Markets

Daily Markets: Markets Look to March for First Fed Cut

Empty Times Square at dusk, New York City
Credit: Eduardo Munoz - Reuters / stock.adobe.com

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. Hong Kong’s Hang Seng fell 1.09% in mixed trading led by Health Technology names, Japan’s Nikkei declined 0.60%, China’s Shanghai Composite dropped 0.29%, and Taiwan’s TAIEX shed 0.10%. South Korea’s KOSPI rose 0.40%, Australia’s ASX All Ordinaries gained 0.70%, and India’s SENSEX leapt 2.05% toward all-time highs as markets celebrated wins by the Bharatiya Janta Party (BJP) a conservative party aligned with current Prime Minister Narendra Modi. European markets are mixed in midday trading, and U.S. equity futures point to a lower open.

As we start what has traditionally been one of the cheerier months of the year, there doesn't seem to be many, if any, reasons for December to disappoint in delivering good tidings for investors. Indeed, the futures curve started Friday morning pricing in a 45% chance of a 25-basis point rate cut in March, and at the time of writing, those odds have moved slightly higher, to 51%. Additionally, while some companies have had earnings misses and lower guidance, traders have dished out punishment in the form of swift and steep share price declines, which seems to have allayed any fears of contagion. Also buoying markets are Fed chair Powell’s recent comments that “the risks of under- and over-tightening are becoming more balanced” meaning that the economy doesn’t seem to be in as much of a precarious position as it was coming into this current quarter.

Data Download

International Economy

It’s a relatively light day for market moving international economic releases. October German Exports were announced this morning and despite the consensus estimate of 1% growth, came in posting a 0.20% decline, still better than the previously reported 2.50% drop. Imports followed a similar pattern, declining 1.20% against a 1.0% estimate and a -1.90% figure in September.

Domestic Economy

10:00 AM ET will see the release of US Factory Orders for October and they are expected to have decreased 2.60%, giving back the bulk of the previous month’s 2.80% increase.

Saturday saw the Biden Administration announce a final rule aimed at ultimately eliminating the practice of flaring, or burning off, natural gas produced as a byproduct from newly drilled oil wells. Additionally, Vice President Kamala Harris pledged $3 billion to a United Nations fund focused on helping developing countries reduce greenhouse gas emissions.

Markets

Friday saw optimism about potential Fed rate cuts boost equities, especially Real Estate which jumped 2.10%. Other highlights included Industrials (1.58%) and Consumer Discretionary gaining 1.37% on positive results from Amazon (AMZN) and Nike (NKE) which combined to contribute to just over 25% of the sector’s results. The Nasdaq Composite rose 0.55%, the S&P 500 added 0.59%, the Dow advanced 0.82% and in a welcome sign of widening breadth, the Russell 2000 closed 2.96% higher.

Shares of Pfizer (PFE) fell 5.12% on Friday after it was revealed that the company’s weight loss pill currently under development would not be moving on to any subsequent trials due to lack of efficacy.

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

  • Dow Jones Industrial Average: 9.35%
  • S&P 500: 19.67%
  • Nasdaq Composite: 36.67%
  • Russell 2000: 5.76%
  • Bitcoin (BTC-USD): 133.10%
  • Ether (ETH-USD): 74.03%

Stocks to Watch

Before U.S. equity markets begin trading today, Sciences Applications International Corporation (SAIC) is scheduled to report its latest quarterly results.

Pre-market breadth is higher today as 281 names in the S&P 500 have traded hands so far this morning with 106 gainers and 175 decliners. Names seeing a healthy bid this morning include Enphase Energy (ENPH) and First Solar (FSLR) while shares of Alaska Air (ALK) are following the time-honored tradition of declining following the company’s recent announcement (more below).

Alaska Air announced on Sunday that it had agreed to acquire Hawaiian Airlines (HA) for $18.00 per share, setting the deal at just over $1.9 billion.

Analysts have high hopes for video game developer Take-Two Interactive Software (TTWO) after the company announced a release date for the trailer for the upcoming 6th version of Grand Theft Auto. By some estimates, the franchise has made the company just under $10 billion since its debut in 2013 and expectations are that that streak will continue.

Boeing (BA) announced Friday that it had been eliminated from the group of competitors vying to develop the next generation of the so-called “Nightwatch” aircraft, which are currently Boeing 747 aircraft specially modified for use by the National Emergency Airborne Command Post (NEACP).

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

IDT Corporation (IDT) and Gitlab (GTLB) 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

Tuesday, December 5

  • Japan: Jibun Bank Services PMI (Final) – November
  • China: Caixin Services PMI – November
  • Eurozone: HCOB Services PMI (Final) – November
  • UK: S&P Global/CIPS Services PMI (Final) – November
  • Eurozone: Producer Price Index - October
  • US: S&P Global Final Services PMI – November
  • US: ISM Non-Manufacturing PMI – November
  • US: JOLTs Job Openings Report – October

Wednesday, December 6

  • Germany: Factory Orders – October
  • Eurozone: Retail Sales – October
  • US: Weekly MBA Mortgage Applications
  • US: ADP Employment Change Report – November
  • US: Productivity – 3Q 2023
  • US: Weekly EIA Crude Oil Inventories

Thursday, December 7

  • China: Imports/Exports – November
  • Japan: Leading Economic Index (Preliminary) – October
  • Germany: Industrial Production – October
  • Eurozone: 3Q 2023 GDP (3rd Estimate)
  • US: Challenger Job Cuts Report – November
  • US: Weekly Initial & Continuing Jobless Claims
  • US: Wholesale Inventories – October
  • US: Weekly EIA Natural Gas Inventories
  • US: Consumer Credit – October

Friday, December 8

  • Japan: GDP (Final) – 3Q 2023
  • Germany: Inflation Rate (Final) – November
  • US: Employment Report – November (8:30 AM ET)
  • US: The University of Michigan Consumer Sentiment Index (Preliminary) – December
  • US: Used Car Prices - November

Thought for the Day

“Adopt the pace of nature: her secret is patience.” ~ Ralph Waldo Emerson

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

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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