March S&P 500 E-Mini futures (ESH25) are down -0.83%, and March Nasdaq 100 E-Mini futures (NQH25) are down -1.26% this morning while Treasury yields continued to rise as investors trimmed bets on Federal Reserve interest rate cuts following Friday’s strong payroll data.
Market participants now look ahead to key U.S. inflation data, remarks from Federal Reserve officials, and the start of the fourth-quarter earnings season later in the week.
In Friday’s trading session, Wall Street’s major equity averages closed sharply lower, with the benchmark S&P 500 and blue-chip Dow dropping to 2-month lows and the tech-heavy Nasdaq 100 falling to a 6-week low. Constellation Brands (STZ) tumbled over -17% and was the top percentage loser on the S&P 500 after the company posted downbeat FQ3 results and provided a soft FY25 comparable EPS forecast. Also, ON Semiconductor (ON) slumped more than -7% and was the top percentage loser on the Nasdaq 100 after Truist Securities downgraded the stock to Hold from Buy. In addition, Advanced Micro Devices (AMD) slid over -4% after Goldman Sachs downgraded the stock to Neutral from Buy. On the bullish side, Walgreens Boots Alliance (WBA) soared more than +27% and was the top percentage gainer on the S&P 500 after reporting better-than-expected FQ1 results.
The U.S. Labor Department’s report on Friday showed that nonfarm payrolls jumped by 256K in December, topping the consensus estimate of 164K. Also, the U.S. December unemployment rate unexpectedly ticked down to 4.1%, stronger than expectations of no change at 4.2%. In addition, the University of Michigan’s U.S. consumer sentiment index unexpectedly fell to 73.2 in January, weaker than expectations of no change at 74.0. At the same time, U.S. average hourly earnings came in at +0.3% m/m and +3.9% y/y in December, compared to expectations of +0.3% m/m and +4.0% y/y.
“The surprisingly strong jobs report certainly isn’t going to make the Fed less hawkish,” said Ellen Zentner at Morgan Stanley Wealth Management. “All eyes will now turn to [this week’s] inflation data, but even a downside surprise in those numbers probably won’t be enough to get the Fed to cut rates any time soon.”
Meanwhile, U.S. rate futures have priced in a 97.3% chance of no rate change and a 2.7% chance of a 25 basis point rate cut at the conclusion of the Fed’s January meeting. The strong U.S. jobs report led traders to reduce their bets on Fed rate cuts to less than 30 basis points by December this year.
The fourth-quarter earnings season kicks off this week, with big banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) set to release their earnings reports on Wednesday, followed by Bank of America (BAC) and Morgan Stanley (MS) on Thursday. UnitedHealth (UNH), Taiwan Semiconductor Manufacturing Company (TSM), and Schlumberger (SLB) are among other major names scheduled to deliver quarterly updates during the week.
On the economic data front, the U.S. consumer inflation report for December will be the main highlight this week. Also, market watchers will be keeping an eye on other economic data releases, including the U.S. PPI, the Core PPI, Retail Sales, Core Retail Sales, the Philadelphia Fed Manufacturing Index, the NY Empire State Manufacturing Index, Crude Oil Inventories, the Export Price Index, the Import Price Index, Initial Jobless Claims, Business Inventories, Building Permits (preliminary), Housing Starts, Industrial Production, and Manufacturing Production.
In addition, Fed officials may provide insights on the monetary policy outlook before the blackout period preceding the late-January meeting. Kansas City Fed President Jeffrey Schmid, New York Fed President John Williams, Richmond Fed President Thomas Barkin, Minneapolis Fed President Neel Kashkari, and Chicago Fed President Austan Goolsbee will be making appearances throughout the week.
The Fed will also release its Beige Book survey of regional business contacts this week, which provides an update on economic conditions in each of the 12 Fed districts. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee.
The U.S. economic data slate is mainly empty on Monday.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.795%, up +0.44%.
The Euro Stoxx 50 Index is down -1.04% this morning as concerns over the state of the global economy continued to weigh on sentiment. Technology and industrial stocks led the declines on Monday. At the same time, energy stocks outperformed as crude oil prices rose more than +1%. The benchmark index extended its losses from Friday after the blowout U.S. jobs report, along with expectations that policies under President-elect Donald Trump could spur inflation, convinced many investors that interest rates would remain higher for longer. This sparked a surge in global bond yields, with European government bond yields continuing to rise on Monday. Meanwhile, European Central Bank Chief Economist Philip Lane stated in an interview with an Austrian newspaper that the ECB will continue to reduce its key interest rate but must proceed at a pace that ensures the continued cooling of inflation. Later in the week, attention will turn to final inflation readings for December from across the region. In corporate news, Entain Plc (ENT.LN) gained over +2% after the British gambling group said it anticipates its 2024 core profit to reach the upper end of its forecast range.
The European economic data slate is empty on Monday.
China’s Shanghai Composite Index (SHCOMP) closed down -0.25%, while Japanese financial markets were closed for a holiday.
China’s Shanghai Composite Index closed lower today, starting the new week on a downbeat note despite stronger-than-expected trade data from the country. Home appliance and telecom stocks led the declines on Monday. At the same time, property stocks gained ground after China’s central bank governor said he sees diminishing risks in the nation’s real estate market, citing enhanced property transactions in recent months. Customs data showed on Monday that China’s exports surged by double digits in December, recording the second-highest monthly total ever and trailing only December 2021, as firms hastened to ship goods in anticipation of higher U.S. tariffs. Also, data showed that imports unexpectedly rebounded in December, breaking a two-month streak of contraction. However, worries about slowing economic activity, persistent deflationary pressures, and the absence of aggressive policy support kept investor sentiment subdued. Meanwhile, China intensified its support for the yuan through a warning and adjustments to its capital controls, following the currency’s decline close to a record low against the dollar in offshore trading. The People’s Bank of China and other regulators will enhance their oversight of the foreign exchange market, address any actions that could disrupt market order, and guard against the risks of an overshoot in the yuan, a statement released Monday showed. In corporate news, MTR Corp. slid over -4% in Hong Kong after HSBC downgraded the stock to Neutral from Buy. Investor focus this week is on China’s Q4 GDP data as well as a series of December data releases, including retail sales and industrial production.
The Chinese December Trade Balance stood at $104.84B, stronger than expectations of $100.00B.
The Chinese December Exports arrived at +10.7% y/y, stronger than expectations of +7.3% y/y.
The Chinese December Imports came in at +1.0% y/y, stronger than expectations of -1.5% y/y.
Japan’s Nikkei 225 Stock Index was closed today for the Coming of Age Day holiday. The markets will reopen on Tuesday.
Pre-Market U.S. Stock Movers
Tesla (TSLA) fell over -2% in pre-market trading after Axios reported that the company’s regulatory credit sales are at risk from President-elect Donald Trump’s policies.
Intra-Cellular Therapies (ITCI) soared about +36% in pre-market trading after Bloomberg reported that Johnson & Johnson is in talks to acquire the biotech company.
Energy stocks and energy service providers are moving higher in pre-market trading, with the price of WTI crude up over +1%. Exxon Mobil (XOM), Devon Energy (DVN), Occidental Petroleum (OXY), and Schlumberger (SLB) are up about +1%.
STMicroelectronics (STM) slid over -4% in pre-market trading after TD Cowen downgraded the stock to Hold from Buy.
Pinterest (PINS) dropped more than -3% in pre-market trading after Jefferies downgraded the stock to Hold from Buy.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - January 13th
ServiceTitan (TTAN), KB Home (KBH), Aehr Test Systems (AEHR), Educational Development (EDUC).
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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