March S&P 500 futures (ESH23) are trending up +0.05% this morning after three major U.S. benchmark indices ended the regular session higher as market participants took an optimistic stance ahead of a crucial U.S. inflation report that could persuade the Federal Reserve to slow the pace of its interest rate hikes. Three major U.S. stock indexes were fueled primarily by gains in the Technology, Consumer Services, and Basic Materials sectors.
In Wednesday’s trading session, all three major U.S. stock indexes rallied to end the session +0.8% to +1.8%, with the Nasdaq rising to a 3-1/2 week high. Also, T-note yields retreated as investors bet that inflation is on a sustainable downward path, possibly leading the Federal Reserve to at least slow its rate increases.
Today, all eyes are focused on the U.S. consumer inflation report in a couple of hours. Economists, on average, forecast that December U.S. CPI will stand at 0.0% m/m and +6.5% y/y, compared to the previous values of +0.1% m/m and +7.1% y/y.
“Both the worst and best days for the S&P 500 in 2022 came on days of a CPI release. As such, it's inevitable that today’s U.S. CPI has the ability to shape the next month. The latest releases have seen two downside surprises on CPI in a row for the first time since the pandemic, which has led to growing hopes that the Fed might achieve a soft landing after all,” wrote Deutsche Bank strategist Jim Reid.
Ahead of an inflation report, U.S. rate futures have priced in a 77.7% chance of a 25 basis point rate increase and a 22.3% chance of a 50 basis point hike at February’s monetary policy meeting.
In addition, investors are likely to focus on a batch of speeches from Federal Reserve officials Harker, Bullard, and Barkin for further clues on the Fed’s rate hike path.
U.S. Core CPI data will also be closely watched today. Economists forecast Core CPI to be +0.3% m/m and +5.7% y/y in December, compared to the previous figures of +0.2% m/m and +6.0% y/y.
U.S. Initial Jobless Claims data will be reported today as well. Economists, on average, forecast that Initial Jobless Claims will come in at 215K, compared to last week’s figure of 204K.
In the bond markets, United States 10-Year rates are at 3.543%, down -0.37%.
The Euro Stoxx 50 futures are up +0.80% this morning as investors geared up for the December U.S. inflation data and more quarterly earnings. European equities have also received a boost from yesterday’s solid numbers by the two retailers, Next (NXT.LN) and JD Sports Fashion (JD-.LN), with investors looking to see if these positive numbers can continue given the challenging backdrop caused by a cost-of-living crisis and high inflation.
The European economic data slate is mainly empty on Thursday.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.05%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.01%.
China’s Shanghai Composite today closed a little higher as a two-day rally in heavyweight technology stocks faded. Regional tech stocks gained ground this week after the Chinese government signaled less severe measures against the country’s internet giants. Also, data on Thursday showed that Chinese CPI increased to 1.8% y/y in December, in line with expectations, as the country eased most of its severe anti-COVID restrictions. However, price pressures remained subdued as the country grapples with its worst-yet COVID-19 outbreak.
At the same time, Japan’s Nikkei 225 Stock Index closed slightly higher after data revealed that the country logged a record-high current account surplus in November as solid returns on Japanese overseas investments mostly offset a rising trade deficit. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 1.81% to 17.95.
Pre-Market U.S. Stock Movers
Akerna Corp (KERN) spiked about +95% in pre-market trading after the company announced the sale of 365 Cannabis to 365 Holdco LLC for $2.8M.
Walt Disney Company (DIS) rose more than +1% in pre-market trading after the Board of Directors announced that it had elected independent director Mark G. Parker as Chairman of the Board.
KB Home (KBH) fell over -2% in pre-market trading after the company reported downbeat Q4 results.
Oramed Pharmaceuticals Inc (ORMP) plunged about -70% in pre-market trading after results from the Phase 3 trial of ORMD-0801 did not meet the primary endpoint.
Yield10 Bioscience Inc (YTEN) climbed over +46% in pre-market trading after the company signed a Memorandum of Understanding with Mitsubishi to market Camelina as biofuel feedstock oil.
Logitech International SA (LOGI) slid more than -15% in pre-market trading after the company guided Q3 revenue below consensus and cut the FY23 outlook.
Roku Inc (ROKU) dropped about -4% in pre-market trading after Jefferies downgraded the stock to underperform from hold with a price target of $30, down from $45.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - January 12th
Taiwan Semiconductor (TSM), Infosys ADR (INFY), Fast Retailing ADR (FRCOY), Seven i ADR (SVNDY), Tesco PLC (TSCDY), Shaw B (SJR), Chr Hansen ADR (CHYHY), Marks & Spencer Group Plc (MAKSY), Washington Federal (WAFD), ASOS plc PK (ASOMY), Oramed (ORMP), Concrete Pumping A (BBCP), OrganiGram Holdings Inc (OGI), Blade Air Mobility (BLDE), Lifecore Biomedical (LFCR), Byrna Technologies (BYRN), Loop Industries (LOOP), Northern Technologies (NTIC), Calloways Nursery (CLWY), Bank of South Carolina (BKSC).
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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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