Stocks Set for Muted Open as Investors Await U.S. Inflation Data

December S&P 500 E-Mini futures (ESZ24) are down -0.10%, and December Nasdaq 100 E-Mini futures (NQZ24) are down -0.14% this morning as investors looked ahead to the release of U.S. inflation data later in the week, which will be scrutinized by Federal Reserve officials before their final meeting this year.

In Friday’s trading session, Wall Street’s major equity averages closed mixed, with the benchmark S&P 500 and tech-heavy Nasdaq 100 notching new record highs. Lululemon Athletica (LULU) surged over +15% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the athleisure retailer posted solid Q3 results and raised its full-year guidance. Also, Hewlett Packard Enterprise (HPE) climbed more than +10% after the IT giant reported better-than-expected FQ4 results. In addition, DocuSign (DOCU) jumped over +27% after the company reported stronger-than-expected Q3 results and issued above-consensus Q4 revenue guidance. On the bearish side, Smith & Wesson Brands (SWBI) tumbled more than -20% after posting downbeat FQ2 results.

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls increased by 227K in November, topping the 218K consensus estimate. At the same time, the U.S. November unemployment rate unexpectedly rose to 4.2%, weaker than expectations of no change at 4.1%. Also, U.S. average hourly earnings rose +0.4% m/m and +4.0% y/y in November, stronger than expectations of +0.3% m/m and +3.9% y/y. Finally, the University of Michigan’s U.S. consumer sentiment index rose to an 8-month high of 74.0 in December, stronger than expectations of 73.1.

“[November’s] jobs report came out right in the ‘Goldilocks’ zone,” said Josh Jamner at ClearBridge Investments. “With things more or less steady, the Fed should be in a position to continue to ease monetary policy over the next several months, and recent comments suggest the pace at which they will do so will be more gradual in 2025.”

Cleveland Fed President Beth Hammack stated on Friday that the U.S. central bank is “at or near” the point where it should moderate the pace of interest rate cuts, pointing to a robust economy and still-elevated inflation. Also, Fed Governor Michelle Bowman said, “I would prefer that we proceed cautiously and gradually in lowering the policy rate as inflation remains elevated.”

Meanwhile, U.S. rate futures have priced in an 87.1% chance of a 25 basis point rate cut and a 12.9% probability of no rate change at the Fed’s monetary policy committee meeting later this month.

In the coming week, the U.S. consumer inflation report for November will be the main highlight. Also, investors will be keeping an eye on other economic data releases, including U.S. PPI, Core PPI, Nonfarm Productivity, Unit Labor Costs, Initial Jobless Claims, Crude Oil Inventories, the Export Price Index, and the Import Price Index. 

Market participants will also focus on earnings reports from several high-profile companies, with Broadcom (AVGO), Adobe (ADBE), Costco (COST), Oracle (ORCL), MongoDB (MDB), Toll Brothers (TOL), AutoZone (AZO), and GameStop (GME) scheduled to release their quarterly results this week.

Federal Reserve officials are in a media blackout period before the December meeting, so they are prohibited from making public comments this week. 

Today, investors will focus on U.S. Wholesale Inventories data, which is set to be released in a couple of hours. Economists expect the final October figure to be +0.2% m/m, compared to -0.2% m/m in September. 

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.161%, up +0.29%.

The Euro Stoxx 50 futures are up +0.18% this morning as a shift in China’s monetary stance boosted sentiment, while investors also positioned for another rate cut by the European Central Bank. China-exposed mining and luxury stocks climbed on Monday after Chinese officials pledged to implement a “more proactive” fiscal policy and a “moderately loose” monetary policy next year. A survey released on Monday showed that investor morale in the Eurozone dropped in December to its lowest level in over a year, with Germany continuing to weigh on the bloc. Meanwhile, the ECB will hold its final policy meeting of the year on Thursday, with economists and investors widely anticipating another 25 basis point rate cut, marking the fourth reduction this year. The ECB is also set to release updated growth and inflation projections, which are expected to be revised lower for the coming year. In corporate news, Compugroup Medical Se & CO Kgaa (COP.D.DX) jumped about +33% after announcing that it is in advanced talks to be acquired by CVC Capital Partners for a proposed 22 euros ($23.24) per share. 

Eurozone’s Sentix Investor Confidence Index was released today.

Eurozone December Sentix Investor Confidence Index has been reported at -17.5, weaker than expectations of -12.4.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.05%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.18%.

China’s Shanghai Composite Index closed just below the flatline today as investors digested weaker-than-expected inflation data from the country. Tech hardware stocks led the declines on Monday. Data from the National Bureau of Statistics showed on Monday that China’s consumer inflation slowed in November, while producer prices improved yet remained in decline, indicating persistent weak domestic demand despite Beijing’s efforts to boost spending. Meanwhile, the 24-man Politburo, led by President Xi Jinping, declared that it would adopt a “moderately loose” monetary policy strategy for 2025, signaling further easing to come. The body also strengthened its language on fiscal policy, stating it will be “more proactive,” an upgrade from the previous “proactive,” according to the official Xinhua News Agency. Investors are now turning their attention to the Central Economic Work Conference, set to begin on Wednesday, which will outline China’s economic priorities and targets for 2025. In corporate news, Wuxi Biologics climbed over +9% in Hong Kong after the so-called Biosecure Act was excluded from a U.S. defense bill.

The Chinese November CPI came in at -0.6% m/m and +0.2% y/y, weaker than expectations of -0.4% m/m and +0.5% y/y.

The Chinese November PPI stood at -2.5% y/y, stronger than expectations of -2.8% y/y.

Japan’s Nikkei 225 Stock Index closed marginally higher today, supported by gains on Wall Street at the end of last week. Technology stocks outperformed on Monday. However, gains were limited by ongoing global political instability. Political turmoil in South Korea and France, along with the collapse of Syrian President Bashar al-Assad’s regime, weighed on sentiment. Meanwhile, data released on Monday showed that the Japanese economy expanded at a faster pace than initially estimated in the July-September quarter, driven by upward revisions in capital investment and exports, bolstering expectations that the Bank of Japan will hike interest rates soon. Separately, data showed Japan’s current account surplus exceeded expectations in October. In addition, data showed that the gauge for Japan’s service sector unexpectedly rose to an 8-month high in November. In corporate news, Rakuten Group surged over +6%, building on Friday’s gains after the company unveiled a shareholder benefits program. Investors are now awaiting Japanese business sentiment data, set to be released later in the week, to gain further insight into the health of the economy. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -6.50% to 21.43.

The Japanese GDP arrived at +0.3% q/q in the third quarter, in line with expectations.

The Japanese October Current Account n.s.a. came in at 2.457T yen, stronger than expectations of 2.318T yen.

The Japanese November Economy Watchers Current Index stood at 49.4, stronger than expectations of 47.3. 

Pre-Market U.S. Stock Movers

Interpublic Group (IPG) surged over +13% in pre-market trading after the Wall Street Journal reported that Omnicom Group was in advanced talks to acquire the company.

Super Micro Computer (SMCI) gained over +8% in pre-market trading after it announced that Nasdaq had extended its deadline to comply with listing rules. 

Reddit (RDDT) climbed more than +4% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $200.

Workday (WDAY) rose over +9% and Apollo Global Management (APO) advanced more than +6% in pre-market trading after S&P Dow Jones Indices announced on Friday that both stocks would be added to the benchmark S&P 500 index later this month.

Nvidia (NVDA) fell over -1% in pre-market trading after China’s market regulator launched an investigation into the chipmaker for alleged breaches of the country’s anti-monopoly law.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - December 9th

Oracle (ORCL), MongoDB (MDB), Caseys (CASY), Toll Brothers (TOL), Healthequity (HQY), Vail Resorts (MTN), C3.ai (AI), Braze (BRZE), Phreesia (PHR), Hello Group (MOMO), Yext (YEXT), Oil-Dri Of America (ODC), VersaBank (VBNK).