% y/y.

The German November Factory Orders came in at -5.3% m/m, weaker than expectations of -0.5% m/m.

The French November Consumer Spending was at +0.5% m/m, weaker than expectations of +1.0% m/m.

U.K. December Construction PMI stood at 48.8, weaker than expectations of 49.6.

Eurozone December CPI has been reported at -0.3% m/m and +9.2% y/y, weaker than expectations of +0.8% m/m and +9.7% y/y, declining year-on-year for a second straight month.

Eurozone November Retail Sales stood at +0.8% m/m and -2.8% y/y, stronger than expectations of +0.5% m/m and -3.3% y/y.

Asian stock markets today settled in the green as investors bet on an economic boost from China’s reopening of its borders this week. China’s Shanghai Composite Index (SHCOMP) closed up +0.08%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.59%.

China’s Shanghai Composite today closed higher as the country prepares to open its borders after three years of COVID-19 lockdowns. However, China is still grappling with a massive surge in COVID-19 infections, which could delay a broader reopening and disrupt business activity.

“While the re-opening is likely to be a bumpy affair amid surging COVID-19 cases and increasingly stretched health systems, our economists expect growth momentum across Asia to gather steam, led by China,” HSBC strategists wrote in a note.

At the same time, Japan’s Nikkei 225 Stock Index closed higher today, fueled by gains in the Electrical/Machinery, Chemical, and Glass sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 6.24% to 18.93.

Pre-Market U.S. Stock Movers

CytomX Therapeutics Inc (CTMX) spiked over +59% in pre-market trading after the company announced it had partnered with Moderna to create investigational mRNA-based conditionally activated therapies.

Fate Therapeutics Inc (FATE) plunged about -50% in pre-market trading after the company announced the termination of its collaboration pact with Johnson&Johnson unit Janssen Biotech.

Graphite Bio Inc (GRPH) tumbled more than -49% in pre-market trading after the company voluntarily paused the Phase 1/2 CEDAR study of nulabeglogene autogedtemcel due to a serious adverse event in the first patient dosed with nula-cel.

Costco Wholesale Corp (COST) rose about +2% in pre-market trading after the company reported December sales of $23.80 billion, up 7% from $22.24 billion last year.

Spruce Biosciences Inc (SPRB) climbed about +89% in pre-market trading after the company entered an exclusive agreement for Tildacerfont with Kaken Pharma.

World Wrestling Entertainment Inc (WWE) gained about +10% in pre-market trading after announcing plans for strategic alternatives under returning executive chairman Vince McMahon. 

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - January 6th

Sodexo PK (SDXAY), Greenbrier (GBX), Chase (CCF), Oramed (ORMP), Silvergate Cap (SI), Blade Air Mobility (BLDE), Lifecore Biomedical (LFCR), Byrna Technologies (BYRN), Hurco (HURC), Trinity Place Holdings Inc (TPHS).

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