March S&P 500 futures (ESH23) are trending up +1.12% this morning after three major U.S. benchmark indices closed lower on 2022’s last trading day as market participants braced for the new year with concerns over a potential recession and the U.S. Federal Reserve monetary policy tightening path. Three major U.S. stock indexes were weighed down primarily by losses in the Utilities, Basic Materials, and Industrials sectors.

The S&P 500 lost 19.4% for the year, the Nasdaq Composite tumbled 33.1%, and the Dow posted an 8.7% fall for 2022, booking their biggest percentage declines since the 2008 financial crisis, as the U.S. Federal Reserve unleashed a series of rate hikes to curb the highest inflation in 40 years.

“There’s uncertainty on the fundamentals, what the economy is going to do, what the Fed is going to do, what earnings are going to do. But also is the market going to start off with a sell-off in January?,” said James Ragan, a Director of Wealth Management Research at D.A. Davidson in Seattle.

Investor sentiment was also dulled after the International Monetary Fund Director Kristalina Georgieva warned on Sunday that the United States, Europe, and China were all slowing simultaneously. Also, Georgieva said that at least a third of the world faces a potential recession this year amid high inflation and rising interest rates.

In the coming week, investors will be waiting for the release of the FOMC’s meeting minutes and the spate of economic data, including U.S. ISM Manufacturing PMI, JOLTs Job Openings, ADP Nonfarm Employment Change, Exports, Imports, Initial Jobless Claims, Trade Balance, S&P Global Composite PMI, Services PMI, Crude Oil Inventories, Average Hourly Earnings, Nonfarm Payrolls, Participation Rate, Private Nonfarm Payrolls, Unemployment Rate, Factory Orders, and ISM Non-Manufacturing PMI.

Today, all eyes are focused on the U.S. Manufacturing PMI reading in a couple of hours. Economists, on average, forecast that December Manufacturing PMI will stand at 46.2, compared to November’s value of 47.7.

Also, investors are likely to focus on the U.S. Construction Spending data, which was at -0.3% m/m in October. Economists foresee the new figure to be -0.4% m/m.

In the bond markets, United States 10-Year rates are at 3.750%, down -2.11%.

The Euro Stoxx 50 futures are up +1.42% this morning as market participants return from the holiday period and assess the economic outlook for the new year. Investors have been closely monitoring China's reopening efforts and a resurgence in COVID-19 infections, evaluating the potential impact on Europe given the significance of this export market to some of the region’s largest companies. Also, investors’ eyes are focused on the German CPI data due later in the session for more clues on price pressures in the region.

European Central Bank President Christine Lagarde said on Monday that wages in Eurozone were growing faster than earlier expected, and the central bank must prevent this from adding to already-high inflation.

Switzerland’s procure.ch PMI, Germany’s Unemployment Change, Germany’s Unemployment Rate, and U.K. Manufacturing PMI data were released today.

Switzerland’s December procure.ch PMI has been reported at 54.1, stronger than expectations of 53.3.

The German December Unemployment Change stood at -13K, stronger than expectations of +15K.

The German December Unemployment Rate came in at 5.5%, stronger than expectations of 5.6%.

U.K. December Manufacturing PMI was at 45.3, stronger than expectations of 44.7.

Most Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.88%, while the Japanese market was closed for the holidays.

China’s Shanghai Composite today closed higher as market participants weighed the near-term challenges of the COVID-19 infections in the country against the longer-term benefits of a full reopening of the world’s second-largest economy. Also, recent data revealed that China’s manufacturing sector shrank for a fifth consecutive month in December as COVID-19 infections swept through production lines.

“China is entering the most dangerous weeks of the pandemic. The authorities are making almost no efforts now to slow the spread of infections and, with the migration ahead of Lunar New Year getting started, any parts of the country not currently in a major COVID wave will be soon,” warned analysts at Capital Economics.

Pre-Market U.S. Stock Movers

Li Auto Inc (LI) climbed more than +7% in pre-market trading after the company announced a monthly delivery record of 21,233 vehicles in December 2022, up 50.7% y/y.

Nio Inc Class A ADR (NIO) rose over +4% in pre-market trading after the company announced a record monthly delivery of 15,815 vehicles in December 2022, up 50.8% y/y.

Tesla Inc (TSLA) slid about -4% in pre-market trading after the company reported record Q4 deliveries of over 405,000 vehicles but missed consensus expectations. On the ground of this, Goldman Sachs lowered its price target on the stock to $205 from $235 and kept a buy rating.

Fresenius Medical Care Corporation (FMS) dropped over -3% in pre-market trading after Jefferies downgraded the stock to underperform from buy with a price target of $11.70, down from $14.

Monte Rosa Therapeutics Inc (GLUE) gained more than +5% in pre-market trading after Wells Fargo upgraded the stock to overweight from equal weight with an unchanged price target of $18.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - January 3rd

ETV Limited Duration (EVV), Virtus Dividend Interest Premium Strategy Fund (NFJ), Smart Global (SGH), Pimco Income Strategy II Closed (PFN), Virtus Equity Convertible (NIE), Oramed (ORMP), PIMCO California Municipal Income (PCQ), PIMCO Municipal Income Fund (PMF), Blade Air Mobility (BLDE), Byrna Technologies (BYRN).

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