Daily Markets: The December CPI Report, Bitcoin ETFs Debut Ahead

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Today’s Big Picture

Asia-Pacific equity markets finished the day higher except for South Korea’s KOSPI, which declined 0.07% in a mixed day that saw Utilities names tip the final result slightly negative. India’s SENSEX eked out a 0.09% gain to close ahead, China’s Shanghai Composite rose 0.31%, both Australia’s ASX All Ordinaries and Taiwan’s TAIEX came in around 0.45% and Hong Kong’s Hang Seng gained 1.37%. Japan’s Nikkei extended its multi-decade peak by 1.77% as a weak Yen and Technology expectations pushed that index above 35,000, a level not seen in almost 34 years. 

Major European markets are up in midday trading and US equity futures are pointing to a positive open. However, what the December Consumer Price Index (CPI) brings at 8:30 AM ET could alter those futures. 

The market is caught between Fed funds futures traders expecting six rate cuts this year while the central bank has signaled potentially three cuts after more cautious comments from Fed officials suggesting any cuts may not materialize until 2H 2024. This has many looking to this morning’s December CPI report, which is expected to show a tick-up for its headline figure, for clarity on which path is the likely one.  

The December CPI headline figure is forecasted to rise to +3.2% YoY, up from +3.1% the prior month. The crux of the report will once again be the core-CPI reading for December, which is expected to slow to +3.8% YoY from +4.0% the month before, but even such a print suggests a long path to the Fed’s 2% target and the Fed’s first rate cut. 

Heading into the report, a dramatically lower-than-expected core CPI figure would be welcomed by the stock market. But a figure that meets or is above the consensus forecast would be the latest data point arguing against the market’s expectation for rate cuts to begin this March and foster a recalibration of those expectations. Re-thinks such as that tend to bring volatility back into the market, something we could also see as the December quarter earnings season moves up a gear early next week. 

Data Download

International Economy

A preliminary reading for the index of leading economic indicators in Japan declined to 107.7 in November from a final 108.9 in October.  That latest data pointed to its lowest level since October 2020, as recovery in the Japanese economy remained fragile. 

Domestic Economy

In addition to the December CPI report, we have the usual Thursday economic data: Weekly Initial and Continuing Jobless Claims and Natural Gas Inventory data. 

Markets

Leadership came from the usual suspects as the tightly knit Magnificent Seven (or maybe the Super Six as Tesla (TSLA) did not participate) pushed Consumer Discretionary (0.80%), Technology (0.85%), and Communication Services (0.93%) higher. Industrials follow a distant fourth gaining 0.51% and Energy was yesterday’s laggard, giving back 0.98%. Overall, broad indexes were higher as the Russell 2000 gained 0.11%, the Dow rose 0.45%, the S&P 500 added 0.57% and the Nasdaq Composite closed 0.75% higher.

If readers have ever wondered about Bitcoin and how they could get exposure to it, today marks the first time US investors can access Bitcoin directly in the form of an ETF. While it took the SEC over a decade to issue a final approval (which they did for real yesterday) there are now up to 11 funds that are set to start trading today across all exchanges. 

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

  • Dow Jones Industrial Average: 0.02%
  • S&P 500: 0.29%
  • Nasdaq Composite: -0.28%
  • Russell 2000: -2.80%
  • Bitcoin (BTC-USD): 10.87%
  • Ether (ETH-USD): 12.88%

Stocks to Watch

No market-moving earnings reports are expected to be released before equities start trading later this morning. 

Pre-market breadth is slightly broader today as 237 names in the S&P 500 have traded hands so far this morning with 181 gainers and 56 decliners. Names catching a bid this morning include GE Healthcare (GEHC)Mohawk Industries (MHK), and Marathon Petroleum Corp (MPC). Yum! Brands (YUM) is coming under some pressure after Wells Fargo Securities issued a research note this morning downgrading the name to equal weight from overweight and lowering their price target to $135 from $150.

Alphabet (GOOGL) Google is laying off hundreds of staff working on its digital assistant, hardware and engineering teams. This follows Amazon (AMZN) laying off hundreds of staff in its Prime Video and studios business earlier this week. 

Microsoft (MSFT) announced EU cloud customers would be able to keep all personal data within the European Data Boundary.

Global Payments (GPN) and Commerzbank (CRZBF) announced a joint venture that will offer digital payment services for merchants across Germany.

Renesas Electronics (RNECY) will acquire all outstanding shares of Transphorm’s (TGAN) common stock for $5.10 per share in cash. The acquisition provides Renesas with in-house GaN technology, a key next-generation material for power semiconductors, expanding its reach into fast-growing markets such as EVs, computing, renewable energy, and industrial power conversion.

Chesapeake Energy Corporation (CHK) and Southwestern Energy Company (SWN) have agreed to merge in an all-stock transaction valued at $7.4 billion, or $6.69 per share, based on Chesapeake’s closing price on January 10, 2024.

Cummins (CMI) agreed to pay a combined $2 billion in fines and remedies to settle a lawsuit filed by the US Department of Justice and the state of California charging the company with installing devices meant to cheat emissions controls.

Ahead of its quarterly earnings report on Friday, Citigroup (C) shared it recorded a $1.3 billion reserve build in 4Q 2023 related to increases in transfer risk associated with exposures outside the U.S., mostly related to Argentina.

IPOs

Smith Douglas Homes (SDHC) priced its 7.7 million share IPO at $21.00 per share, the high end of the $18-$21 target range. 

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

After Today’s Market Close

No market-moving earnings reports are expected 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

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

“Distance yourself from the people that you don’t want to become.” ~Shane Parrish

Disclosures

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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