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Barchart
Oleksandr Pylypenko

Stocks Mixed Before the Open as Bond Yields Rebound, U.S. Jobs Report Looms

December S&P 500 futures (ESZ23) are down -0.05%, and December Nasdaq 100 E-Mini futures (NQZ23) are up +0.13% this morning as global bond yields climbed amid speculation that the Bank of Japan will soon scrap the world’s last negative interest-rate regime, with the focus now shifting to Friday’s U.S. jobs report.

In Wednesday’s trading session, Wall Street’s major averages ended in the red. Box Inc (BOX) slid more than -10% after the company reported weaker-than-expected Q3 results and lowered its FY24 guidance. Also, energy stocks retreated as the price of WTI crude dropped over -4% to a 5-month low. On the bullish side, Campbell Soup Company (CPB) gained over +7% and was the top percentage gainer on the benchmark S&P 500 after the canned soups maker reported better-than-expected Q1 adjusted EPS and backed its full-year guidance. In addition, SentinelOne Inc (S) climbed more than +16% after the cybersecurity firm posted upbeat Q3 results and raised its full-year revenue forecast.

The ADP National Employment report on Wednesday showed private payrolls rose by 103K jobs in November, lower than the consensus figure of 130K and moderating from the 106K reading in October. Also, U.S. Q3 nonfarm productivity was revised upward to +5.2% q/q from +4.7% q/q, stronger than expectations of +4.9% q/q. In addition, U.S. unit labor costs were revised downward to -1.2% q/q from -0.8% q/q in the third quarter, a bigger decline than expectations of -0.9% q/q.

“This is basically what markets are looking for (as) weaker labor growth would reduce the threat of inflation,” said Peter Cardillo, a chief market economist at Spartan Capital Securities.

Meanwhile, U.S. rate futures have priced in a 97.5% chance of no hike at the December FOMC meeting and a 97.9% chance of no hike at the January FOMC meeting. In addition, U.S. rate futures have priced in a 51.7% probability of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.

On the earnings front, notable companies like Broadcom (AVGO), Lululemon Athletica (LULU), Dollar General (DG), and DocuSign (DOCU) are set to report their quarterly figures today.

On the economic data front, investors will likely focus on U.S. Initial Jobless Claims data due later in the day. Economists estimate this figure to come in at 222K, compared to last week’s value of 218K.

In the bond markets, United States 10-year rates are at 4.145%, up +0.64%.

The Euro Stoxx 50 futures are down -0.36% this morning as investors digested Eurozone growth data while exercising caution ahead of a crucial U.S. monthly jobs report scheduled for Friday. Losses in travel and leisure stocks are leading the overall market lower, with Deutsche Lufthansa Ag (LHA.D.DX) falling more than -4% after JPMorgan downgraded the stock to Underweight from Overweight. Eurostat’s final data showed Thursday that the Eurozone economy contracted -0.1% q/q in the third quarter of 2023, confirming preliminary estimates. In other corporate news, Games Workshop Group Plc (GAW.LN) tumbled over -9% after the miniature wargame maker provided a half-year trading update. 

U.K.’s Halifax House Price Index, Germany’s Industrial Production, Eurozone’s Employment Change, and Eurozone’s GDP data were released today.

U.K. November Halifax House Price Index has been reported at +0.5% m/m, stronger than expectations of +0.3% m/m.

The German October Industrial Production stood at -0.4% m/m, weaker than expectations of +0.2% m/m.

Eurozone Employment Change came in at +0.2% q/q and +1.3% y/y in the third quarter, weaker than expectations of +0.3% q/q and +1.4% y/y.

Eurozone GDP arrived at -0.1% q/q and 0.0% y/y in the third quarter, compared to expectations of -0.1% q/q and +0.1% y/y.

Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.09% and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.76%.

China’s Shanghai Composite today closed slightly lower as investors digested the country’s trade data, while concerns about China’s fiscal health continued to weigh on sentiment. Semiconductor stocks led the declines on Thursday, while media stocks outperformed. Tech giants listed in Hong Kong also retreated. Customs data revealed on Thursday that China’s imports unexpectedly contracted in November from a Covid-hit period a year ago, indicating that local demand remained subdued. On the positive side, China’s exports grew for the first time in six months in November, suggesting that the manufacturing sector might be starting to benefit from an increase in global trade flows. Meanwhile, Moody’s Investors Service put Hong Kong, Macau, and swathes of China’s state-owned firms and banks on downgrade warnings on Wednesday following its earlier downgrade of the outlook for the nation’s sovereign bonds.

“It is unclear if exports can contribute as a growth pillar into next year. The European and U.S. economies are cooling. China still needs to depend on domestic demand as the main driver for growth in 2024,” said Zhiwei Zhang, a chief economist at Pinpoint Asset Management Ltd. 

The Chinese November Trade Balance arrived at $68.39B, stronger than expectations of $58.00B.

The Chinese November Exports stood at +0.5% y/y, stronger than expectations of -1.1% y/y.

The Chinese November Imports came in at -0.6% y/y, weaker than expectations of +3.3% y/y.

Japan’s Nikkei 225 Stock Index closed sharply lower today after Bank of Japan Governor Kazuo Ueda discussed alternatives for a potential shift from negative interest rates. Energy and chip stocks underperformed on Thursday. Export-heavy automobile stocks also lost ground as the yen strengthened, with Toyota Motor Corp falling over -1% and Honda Motor Co Ltd sliding -2%. Meanwhile, Bank of Japan Governor Kazuo Ueda stated on Thursday that the central bank has several options regarding which interest rates to target once it withdraws short-term borrowing costs from negative territory. Ueda also remarked that the central bank will face an “even more challenging” situation at the year-end and the beginning of the next year in response to a question about the economy and guidance of monetary policy. Japanese government bond yields climbed on Thursday following remarks from BOJ Governor Kazuo Ueda and a weak 30-year bond auction. In corporate news, Rakuten Bank Ltd plunged over -8% following the announcement by Rakuten Group that it would sell nearly 15% of the online bank unit. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.88% to 18.38.

“Amid a lack of domestic drivers, investors are taking cues from overseas markets and the currency exchange rate while waiting for Friday’s release of the monthly U.S. non-farm payrolls report,” said Maki Sawada, a strategist at Nomura Securities.

Pre-Market U.S. Stock Movers

Chewy Inc (CHWY) plunged over -11% in pre-market trading after the online pet supplies retailer reported mixed Q3 results and issued below-consensus sales guidance for the holiday quarter.

C3.ai Inc (AI) slid more than -9% in pre-market trading after the company posted mixed Q2 results and offered soft Q3 guidance.

Cerevel Therapeutics Holdings Inc (CERE) surged about +15% in pre-market trading after AbbVie agreed to acquire the neurological drug developer for $8.7 billion.

AerSale Corp (ASLE) soared over +15% in pre-market trading after announcing that it received a Boeing 737NG Supplemental Type Certificate for its revolutionary Enhanced Flight Vision System “AerAware.”

Take-Two Interactive Software Inc (TTWO) fell more than -1% in pre-market trading after BofA downgraded the stock to Neutral from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - December 7th

Broadcom (AVGO), Lululemon Athletica (LULU), Dollar General (DG), Cooper (COO), DocuSign (DOCU), Vail Resorts (MTN), Guidewire (GWRE), Ciena Corp (CIEN), Smartsheet (SMAR), RH (RH), Hashicorp (HCP), Methode Electronics (MEI), Smith & Wesson (SWBI), Liquidity Services (LQDT), Torrid Holdings (CURV), Comtech (CMTL), Avid Bioservices (CDMO), DouYu (DOYU), Hooker Furniture (HOFT).

More Stock Market News from Barchart

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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