MARKET WRAPS
Watch For:
Existing Home Sales; Conference Board Consumer Confidence; EIA Weekly Petroleum Status Report; earnings from Micron Technology, General Mills, Toro, BlackBerry, Winnebago Industries
Today's Headlines/Must Reads
- Powell's Pivot Sows Confusion Over When and How Fast Fed Will Cut
- Meet the New Economy, Just Like the Old Economy
- Senate's Tricky Border Talks Get a Christmas Extension
Opening Call:
Stock futures were softer early Wednesday, not far below levels that would represent a fresh record for the S&P 500.
Futures showed the S&P 500 in line to open less than 1% shy of the record closing closing high of 4796.56 it recorded at the start of January 2022.
The benchmark has jumped 24.2% this year, partly powered by hopes that the economy has not been too badly damaged by the Federal Reserve's ratcheting up of interest rates to cool inflation.
Fund managers now are at their most upbeat on the stock market in nearly two years, according to a survey by Bank of America.
The latest leg of the rally reflects hopes that with inflation back down to 3.1%, the central bank will begin quickly trimming borrowing costs next year.
Not even an apparently concerted effort by Fed officials to counter the market's rate-cut optimism has damped trader's ardor. This dismissal of less-dovish Fedspeak has left some observers bemused.
"Isn't it amazing how investors ignore the hawkish Federal Reserve comments but fully embrace the dovish commentaries," Swissquote Bank said.
"Investors are dreaming of aggressive rate cuts in an environment of strong economic growth, and that is not the right recipe for easing inflation and keeping it sufficiently low. The robust economic data and high earnings expectations are not compatible with a dovish Fed."
Perhaps the current bullishness is also reflective of seasonal trends, with optimism about a festive bounce underpinning stocks.
Stocks to Watch
FedEx reported weaker-than-expected fiscal second-quarter earnings and reduced its fiscal-year sales forecast. Its shares fell 9.5% in premarket trading.
Shares of Lowe's were downgraded to hold from buy at Stifel but the price target was raised to $240 from $235. Lowe's shares fell 1%.
Steelcase reported fiscal third-quarter earnings that rose from a year earlier and beat analysts' estimates but revenue fell 6% and missed forecasts. Steelcase also said it anticipated fourth-quarter revenue in the range of $765 million and $790 million, below revenue of $801.7 million a year earlier. Steelcase shares declined 9.5%.
Forex:
Sterling declined as markets price in Bank of England rate cuts in early 2024 after weaker-than-expected U.K. November inflation data.
"There's growing confidence cuts to the base rate could begin as early as March and that by this time next year the economic landscape will look very different," AJ Bell said.
Bonds:
Investors surveyed in BofA's global fund manager survey in December remain bullish on bonds with allocation up one percentage point on the month to net 20% overweight, the biggest overweight since March 2009.
Regarding which asset class fund managers expect to perform best in 2024, 45% said bonds.
Short-term rates will be lower over the next 12 months, according to 89% of respondents in the survey, the most on record. Also, a record 62% of investors in December expect bond yields to be lower in 12 months time.
Energy:
Oil prices edged higher on concerns about global trade disruptions after major companies paused transit through the Red Sea due to recent attacks by Yemen's Houthi forces.
"The attacks in the Red Sea are the third major disruption to maritime transport this year, alongside low water levels in the Panama Canal and collapse of the Black Sea grain deal," Capital Economics said.
"Higher transport costs will boost the prices of intermediate goods and may rekindle some inflationary pressure."
Metals:
Metals ticked higher supported by market optimism around interest rate cuts next year and hopes of a brighter demand outlook.
The Democratic Republic of Congo, the world's top producer of cobalt, is ready to welcome more U.S. investments in its mining industry, which is dominated by Chinese miners, the country's president said.
For over a decade, Chinese companies have spent billions of dollars buying out U.S. and European miners in Congo's cobalt belt, dominating the production of a metal that has become critical to the global transition to cleaner energy.
TODAY'S TOP HEADLINES
Starbucks CEO Takes On Chain's Social Media Controversy Over Israel-Hamas War
The Starbucks chief executive said protesters vandalizing its stores over the Israel-Hamas war have the wrong impression of the company and its beliefs.
In an annual company letter to workers, Laxman Narasimhan addressed controversies surrounding the coffee chain since the war broke out in October. The letter seeks to remove the company from the controversy caused in part by comments seen as pro-Palestinian by the workers' union.
Bird Electric Scooter Company Files for Bankruptcy After 2021 SPAC
Electric-vehicle company Bird Global filed for bankruptcy with an agreement to sell some of its assets to its existing lenders.
Miami-based Bird filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Florida. The company has a restructuring agreement with its creditors, including selling assets in bankruptcy, according to a company announcement.
China's Benchmark Lending Rates Held Steady
China's benchmark lending rates were kept unchanged as the market had expected, after the central bank held its key policy rates steady.
The one-year loan prime rate was left at 3.45% and the five-year rate was the same as last month at 4.2%, according to the People's Bank of China.
Trump Disqualified From 2024 Presidential Primary Ballot, Colorado Supreme Court Rules
Donald Trump can't appear on the 2024 presidential primary ballot in Colorado because of his actions surrounding the Jan. 6, 2021, riot at the U.S. Capitol, the state's highest court ruled Tuesday.
The first-of-its kind decision sided with a group of Colorado voters who argued in a lawsuit that the Republican front-runner was disqualified under a clause in the 14th Amendment. Enacted after the Civil War, the provision disqualifies from public office those who swore to defend the Constitution and then "engaged in insurrection or rebellion" against the U.S.
Hamas, Palestinian Rivals Conduct Talks About Governing Postwar Gaza
DOHA, Qatar-Hamas's political leaders have been talking with their Palestinian rivals about how to govern Gaza and the West Bank after the war ends, a fraught negotiation that threatens to put them at odds with the militant wing fighting Israel.
The talks are the clearest sign that Hamas's political faction is starting to plan for what follows the conflict.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
BlackBerry 3Q
Economic Calendar [ET]:
0830 Oct Employment Insurance
1330 Bank of Canada summary of monetary policy deliberations
Stocks to Watch:
Gold Royalty Completes Investment in Aura's Borborema Gold Project; Investment Consists of 2% Net Smelter Return Royalty, Loan; Acquired Royalty for $21M, Royalty-Convertible Gold-Linked Loan for $10M
Expected Major Events for Wednesday
05:00/JPN: Nov Convenience Store Sales
07:00/UK: Nov UK producer prices
07:00/UK: Nov CPI
07:00/GER: Nov PPI
07:00/GER: Jan GfK consumer climate survey
08:59/JPN: Dec Monthly Economic Report
09:30/UK: Oct UK House Price Index
10:00/ITA: Oct Balance of Payments
11:00/UK: Nov Aluminium Production report
12:00/US: 12/15 MBA Weekly Mortgage Applications Survey
13:30/CAN: Oct Employment Insurance
13:30/US: 3Q International Transactions
15:00/US: Nov Existing Home Sales
15:00/US: Dec Consumer Confidence Index
15:30/US: 12/15 EIA Weekly Petroleum Status Report
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Wednesday
BlackBerry (BB,BB.T) is expected to report $-0.07 for 3Q.
Celularity Inc (CELU) is expected to report for 3Q.
Citius Pharmaceuticals Inc (CTXR) is expected to report $-0.02 for 4Q.
Enzo Biochem (ENZ) is expected to report for 1Q.
General Mills (GIS) is expected to report $1.16 for 2Q.
Innovative Solutions & Support Inc (ISSC) is expected to report $0.08 for 4Q.
Live Ventures Inc (LIVE) is expected to report for 4Q.
Micron Technology (MU) is expected to report $-1.16 for 1Q.
MillerKnoll Inc (MLKN) is expected to report $0.48 for 2Q.
Near Intelligence Inc (NIR) is expected to report for 3Q.
Ocean Biomedical Inc (OCEA) is expected to report for 3Q.
Optical Cable Corp (OCC) is expected to report for 4Q.
Quantum Corp (QMCO) is expected to report $-0.09 for 2Q.
Raymond James Financial (RJF) is expected to report.
Rite Aid Corp (RADCQ) is expected to report for 3Q.
Sonic Foundry Inc (SOFO) is expected to report $-0.39 for 4Q.
Sonnet BioTherapeutics Holdings Inc (SONN) is expected to report for 4Q.
Technical Communications Corp (TCCO) is expected to report for 4Q.
Toro Co (TTC) is expected to report $0.57 for 4Q.
U.S. Gold Corp (USAU) is expected to report for 2Q.
Wall Financial Corp (WFC.T) is expected to report for 3Q.
Winnebago Industries Inc (WGO) is expected to report $1.00 for 1Q.
Yellow Corp (YELLQ) is expected to report for 3Q.
cbdMD Inc (YCBD) is expected to report for 4Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
ACADIA Pharmaceuticals Raised to Overweight From Equal-Weight by Morgan Stanley
AIG Raised to Outperform From Market Perform by BMO Capital
Alteryx Cut to Neutral From Buy by Citigroup
Alteryx Cut to Neutral From Buy by Rosenblatt
Amicus Therapeutics Raised to Overweight From Equal-Weight by Morgan Stanley
Array Technologies Cut to Neutral From Overweight by Piper Sandler
(MORE TO FOLLOW) Dow Jones Newswires
12-20-23 0612ET
