MARKET WRAPS
Watch For:
Fed Interest Rate Decision; Producer Price Index for November; EIA Weekly Petroleum Status Report; Earnings from Adobe
Today's Top Headlines/Must Reads:
- Where Are Interest Rates Headed? What to Expect From the Fed Meeting
- Powell Could Grapple With How to Frame the Economy
- China Turns the Tables on Wall Street
- Why Biden's EV Tax Credit Could Become Hard to Claim
Opening Call:
Stock futures were inching to fresh 2023 highs on Wednesday, ahead of the Federal Reserve's policy decision, forecasts and commentary later in the session.
The central bank concludes its two-day policy meeting on Wednesday, and investors are placing a 98.2% probability it will reveal it is keeping interest rates unchanged at a range of 5.25% to 5.50%. It is also widely expected to stand pat at the next meeting in January.
Indeed, the market is suggesting that the next move by the Fed will be a cut in rates after its May meeting, and so traders will be keen to see whether the Fed's forecasts and Jerome Powell's comments match that narrative.
The Fed's outlook will determine investor thinking in the shorter term, and will likely be market moving given the higher levels of optimism which have been building over the last couple of months, according to Interactive Investor.
"[A]ny mention of potential rate cuts next year would be seized upon, especially since this is not something [to] which the Fed has yet alluded," it said.
However, with core annual inflation still running at twice the Fed's 2% target, there is danger it may challenge investors' rate-cut optimism.
"Our economists believe that Powell will stop short of declaring the tightening cycle as over, likely restating that 'We are prepared to tighten policy further if it becomes appropriate to do so,'" Deutsche Bank said.
Swissquote Bank agreed it was likely Powell will look to contain market optimism and rectify the rate cut bets. "If so, we should see correction and consolidation in bond and stock valuations during the final weeks of the year."
Premarket Movers
Blend Labs rose 5.7% after Keefe Bruyette raised its price target on shares of the company to $1.85 from $1.50 and maintained a Market Perform rating on the stock.
Camping World was initiated with a Buy rating by analysts at Roth MKM and the price target was set at $30. The stock was rising 1.3%.
Caribou Biosciences' lymphoma trial design was approved by the FDA. Shares rose 2.8%.
Farfetch shares have roughly halved in the past two sessions, and the company was downgraded on Tuesday by Moody's. The stock wavered premarket.
Take-Two Interactive Software is set to join the Nasdaq-100 index, the compiler of the benchmark said. Take-Two stock climbed premarket.
Tuesday's Post-Close Movers
Codorus Valley Bancorp will be acquired by Orrstown Financial Services, the parent company of Orrstown Bank, for $207 million in stock. The deal is expected to close in the third quarter of 2024, creating a Pennsylvania and Maryland community bank with about $5.2 billion in assets. Shares rose 5.5%.
ReShape Lifesciences said Tuesday its modified treatment for obesity had received approval from the FDA. The company said it was preparing for a product launch of its modified Lap-Band 2.0 FLEX in the U.S. Shares rose 43%.
Forex:
The Fed is expected to leave interest rates on hold, and how the dollar moves afterward will depend on whether policymakers counter recent growing expectations for rate cuts next year, UniCredit Research said.
UniCredit doesn't expect the Fed to "push back firmly against recent market expectations of aggressive rate cuts," which means EUR/USD could stabilize above 1.08.
However, if the Fed suggests rate-cut expectations are overdone, the DXY dollar index should rally further above 104 and EUR/USD would retreat, albeit likely staying above 1.07, UniCredit said.
Sterling fell after data showed U.K. GDP fell by 0.3% in October , more than the 0.1% contraction expected in a WSJ poll, which could cause growing speculation about possible interest-rate cuts next year, Quilter Investors said.
The BOE is expected to leave interest rates on hold on Thursday but close attention will be paid to any comments on economic weakness.
"Calls for rate cuts are likely to grow stronger should this sort of economic data persist," Quilter said. "Interest rates are biting now and further contraction cannot be ruled out."
Energy:
Oil prices were close to 1% lower after nations agreed for the first time to move away from using fossil fuels .
UBS said oil demand concerns coupled with worries about OPEC and its allies unwinding production cuts next year were some of the main factors currently weighing on prices.
Prices are down around 10% since the OPEC+ meeting at the end of November and are expected to remain volatile as market liquidity dries up at the end of the year, UBS added. "Further lows cannot be excluded."
UBS still sees prices trending higher next year, with market balances tightening in again with OPEC+ implementing their production cuts.
Metals:
Base metals prices moved lower, while gold held firm as a stronger dollar kept the pressure on commodities backed by the greenback.
Worries over copper supply have emerged, largely from Latin America where major producers are halting production.
The Panama Supreme Court found earlier this month that First Quantum's contract to operate a copper mine was unconstitutional, which Sucden Financial said would mean 500,000 tons of copper being lost from the market.
Still Sucden said that for now prices are being led by the dollar rather than fundamentals.
TODAY'S TOP HEADLINES
GM Moves Forward After Strike, Focusing on Cost Cuts and EVs
General Motors' finance chief has a balancing act to achieve as the company moves ahead under new labor contracts that will add billions of dollars in costs over roughly four years.
Chief Financial Officer Paul Jacobson must offset the higher costs while convincing investors that GM is on solid ground, even as its electric-vehicle and driverless-car businesses face challenges.
XPO Gets Approval to Acquire 28 Service Centers as Part of Yellow's Bankruptcy
Transport company XPO said Tuesday the U.S. Bankruptcy Court for the District of Delaware approved the company's offer for 28 service center locations which were previously operated by trucking company Yellow.
The deal includes sites in Brooklyn, N.Y.; Nashville, Tenn.; Atlanta; Houston; and Las Vegas, XPO said.
Apple, Google Get Billions From Their App Stores. That's Now Under Threat.
Monday's court ruling that Google has operated an illegal app-store monopoly is the latest in a mounting series of threats to the $500 billion-a-year app-store economy, which has evolved into a profit machine for Apple and Google that helped define the smartphone era.
A jury unanimously sided with Epic Games, saying that Google had harmed the videogame maker by maintaining an illegal monopoly. Google said it plans to appeal the verdict and stands by its business model. In a separate case that concluded in 2021, a federal judge largely ruled against Epic even as she ruled that Apple must allow third-party software makers to steer customers to payment options within their own apps. The outcome might ultimately be decided by the Supreme Court.
Cash Is About to Be Dethroned. Bonds Are the Place to Be.
About the author: Ashish Shah is chief investment officer of public investing at Goldman Sachs Asset Management.
House Set to Vote on Making Biden Impeachment Probe Official
WASHINGTON-The House is set to vote Wednesday on formally opening an impeachment probe into President Biden, as Republicans ratchet up their contentious investigation entering an election year.
House Republicans, who aim to muscle through the resolution along party lines, said opening a formal inquiry into the president and his family members' overseas business dealings would help them gain access to more information, even though they cautioned it might not lead to Biden's impeachment.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Dollarama 3Q
VersaBank 4Q
Economic Calendar (ET):
Nothing scheduled
Stocks to Watch:
Becker Milk 6-Mos Loss/Shr C$0.30; 6-Mos Rev C$1.49M
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Boardwalk REIT: Received Letter From Canada Revenue Agency Saying It Will Issue Notices of Reassessment of Tax; Management Is Assessing Implications of CRA Letter; Plan to File Objection With CRA Appeals Division; Difficult to Estimate Time Needed to Resolve Dispute, Appeal to Tax Court of Canada May Be Required
Expected Major Events for Wednesday
00:01/UK: Nov Scottish Retail Sales Monitor
07:00/UK: Oct Index of production
07:00/UK: Oct UK trade
07:00/UK: Oct Index of services
07:00/UK: Oct Monthly GDP estimates
09:00/ITA: 3Q Labour Cost Index
09:30/UK: 3Q Business Finance Review
11:00/FRA: Oct OECD Harmonised Unemployment Rates
12:00/US: 12/08 MBA Weekly Mortgage Applications Survey
12:30/UK: Nov NIESR Monthly GDP Tracker
13:30/US: Nov PPI
15:00/US: Nov Online Help Wanted Index
15:30/US: 12/08 EIA Weekly Petroleum Status Report
16:59/GER: Oct Balance of Payments
19:00/US: Federal Reserve economic projections
19:00/US: U.S. interest rate decision
23:50/JPN: Oct Orders Received for Machinery
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Wednesday
ABM Industries (ABM) is expected to report $0.68 for 4Q.
Adobe Inc (ADBE) is expected to report $3.08 for 4Q.
Amtech Systems Inc (ASYS) is expected to report $0.06 for 4Q.
BQE Water is expected to report for 3Q.
Caldwell Partners International Inc (CWL.T) is expected to report for 4Q.
Celularity Inc (CELU) is expected to report for 3Q.
CleanSpark Inc (CLSK) is expected to report for 4Q.
Cognyte Software Ltd (CGNT) is expected to report for 3Q.
Dollarama (DLMAF,DOL.T) is expected to report $0.85 for 3Q.
(MORE TO FOLLOW) Dow Jones Newswires
12-13-23 0608ET
