Market Wraps
Watch For:
PPI; Retail Sales; EIA Weekly Petroleum Status Report; Fedspeak from Barr, Barkin; Earnings from Target, TJX, Palo Alto Networks, Cisco Systems
Today’s Top Headlines/Must Reads:
– The Elusive Soft Landing Is Coming Into View
– What to Watch in the Retail Report: Is Spending Cooling as Holidays Arrive?
– While All Inflation Feels Bad, Housing Inflation Is the Worst
Opening Call:
Stock futures rose on Wednesday, extending the strong rally sparked by diving bond yields after soft inflation data bolstered hopes the Federal Reserve will be reducing borrowing costs next year.
Markets are pricing in a 47% chance of a 25 basis point rate cut to a range of 5.00 to 5.25% in May, up from 32% a month ago.
“[M]ore bets are being placed on cuts to interest rates coming in the Spring. The upbeat sentiment looks set to continue to provide a tailwind to trading later on Wall Street,” Hargreaves Lansdown said.
However, some observers cautioned that the market’s latest ebullience was a bit much. “I think people are overreacting to short-term numbers,” Jamie Dimon told Bloomberg TV on Tuesday.
“I’m afraid inflation might not go away that quickly,” and while the Fed was right to halt rate hikes for now “they might have to do a little bit more,” Dimon said.
A fresh test for the bond and stock market rally may come when the producer prices report is released. Traders will be hoping that pipeline inflation is also easing, while wishing that retail sales numbers show the consumer has not been severely cowed by the Fed’s campaign of rate rises.
Overseas Markets
European stocks rose, with stocks in London leading gains after U.K. inflation slowed to a two-year low , suggesting the Bank of England may also be done raising rates.
Asian stocks jumped, with the Hang Seng Index soaring nearly 4% as every constituent rose. Stocks in mainland China and Japan also rose.
New data showed Chinese retail spending picked up in October , underpinning broader market sentiment.
Premarket Movers
Berkshire Hathaway eliminated its stakes in General Motors, Johnson & Johnson, and Procter & Gamble in the third quarter, and reduced its stake in Amazon.com by 5%. Berkshire bought 9.7 million shares of Sirius XM during the quarter. Shares of Sirius were rising 3.3% in premarket trading.
Getty Images Holdings lowered its 2023 outlook, citing challenges ranging from strikes in Hollywood to a stronger dollar. Shares fell 0.2%.
U.S.-listed shares of JD.com rose 5% after the company reported third-quarter earnings and revenue that beat analysts’ estimates.
Nvidia closed higher Tuesday, rising 2.1%, to record its 10th straight gain. Shares were rising 0.6% in premarket trading.
Plug Power rose premarket, extending a recent bout of volatility after it warned last week that it might go bust.
Tuesday’s Post-Close Movers
Solid Biosciences’ investigational new drug application for a Duchenne Muscular Dystrophy gene therapy candidate was cleared by the FDA. Shares rose 40%.
TherapeuticsMD will consider strategic alternatives such as an acquisition, merger or asset sales. Shares rose 4.5%.
Forex:
The dollar remains sensitive to incoming data after lower-than-expected CPI data caused it to depreciate broadly against all G10 currencies on Tuesday, Danske Bank Research said.
Weaker-than-expected retail sales data “could provide an additional boost to cyclical-sensitive assets and further weaken the dollar.”
Sterling fell, and looks vulnerable, after data showed U.K. annual CPI inflation dropped sharply in October, cementing the view that interest rates have likely peaked, ING said.
“The chances of a Bank of England surprise hike in December were already very low, but this morning’s inflation figures for October are further helping a dovish case.”
U.K. money markets are now close to pricing in a rate cut in June but ING still considers pricing to be “conservative” relative to the U.S. and eurozone, meaning sterling risks underperforming as the economy deteriorates, ING said.
Energy:
Oil prices inched lower following earlier gains on cooling inflation and the IEA revising up its demand estimates.
Official oil inventory data is due later in the day, but industry data released late on Tuesday pointed to a weekly build in inventories.
Meanwhile, China’s industrial output grew 4.6% in October compared with the same period a year earlier, while retail sales rose 7.6% on year. According to the IEA, Chinese demand for oil remains strong.
Metals:
Metal prices rose, helped by a weaker dollar, with the macro mood more bullish as a result of cooling inflation, Peak Trading Research said.
“Investors believe that this is ‘mission accomplished’ for the Fed.”
Peak added that it is now unlikely the Fed will raise interest rates this hiking cycle, a tailwind for commodities.
The Chamber of mines said mineral exports from the Democratic Republic of Congo are on the move as truckers in the world’s top cobalt producer end a nearly two-week strike action.
The standoff, in which truck drivers were pushing for more risk allowances stranded more than 3,000 trucks loaded with around 100,000 metric tons of copper and cobalt, raising fears of a global supply crunch for metals key to electric vehicle manufacturing.
Today’s Top Headlines
Several GM Factories Reject UAW Deal, Putting Pact on Shaky Ground
A majority of United Auto Workers members at several General Motors factories voted against a proposed labor agreement, jeopardizing a tentative contract that both union leaders and GM have called historic.
About 68% of workers at GM’s factory in Spring Hill, Tenn., voted down the tentative deal, the union posted on its website Tuesday. A majority of workers at a GM plant in Flint, Mich., and an engine plant in suburban Detroit rejected it.
Meta Allows Ads Claiming Rigged 2020 Election on Facebook, Instagram
Meta Platforms will let political ads on Facebook and Instagram question the legitimacy of the 2020 U.S. presidential election, one of several changes the social-media company and other platforms have made to loosen constraints on campaign advertising for 2024.
Meta made the change last year, but it hasn’t gained wide attention. The company decided to allow political advertisers to say past elections were “rigged” or “stolen” but prevented them from questioning the legitimacy of ongoing and coming elections.
Amazon’s stock reaches a milestone not seen in 19 months
Amazon.com Inc. hit a milestone Tuesday that it hadn’t reached in 19 months.
Shares of Amazon AMZN rose 2.2% on Tuesday, closing at $145.80, their highest close since April 21, 2022, when they ended the session at $148.30.
The $2 Trillion Interest Bill That’s Hitting Governments
The world spent the past decade-plus taking advantage of rock-bottom interest rates to binge on debt. An unprecedented bill is coming due.
Governments are expected to spend a net $2 trillion paying interest on their debt this year as higher interest rates make borrowing more expensive, up more than 10% from 2022, according to an analysis of International Monetary Fund data by research consulting firm Teal Insights and a separate analysis by Fitch Ratings. By 2027, it could top $3 trillion, according to Teal Insights.
U.S. stocks on course for record dividends in 2023, as 98% of companies hold or raise payouts in the third quarter
Almost all dividend-paying large U.S. companies increased their payouts or kept them steady in the the third quarter, delivering a 4.5% increase in cash distributed that trumped the global trend.
In its latest quarterly report on the world’s 1,200 biggest public corporations by market value, U.K.-based fund manager Janus Henderson said 98% of U.S. companies surveyed did not trim their dividends, compared to 89% worldwide.
House Passes GOP Plan to Avert Government Shutdown
WASHINGTON-House lawmakers approved a Republican plan Tuesday that would continue funding federal agencies until early next year, a critical step in averting a partial government shutdown, with House Speaker Mike Johnson (R., La.) relying heavily on Democratic votes to get his bill across the finish line.
The 336-95 vote exceeded a two-thirds threshold required under a special procedure employed by Johnson to sidestep internal GOP disagreements. The measure still requires approval from the Democratic-controlled Senate, where the leaders of both parties have signaled support but timing was uncertain.
Texas Bill Gives State Power to Arrest and Deport Migrants
AUSTIN, Texas-A bill approved by Texas lawmakers Tuesday will allow the state to begin arresting, jailing and in some cases deporting migrants who cross the U.S.-Mexico border illegally-an unprecedented escalation of the state’s challenge of federal immigration authority.
The measure, passed Tuesday in the House after being approved earlier in the Senate, will make it a state crime to cross the border from Mexico between ports of entry, for anyone without legal authorization to be in the U.S. It is set to allow state and local police to begin arresting people suspected of such crossings. Local judges could then order removal of migrants who prefer that to prosecution.
Source: Dow Jones Newswires