March S&P 500 E-Mini futures (ESH24) are up +0.14%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.18% this morning as trading resumed after the Christmas holiday, with investors looking ahead to earlier and deeper interest rate cuts from the Federal Reserve next year following a cooler-than-expected U.S. inflation report last week.
In Friday’s trading session, Wall Street’s major averages ended mixed. ANSYS Inc (ANSS) climbed over +18% and was the top percentage gainer on the benchmark S&P 500 following a report from the Wall Street Journal indicating that Synopsys is in talks to acquire the company in a deal that may be struck early next year. Also, Karuna Therapeutics Inc (KRTX) soared more than +47% after Bristol Myers Squib agreed to buy the drugmaker for $14 billion in cash. In addition, Rocket Lab USA, Inc. (RKLB) gained over +22% after winning a $515 million contract with a U.S. government customer to design, manufacture, deliver, and operate 18 space vehicles. On the bearish side, Nike Inc (NKE) plunged more than -11% after the footwear and sports apparel giant reported mixed Q2 results and issued cautious revenue guidance for the second half of the fiscal year.
Data from the U.S. Department of Commerce on Friday showed that the U.S. core PCE price index, a key inflation gauge monitored by the Federal Reserve, stood at +0.1% m/m and +3.2% y/y in November, weaker than expectations of +0.2% m/m and +3.3% y/y. Also, U.S. November personal spending rose +0.2% m/m, in line with expectations. In addition, the University of Michigan’s reading of consumer sentiment was revised higher to a 5-month high of 69.7 in December, stronger than expectations of 69.4. Finally, U.S. November new home sales fell -12.2% m/m to 590K, weaker than expectations of 695K.
“The data was very dovish, and, of course, this is the Fed’s primary measure of inflation. But the core being below expectations and the top line also being below expectations is positive for the market, indicative that inflation is declining,” said Tim Griskey, a senior portfolio strategist at Ingalls & Snyder.
Meanwhile, U.S. rate futures have priced in a 14.5% chance of a 25 basis point rate cut at the next central bank meeting in January and a 75.6% chance of a 25 basis point rate cut at the March FOMC meeting.
Later in this holiday-shortened week, investors will be monitoring a spate of economic data, including the U.S. Richmond Manufacturing Index, Initial Jobless Claims, Wholesale Inventories (preliminary), Pending Home Sales, Crude Oil Inventories, and Chicago PMI.
Today, investors will likely focus on the U.S. S&P/CS HPI composite - 20 n.s.a. Economists, on average, forecast that the October S&P/CS HPI composite - 20 n.s.a. will stand at +5.0% y/y, compared to the previous figure of +3.9% y/y.
In the bond markets, United States 10-year rates are at 3.898%, down -0.36%.
Major European markets are closed today.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.68% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.16%.
China’s Shanghai Composite today closed lower as investor sentiment remained weak despite the authorities easing their stance following last week’s move to tighten restrictions on the videogame industry. Losses in semiconductor and information technology stocks led the overall market lower. At the same time, Chinese gaming stocks listed in Shanghai and Shenzhen rebounded on Tuesday following China’s approval of 105 domestic games on Monday. Monday’s approvals indicate that Chinese authorities support the growth of the online gaming industry, as mentioned in a post by an industry association on WeChat, republished by the official Xinhua news agency. As a result, Kingnet Network Co Ltd climbed over +3%, Hangzhou Dianhun Network Tech Co Ltd rose more than +1%, and Sichuan Xunyou Network Technology Co Ltd gained about +1%. Meanwhile, at least eight gaming companies listed in China, including Perfect World Co, announced share buyback plans amounting to a total of up to 780 million yuan ($109.17 million). Investor attention is currently directed toward Chinese Purchasing Managers’ Index readings scheduled for the weekend, seeking further insights into business activity in the country.
Japan’s Nikkei 225 Stock Index closed slightly higher today following Bank of Japan Governor Kazuo Ueda’s speech on Monday that suggested he’s in no hurry to conclude the ultra-easy monetary policy. Shipping and chip stocks outperformed on Tuesday, while retail stocks lost ground. Data showed on Tuesday that Japan’s business-to-business service inflation remained unchanged at 2.3% in November. Meanwhile, Bank of Japan Governor Kazuo Ueda stated on Monday that the likelihood of reaching the central bank’s inflation target was “gradually rising.” He also mentioned that the central bank would contemplate changing its policy if the prospects of sustainably attaining the 2% target increase “sufficiently.” “We will carefully examine economic developments as well as firms’ wage- and price-setting behavior and thereby decide on future monetary policy in an appropriate manner,” Ueda said. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.93% to 16.77.
“With the Nikkei 225 at high levels, year-end selling to lock in profits and losses is likely to weigh on the upside,” said Hideyuki Ishiguro, a senior strategist at Nomura Asset Management.
The Japanese November Unemployment Rate stood at 2.5%, in line with expectations.
The Japanese November Jobs/applications ratio arrived at 1.28, weaker than expectations of 1.30.
Pre-Market U.S. Stock Movers
Gracell Biotechnologies Inc. (GRCL) spiked about +61% in pre-market trading after AstraZeneca announced that it had entered into a definitive agreement to acquire the company for $1.2 billion.
Stratasys Ltd (SSYS) surged over +10% in pre-market trading after confirming that it had received a preliminary proposal from Nano Dimension Ltd. to acquire all outstanding shares of Stratasys not currently owned for $16.50 per share in cash.
Nio Inc (NIO) gained more than +4% in pre-market trading after the Chinese electric car maker unveiled the ET9 executive sedan on Saturday, positioning it in the same class as Mercedes Benz’s Maybach and Porsche’s Panamera series.
Hollysys Automation Technologies Ltd (HOLI) climbed over +5% in pre-market trading after Buyer Consortium, led by Dazheng Group Acquisition Limited, announced that it had submitted an increased all-cash offer of $29.00 per share to buy the company.
Intel Corporation (INTC) rose more than +2% in pre-market trading following a Reuters report stating that the Israeli government had approved a $3.2 billion grant for the company’s new $25 billion chip facility in southern Israel.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - December 26th
Mesabi Trust (MSB), Citius Pharma (CTXR), PHX Minerals (PHX), Veru (VERU).
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