Daily Markets: A Holding Pattern Ahead of the December CPI Report

Today’s Big Picture

Asia-Pacific equity markets finished the day lower except for Japan’s Nikkei which was pushed 2.01% higher, and into a 34-year peak on continued technology strength and weak Yen, and India’s SENSEX which gained 0.38%. Taiwan’s TAIEX fell 0.40%, China’s Shanghai Composite dropped 0.54%, Hong Kong’s Hang Seng declined 0.57%, and Australia’s ASX All Ordinaries gave back 0.60%. South Korea’s KOSPI closed down 0.75% in mixed day that saw Retail Trade, and Energy Minerals drag that index lower.

European markets are down across the board in midday trading and U.S. equity futures are pointing to a mixed open as Nasdaq 100 futures are the only contract trading higher this morning.

We have another potential calm before the storm day in the stock market as investors and market pundits wait for tomorrow’s December Consumer Price Index (CPI) report. What that report reveals about inflation could lead to the market re-thinking the pace of expected Fed rate cuts for this year. Despite several Fed officials calling for not only far fewer rate hikes in 2024 and a far later start for those cuts, the market continues to call for six rate cuts this year, with the first one slated for March. 

Perhaps the market will heed potentially sobering comments from New York Fed president John Williams this afternoon, but investors are likely to put more weight behind post-CPI report comments from Richmond Fed President Tom Barkin (Thursday) and Minneapolis Fed president Neel Kashkari (Friday). Barring a December core CPI print that surprises significantly to the downside compared to the market expectation for +3.8% YoY (+0.3% MoM), Fed officials could cite continued wage pressure and the sharp rise in shipping rates as reasons for taking a more measured approach to rate cuts. 

Data Download

International Economy

Shipping rates continue to rise steeply, while vessels face weekslong delays on account of diversions from the Red Sea around the Horn of Africa to avoid attacks by Iran-backed Houthi rebels. According to Drewry's World Container Index which tracks freight rates on eight trade routes, the average shipping costs for 40-foot containers have nearly doubled since the attacks began.

The World Economic Forum’s “Global Risks Report 2024” ranked AI-derived misinformation and disinformation ahead of climate change, war and economic weakness.

Domestic Economy

Today brings the usual weekly Wednesday fare which is the weekly MBA Mortgage Applications Index and EIA Crude Oil inventory data. We also have November Wholesale Inventories being reported at 10 AM ET, and the market expects a 0.2% dip compared to October. 

U.S. power grid operator PJM Interconnection forecasts increased electrification of transportation and industry will triple its growth expectations for electricity use in its footprint over the next decade.

The Securities and Exchange Commission experienced a “cybersecurity incident” yesterday when its X account was compromised and a fake post claiming that the agency green-lit plans for a spot-Bitcoin ETF, which fueled a brief surge in the price of Bitcoin. The commission soon followed up with a subsequent post walking back the claim providing BTC holders with some unusual intraday volatility. BTC ended the day down 2.03%.

Markets

Monday’s relief was short-lived as equities traded off yesterday with Technology (0.16%) and Consumer Staples (0.26%) posting the only sector gains. Aside from Energy dropping 1.60%, Utilities (-0.82%) and Materials (1.15%) led markets lower. Technology’s gains were enough to push the Nasdaq Composite into positive territory gaining 0.09% but the S&P 500 fell 0.15%, the Dow dropped 0.42% and the Russell 2000 closed 1.05% lower.  

Shares of Newell Brands (NWL) rose 4.91% after the company announced it would be eliminating 7% of office jobs and reducing its real estate footprint which prompted a number of analyst firms to issue increased price target estimates. 

Here’s how the major market indicators stack up year-to-date: 

• Dow Jones Industrial Average: -0.44%
• S&P 500: -0.28%
• Nasdaq Composite: -1.02%
• Russell 2000: -2.91%
• Bitcoin (BTC-USD): 9.65%
• Ether (ETH-USD): 1.89%

Stocks to Watch

We have a bit of a breather this morning because no companies are expected to release quarterly results before equities begin trading later this morning. 

Pre-market breadth is lighter today as 216 names in the S&P 500 have traded hands so far this morning with 150 gainers and 66 decliners. Shares of Intuitive Surgical (ISRG) are catching a healthy bid this morning (more below) while Illinois Tool Works (ITW) and Etsy (ETSY) are being bid lower ahead of the open 

Taiwan Semiconductor Manufacturing (TSM) reported its December revenue of $176.3 billion, down 14.4% sequentially and 8.4% year over year. The company’s revenue for 4Q 2023 rose 14.4% compared to 3Q 2023 and was little changed compared to the 4Q 2022. 

Shares of Aehr Test Systems (AEHR) fell in after-market trading last night after the company shared that the decelerating sales growth rate in the EV market was adversely affecting the timing of various customer orders and capacity increases for silicon carbide devices used in these vehicles. That led the company to cut its FY2024 revenue outlook to $75-$85 million, down from its prior guidance of $100 million and the $103 million consensus. 

Following the company's pre-announcing better-than-expected 4Q 2023 results, shares of Intuitive Surgical (ISRG) moved higher in after-market trading last night. The company expects a 17% YoY increase in revenue to approximately $1.93 billion compared to the $1.88 billion consensus.  Intuitive anticipates a 13%-16% increase in procedures in 2024 compared to 2023. The surge in surgical procedure volume is primarily attributed to a 25% rise in U.S. general surgery procedures and a reduction in COVID-19 infections and hospitalizations throughout 2023.

Walmart (WMT) announced it will use AI and computer vision technology to deliver new levels of convenience as members exit their club, including receipt verification. The company also announced what is one of the largest drone delivery expansions, with plans to cover up to 1.8 million more households in Texas,

Tesla (TSLA) unveiled the revamped edition of its Model 3 sedan in North America today, maintaining existing price points. Refreshed versions of both variants come with notable enhancements, such as a rear display for backseat passengers, the introduction of two new colors, "Stealth Grey and Ultra Red," and a fresh wheel design.

Following recent speculation, Hewlett Packard Enterprise (HPE) and Juniper Networks (JNPR) announced they entered a definitive agreement under which HPE will acquire Juniper in an all-cash transaction for $40.00 per share, representing an equity value of approximately $14 billion.

Intel (INTC) announced a deal to buy Silicon Mobility SAS, a fabless silicon and software company that makes systems on chips (SoCs) for EV energy management. Intel also announced a family of AI-enhanced software-defined vehicle (SDV) SoCs.

Trend Micro (TMICF) joins a growing list of technology companies reducing headcount. The cybersecurity company shared it has laid off 2% of its global workforce. Reports also indicate Amazon (AMZN) live streaming site Twitch is expected to cut about 35% of its workforce or 500 workers.

IPOs

Zhengye Biotechnology (ZYBT), which specializes in livestock vaccines, has filed for a proposed US IPO.

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

KB Home (KBH) is the lone company expected to report after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Thursday, January 11

• Japan: Leading Indicators Index (Preliminary) - November
• US: Weekly Initial & Continuing Jobless Claims 
• US: Consumer Price Index – December 
• US: Weekly EIA Natural Gas Inventories 
• US: Treasury Budget – December 

Friday, January 12

• China: Inflation Rate, Producer Price Index – December
• Japan: Eco Watchers Survey – December
• UK: Industrial Production, Manufacturing Production - November
• US: Producer Price Index - December

Thought for the Day

“All truly great thoughts are conceived while walking.” ~ Friedrich Nietzsche

Disclosures

• Trend Micro (TMICF) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Intel (INTC), Juniper Networks (JNPR) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Walmart (WMT) is a constituent of the Tematica BITA Big Spenders & Savers Index 
• Walmart (WMT) is a constituent of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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