Stocks Slip Before the Open as Bond Yields Climb, U.S. PPI Data and ECB Decision in Focus

December S&P 500 E-Mini futures (ESZ24) are down -0.15%, and December Nasdaq 100 E-Mini futures (NQZ24) are down -0.23% this morning as Treasury yields marched higher, while investors awaited crucial U.S. producer inflation data as well as the European Central Bank’s interest rate decision.

In yesterday’s trading session, Wall Street’s major indexes ended mixed, with the tech-heavy Nasdaq 100 notching a new record high. Broadcom (AVGO) climbed over +6% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after The Information reported that Apple was working with the chipmaker on a server chip exclusively designed for artificial intelligence. Also, megacap technology stocks advanced, with Tesla (TSLA) gaining more than +5% and Nvidia (NVDA) rising over +3%. In addition, GameStop (GME) rose more than +7% after the videogame retailer reported a surprise Q3 profit. On the bearish side, Walgreens Boots Alliance (WBA) slid over -5% after analysts cast doubt on the likelihood of Sycamore Partners acquiring the drugstore chain. 

The U.S. Bureau of Labor Statistics report released on Wednesday showed that consumer prices increased +0.3% m/m in November, in line with expectations. On an annual basis, headline inflation picked up to +2.7% in November from +2.6% in October, in line with expectations. Also, the November core CPI, which excludes volatile food and fuel prices, remained unchanged from October at +3.3% y/y, right on expectations.

“The debate for the FOMC next week between cut or skip is over. This inflation print should be risk asset friendly and provide a tailwind to equity markets as we move through one of the strongest seasonal periods of the year,” said Jeff Schulze at ClearBridge Investments.

Meanwhile, U.S. rate futures have priced in a 98.6% chance of a 25 basis point rate cut at the upcoming monetary policy meeting.

Today, all eyes are focused on the U.S. Producer Price Index, which is set to be released in a couple of hours. Economists, on average, forecast that the U.S. November PPI will come in at +0.2% m/m and +2.6% y/y, compared to the previous figures of +0.2% m/m and +2.4% y/y.

The U.S. Core PPI will also be closely monitored today. Economists expect November figures to be +0.2% m/m and +3.2% y/y, compared to October’s numbers of +0.3% m/m and +3.1% y/y.

U.S. Initial Jobless Claims data will be released today as well. Economists estimate this figure to arrive at 221K, compared to last week’s number of 224K.

On the earnings front, notable companies like Broadcom (AVGO), Costco (COST), and Ciena (CIEN) are slated to release their quarterly results today.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.300%, up +0.66%.

The Euro Stoxx 50 futures are up +0.02% this morning as investors geared up for the European Central Bank’s monetary policy decision. Energy stocks outperformed on Thursday. China-exposed mining and luxury stocks also advanced after the Chinese Commerce Ministry said that “China is open to contact and communication with the Trump administration’s economic and trade team.” The ECB is widely expected to lower its policy rate by 25 basis points for the fourth time this year amid a deteriorating economic outlook and ongoing political instability in France and Germany. The central bank is also set to release updated growth and inflation projections, which are expected to be revised lower for the coming year. Meanwhile, the Swiss National Bank delivered a larger-than-anticipated 50-basis-point rate cut on Thursday, lowering the key policy rate to 0.50%. In corporate news, Lonza Group Ag (LONN.Z.IX) climbed over +6% following the Swiss contract drugmaker’s announcement of plans to exit its capsules and health ingredients business.

The European economic data slate is mainly empty on Thursday. 

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.85%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.21%.

China’s Shanghai Composite Index closed higher today, continuing its upward trend driven by expectations of additional growth measures from Beijing. Liquor stocks led the gains on Thursday. Investors are now awaiting details from China’s two-day Central Economic Work Conference, which is expected to outline economic priorities and targets for next year. This comes after Monday’s Politburo meeting readout, where top leaders pledged to adopt a “moderately loose” monetary policy and a “more proactive” fiscal policy to boost economic growth. Meanwhile, Chinese authorities set a stronger-than-expected yuan fixing on Thursday, continuing their support for the currency after it weakened following a Reuters report that the nation is contemplating FX depreciation next year. In other news, China’s commerce ministry stated that it is open to trade talks with the U.S. That followed a CNBC report that U.S. President-elect Donald Trump extended an invitation to Chinese President Xi Jinping for his January inauguration at the White House. In corporate news, Guosheng Financial climbed +10% after receiving approval from the China Securities Regulatory Commission for the merger and absorption of its subsidiary, Guosheng Securities.

Japan’s Nikkei 225 Stock Index closed higher and hit a 2-month high today, tracking overnight gains on Wall Street amid growing expectations for the Fed’s rate cut next week. Electronics and automobile stocks led the gains on Thursday. Meanwhile, the Bank of Japan’s monetary policy outlook remains highly uncertain. Bloomberg reported late Wednesday that BOJ officials view little disadvantage in delaying interest rate hikes, although they remain open to an increase next week depending on upcoming data and market developments. According to the latest Bloomberg survey, January has become the most popular timing among BOJ watchers for the next rate hike, although over 40% still anticipate a move from the central bank next week. In other news, foreign investors became net buyers of Japanese stocks for the first time in three weeks as of December 7th, attracted by a rally in local shares and reduced expectations for the BOJ rate hike. Foreigners bought 482.3 billion yen ($3.17 billion) worth of Japanese stocks during the week, marking the largest net weekly purchase since November 9th, according to data from the Ministry of Finance. In corporate news, Digital Hearts gained more than +4% after the company revised its full-year net income forecast, attributing the adjustment to an expected 400 million yen gain from the sale of its subsidiary, Identity. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.92% to 21.97.

Pre-Market U.S. Stock Movers

Adobe (ADBE) plunged over -10% in pre-market trading after the Photoshop maker issued below-consensus FY25 guidance. 

Chewy (CHWY) slid more than -2% in pre-market trading after announcing a public offering of around 15.85 million shares by Buddy Chester Sub, an entity connected to BC Partners Advisors, Chewy’s biggest shareholder.

T-Mobile US (TMUS) fell nearly -1% in pre-market trading after KeyBanc downgraded the stock to Sector Weight from Overweight.

Constellation Energy (CEG) rose over +2% in pre-market trading after BofA upgraded the stock to Buy from Neutral with a $269 price target.

Boeing (BA) gained about +1% in pre-market trading after Northcoast upgraded the stock to Neutral from Sell.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - December 12th

Broadcom (AVGO), Costco (COST), Ciena Corp (CIEN), RH (RH), Quanex Building Products (NX), Liquidity Services (LQDT), Lovesac (LOVE), AstroNova (ALOT), Lee Enterprises (LEE), Live Ventures (LIVE), Good Times (GTIM).