Today’s Big Picture
Asia-Pacific equity markets finished the day mixed. China’s Shanghai Composite fell 1.15%, South Korea’s KOSPI declined 0.97% and Hong Kong’s Hang Seng gave back 0.89% ahead of today’s Federal Reserve announcement. India’s SENSEX ended the day flat, eking out a 0.05% gain while Taiwan’s TAIEX rose 0.10%, Japan’s Nikkei added 0.25%, and Australia’s ASX All Ordinaries closed 0.30% higher. European markets are mostly higher in midday trading, and U.S. equity futures point to a positive open.
At 2 PM ET the Fed will conclude its long-awaited December policy meeting. While it is expected to leave the Fed funds rate unchanged, the market expects that the central bank will open the door to potential rate cuts in 2024. The question many are grappling with is how many rate cuts are on the table for next year. The CME Fed Watch Tool reflects the expectation for 4 to 5 rate cuts in the coming 12 months. Should the Fed’s comments be more hawkish than expected or its updated economic projections point to fewer rate cuts in 2024, it would challenge the current narrative responsible for the stock market’s surge over the last few weeks.
Yesterday’s November Consumer Price Index (CPI) showed little progress in year-over-year core CPI data while headline inflation came in warmer than expected. That followed the stronger-than-expected November Employment Report, which also showed wage growth re-accelerating. The final piece of inflation data before the Fed concedes its meeting this afternoon arrives at 8:30 AM ET - the November Producer Price Index. Should the data come in above the consensus forecast that sees headline PPI up 1% YoY for the month and core CPI up 2.2% YoY, it would be another factor that favors the Fed taking a cautious stance on rate cuts.
Data Download
International Economy
China's banks extended CNY 1.09 trillion in new yuan loans in November, a significant rise from October's CNY 0.74 trillion but below market expectations of CNY 1.30 trillion. Recently, central bank chief Pan Gongsheng committed to maintaining accommodative monetary policies to aid China's recovery.
Industrial production in the Euro Area declined by 6.6% year-over-year in October 2023, exceeding an expected 4.6% fall and extending the current sequence of contraction to an eighth consecutive month.
Industrial production in the UK rose 0.4% year-on-year in October, easing from a 1.5% advance in the previous month and well below market expectations of a 1.1% rise. Manufacturing production in the UK tumbled 1.1% MoM in October from a 0.1% rise in the previous month and below forecasts of 0%, with 10 out of 13 sub-sectors contributing to its fall.
Nearly 200 countries at the COP28 climate summit in Dubai have agreed to transition away from fossil fuels in a first-of-its-kind deal that will likely usher in the end of the fossil fuel era. While calling on countries to shift away from fossil fuels "in a just, orderly and equitable manner" to achieve net zero by 2050, the deal insists that the global transition to clean energy should ramp up this decade.
Domestic Economy
In addition to the November PPI report out at 8:30 AM ET and the Fed’s monetary policy decision and updated economic projections at 2 PM ET, today also brings the latest weekly data for the MBA Mortgage Application Index and crude oil inventory data from the Energy Information Administration.
Markets
Equities got a boost from yesterday’s CPI report, except for Energy which traded off 1.37% after oil traded below $70 a barrel once again. Utilities also moved 0.41% lower as traders rotated away from the defensive sector and Real Estate closed flat, down a mere 0.03%. Strength came from Financials (0.72%), Technology (0.66%), and Materials (0.58%). The S&P 500 rose 0.46%, the Dow gained 0.48% and the Nasdaq Composite added 0.70% while the Russell 2000 fell 0.13%. Shares of Broadcom (AVGO) were bid up 4.18% extending gains on the heels of its recent quarterly update and closing of the VMware acquisition.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 10.35%
- S&P 500: 20.95%
- Nasdaq Composite: 38.86%
- Russell 2000: 6.81%
- Bitcoin (BTC-USD): 149.88%
- Ether (ETH-USD): 83.70%
Stocks to Watch
Before U.S. equity markets begin trading today, Cognyte Software (CGNT), Photronics (PLAB), and REV Group (REVG) are expected to report quarterly results.
Pre-market breadth is healthy as 230 of the 503 names in the S&P 500 have traded hands so far this morning with 149 gainers and 81 decliners. Shares of Take-Two Interactive (TTWO) are seeing a strong bid following the announcement of its addition to the Nasdaq-100 Index (more below) while Linde plc (LIN) is bid lower this morning, cited by some as the result of that name not being included in the recent reconstitution of the Nasdaq-100 index.
Tesla (TSLA) filed a recall covering more than 2 million vehicles after the National Highway Traffic Safety Administration determined its driver-assistance system Autopilot doesn’t do enough to prevent misuse. Tesla expects to deploy an over-the-air software remedy shortly.
Boeing (BA) delivered 56 commercial airplanes in November - 45 of the 737 Max, one P-8 maritime patrol plane, 777 freighters, two 767s, and six 787 Dreamliners. It was the company’s highest level of deliveries since June as it recovered from 737 Max manufacturing defects.
ASML (ASML) announced it will jointly invest $760 million alongside Samsung (SSNLF) to build a plant that develops cutting-edge semiconductor processing technology in South Korea.
L3Harris Technologies (LHX) said it will halt merger and acquisition activity for the foreseeable future to bolster its balance sheet. The company also forecast revenue of ~$21 billion for 2024, in line with consensus estimates.
Mynaric (MYNA) shares were moving higher after the company signed a contract with Northrop Grumman (NOC) to deliver optical communication terminals under the U.S. Space Development Agency Tranche 2 Transport Layer-Alpha space vehicles program.
Vertex (VERX) has commenced a public tender offer for 100% of the shares of Pagero Group AB (local ticker PAGERO) for 36 SEK in cash per share, a total tender value of approximately $555 million.
Reports suggest Walgreens Boots Alliance (WBA) is examining the separation of UK pharmacy chain Boots, which could be valued at about £7 billion ($8.8 billion)
Nasdaq announced an update to the annual reconstitution of the Nasdaq-100 Index. Take-Two Interactive Software will be added to the Nasdaq-100 Index replacing Seagen (SGEN), which is expected to be acquired by Pfizer (PFE) as of December 14. This change will become effective before the market opens on December 18.
IPOs
Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Adobe (ADBE) and Nordson (NDSN) are slated to report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Thursday, December 14
- UK: Bank of England Interest Rate Decision
- Eurozone: European Central Bank Interest Rate Decision
- US: Weekly Initial & Continuing Jobless Claims
- US: Import/Export Prices – November
- US: Retail Sales – November
- US: Business Inventories – October
- US: Weekly EIA Natural Gas Inventories
Friday, December 15
- Japan: Jibun Bank Flash Manufacturing and Services PMI – December
- China: Industrial Production, Retail Sales, Vehicle Sales, Foreign Direct Investment – November
- Eurozone: HCOB Flash Manufacturing and Services PMI – December
- UK: S&P Global/CIPS Flash Manufacturing and Services PMI - December
- US: Empire Manufacturing Index – December
- US: Industrial Production & Capacity Utilization – November
- US: S&P Global Flash Manufacturing and Services PMI – December
Thought for the Day
“If you want to conquer fear, don’t sit at home and think about it. Go out and get busy.” ~ Dale Carnegie
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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Chris Versace
Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.
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Mark Abssy
Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.
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