S&P Futures Slip Ahead of U.S. Retail Sales Data and FOMC Meeting

December S&P 500 E-Mini futures (ESZ24) are trending down -0.45% this morning as investors braced for the start of the Federal Reserve’s two-day policy meeting while also awaiting a new batch of U.S. economic data, with a particular focus on the retail sales report.

In yesterday’s trading session, Wall Street’s main stock indexes closed mixed, with the tech-heavy Nasdaq 100 notching a new all-time high and the blue-chip Dow posting a 3-week low. Broadcom (AVGO) climbed over +11% and was the top percentage gainer on the S&P 500 and Nasdaq 100, extending last Friday’s rally after it reported better-than-expected FQ4 adjusted EPS and provided upbeat FQ1 revenue guidance. Also, Tesla (TSLA) gained more than +6% after Wedbush Securities raised its price target on the stock to $515 from $400. In addition, Honeywell International (HON) rose over +3% and was the top percentage gainer on the Dow after saying it’s exploring a separation of its aerospace business. On the bearish side, Super Micro Computer (SMCI) slumped more than -8% and was the top percentage loser on the S&P 500 and Nasdaq 100 after Nasdaq announced that the stock would be removed from the tech-heavy index later this month.

Economic data released on Monday showed that the U.S. S&P Global manufacturing PMI fell to 48.3 in December, weaker than expectations of 49.4. Also, the Empire State manufacturing index came in at 0.20 in December, weaker than expectations of 6.40. At the same time, the U.S. December S&P Global services PMI unexpectedly rose to 58.5, stronger than expectations of 55.7.

The Federal Reserve kicks off its two-day meeting later in the day. While Fed officials are widely expected to cut interest rates by a quarter percentage point on Wednesday, the trajectory for the following months is less clear. Market watchers will closely follow the central bank’s quarterly “dot plot” in its Summary of Economic Projections, which shows FOMC member forecasts regarding the path of interest rates, and Chair Jerome Powell’s post-decision press conference. 

On the economic data front, all eyes are focused on U.S. Retail Sales data, which is set to be released in a couple of hours. Economists, on average, forecast that November Retail Sales will stand at +0.6% m/m, compared to the October figure of +0.4% m/m.

Also, investors will focus on U.S. Core Retail Sales data, which came in at +0.1% m/m in October. Economists foresee the November figure to be +0.4% m/m.

U.S. Industrial Production and Manufacturing Production data will be released today as well. Economists forecast November Industrial Production at +0.3% m/m and Manufacturing Production at +0.5% m/m, compared to October’s figures of -0.3% m/m and -0.5% m/m, respectively.

“Near-term momentum may depend on what Fed Chair Powell says after the announcement, and whether retail sales or the PCE Price Index catch the market off guard,” said Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.423%, up +0.53%.

The Euro Stoxx 50 futures are up +0.12% this morning as investors geared up for interest rate decisions from major central banks later in the week. Data from the Office for National Statistics released on Tuesday showed that wage growth accelerated in the U.K. over the three months to October, while the unemployment rate remained unchanged. Separately, the Ifo Institute reported that German business sentiment worsened more than expected in December, hitting the lowest level since May 2020. At the same time, the ZEW Economic Research Institute said that the gauge of economic sentiment for Germany unexpectedly improved to a 4-month high in December. Market participants are awaiting monetary policy decisions from the Fed on Wednesday as well as the Bank of Japan and the Bank of England on Thursday. In other news, German Chancellor Olaf Scholz lost his confidence vote as anticipated, setting the stage for a snap election on February 23rd. In corporate news, Airbus Se (AIR.FP) rose over +1% after Deutsche Bank upgraded the stock to Buy from Hold.

European Central Bank Governing Council member Olli Rehn stated Tuesday that interest rates will keep moving lower as inflation begins to stabilize around the 2% target. “The direction of our monetary policy is now clear,” Rehn said. “The speed and scale of the rate cuts will be determined in each meeting on the basis of incoming data and comprehensive analysis.”

U.K.’s Average Earnings ex Bonus, U.K.’s Unemployment Rate, Germany’s Ifo Business Climate Index, Germany’s ZEW Economic Sentiment Index, and the Eurozone’s ZEW Economic Sentiment Index were released today.

U.K. Average Earnings ex Bonus stood at 5.2% in the three months to October, stronger than expectations of 5.0%.

U.K. Unemployment Rate was 4.3% in the three months to October, in line with expectations.

The German December Ifo Business Climate Index has been reported at 84.7, weaker than expectations of 85.5.

The German December ZEW Economic Sentiment Index arrived at 15.7, stronger than expectations of 6.8.

Eurozone December ZEW Economic Sentiment Index came in at 17.0, stronger than expectations of 12.2.

Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.73% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.24%.

China’s Shanghai Composite Index ended in the red today, hitting its lowest level in over two weeks. Consumer and software stocks led the declines on Tuesday. Sentiment among investors remained downbeat after data released on Monday indicated that the Chinese economy seems to be weakening. A State Council meeting, chaired by Premier Li Qiang, was convened following the data release, calling on relevant departments to turn the decisions made at the Central Economic Work Conference into concrete plans. Meanwhile, during the afternoon session, the benchmark index received a temporary boost after Reuters reported that Beijing intends to set an annual growth target of about 5% for next year and increase the budget deficit to 4% of gross domestic product. Moody’s Ratings raised China’s 2025 GDP growth projection to 4.2% from 4.0%, buoyed by expectations of stabilizing credit conditions and Beijing’s stimulus measures. In other news, Fitch Ratings said in a note that fiscal support will be crucial in tackling China’s weak domestic demand and partially mitigating external headwinds. In corporate news, BYD gained over +2% after The Paper reported that the company’s Xi’an plant in Shaanxi province met its 2024 production goal of 1 million vehicles as of December 13th. Investors are now looking forward to the People’s Bank of China’s loan prime rate decisions later this week.

Japan’s Nikkei 225 Stock Index closed slightly lower today, reversing earlier gains as caution prevailed ahead of central bank policy decisions in the U.S. and Japan. Financial and automobile stocks weighed on the index on Tuesday. Meanwhile, the Bank of Japan will announce its policy decision on Thursday, and speculation is growing that the central bank might refrain from raising interest rates as officials seek more time to evaluate recent economic data. A survey of 150 financial institutions by Ueda Yagi Tanshi showed that 91% expect short-term rates to stay at 0.25%, while 95% predict that the overnight call rate will increase within three months, up from 67% in October. In corporate news, Advantest slumped over -9% after revealing its latest testing solutions for advanced applications. At the same time, SoftBank Group gained more than +4% after U.S. President-elect Donald Trump announced at an event, alongside Chief Executive Officer Masayoshi Son, that the technology start-up investor would invest $100 billion in the U.S. over the next four years. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.95% to 19.57.

Pre-Market U.S. Stock Movers

Tesla (TSLA) rose over +2% in pre-market trading after Mizuho upgraded the stock to Outperform from Neutral with a $515 price target.

Mitek Systems (MITK) soared more than +18% in pre-market trading after the company reported better-than-expected FQ4 results.

SolarEdge (SEDG) surged over +14% in pre-market trading after Goldman Sachs double-upgraded the stock to Buy from Sell with a price target of $19.

Red Cat Holdings (RCAT) plunged more than -11% in pre-market trading after reporting weaker-than-expected FQ2 results.

Cloudflare (NET) gained over +2% in pre-market trading after Stifel upgraded the stock to Buy from Hold with a price target of $136.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - December 17th

Heico (HEI), Amentum Holdings LLC (AMTM), Worthington Industries (WOR), Ree Automotive Holding (REE), Cheetah Mobile Inc (CMCM), Neuroone Medical (NMTC).