March S&P 500 futures (ESH23) are trending up +0.40% this morning after three major U.S. benchmark indices closed sharply higher on Friday after a crucial U.S. jobs report pointed to cooling wage growth and data showed a slight contraction in services activity, easing fears about a more hawkish Federal Reserve. Three major U.S. stock indexes were fueled primarily by gains in the Basic Materials, Industrials, and Technology sectors.

The U.S. Labor Department’s report showed that nonfarm payrolls rose by 223K jobs last month, above economists’ estimates of 200K jobs. At the same time, average hourly earnings increased less than expected to +0.3% m/m, down from +0.4% m/m in November, easing worries about a wage growth spiral. In addition, ISM Non-Manufacturing PMI fell for the first time in more than 2-1/2 years to 49.6 in December, missing expectations of 55.0.

“We got good news on the inflation front with wage gains that are slowing. We got participation rates to pick up again and yet we're still creating jobs. It’s a kind of win-win for the economy. And on the other side the ISM services report was really weak and broadly weak” said Megan Horneman, a chief investment officer at Verdence Capital Management in Hunt Valley, Maryland.

Atlanta Fed President Raphael Bostic said on Friday that the latest U.S. jobs data did not change his outlook on monetary policy and reiterated the Fed would need to hike rates further and hold them at that peak until “well” into 2024 to cool inflation. Also, Bostic said he expects a quarter- or half-percentage point rate increase at the next policy meeting.

Meanwhile, U.S. rate futures have priced in a 76.2% chance of a 25 basis point rate increase and a 23.8% chance of a 50 basis point hike at February’s monetary policy meeting. 

In the coming week, U.S. CPI data for December will be the main highlight as investors look for further clues about the size of the Federal Reserve’s next rate hike. In addition, market participants will be eyeing a spate of economic data, including U.S. Crude Oil Inventories, Core CPI, Initial Jobless Claims, Export Price Index, Import Price Index, Michigan Consumer Expectations (preliminary), and Michigan Consumer Sentiment (preliminary).

The U.S. economic data slate is largely empty on Monday.

In the bond markets, United States 10-Year rates are at 3.602%, up +0.87%.

The Euro Stoxx 50 futures are up +0.02% this morning as the opening of China’s borders bolstered the outlook for the global economy. The move is likely to boost the country’s economic activity, which would have a broader impact given China’s importance as a crucial market for European exporters. In addition, a clutch of positive U.S. and European data on Friday soothed fears that the U.S. Federal Reserve and the European Central Bank would continue with their aggressive monetary policy.

Switzerland’s Unemployment Rate s.a., Germany’s Industrial Production, France’s Trade Balance, and Eurozone Unemployment Rate data were released today.

Switzerland’s December Unemployment Rate s.a. stood at 1.9%, stronger than expectations of 2.1%.

The German November Industrial Production has been reported at +0.2% m/m, stronger than expectations of +0.1% m/m.

The French November Trade Balance was at -13.8B, weaker than expectations of -11.3B.

Eurozone November Unemployment Rate came in at 6.5%, in line with expectations.

Asian stock markets today settled in the green amid optimism over a potential economic recovery in China. China’s Shanghai Composite Index (SHCOMP) closed up +0.58%, while the Japanese market was closed for a holiday.

China’s Shanghai Composite today closed higher after the country reopened its international borders on Sunday. The move marks Beijing’s largest pivot away from its severe zero-COVID strategy, which hammered economic growth in the country for the past three years. Market participants are now pricing in a potential economic recovery in China this year from the reopening. However, analysts still maintained an air of caution over the near-term outlook amid the worst-yet COVID-19 outbreak in China that could potentially delay an economic recovery.

“China looks well positioned across the growth, policy, and inflation cycles in a global context in 2023,” analysts at Goldman Sachs said in a note. 

Pre-Market U.S. Stock Movers

CureVac NV (CVAC) climbed about +25% in pre-market trading after Jefferies upgraded the stocks to buy from hold with a price target of $21, up from $9 following the company’s preliminary data from its ongoing Phase 1 clinical programs in COVID-19 and seasonal flu.

Weibo Corp (WB) rose more than +4% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a $25 price target.

Alibaba Group Holdings Ltd ADR (BABA) gained over +5% in pre-market trading after Goldman Sachs added the stock to its conviction buy list and raised its price target on the shares to $138 from $133.

Xpeng Inc (XPEV) dropped more than -1% in pre-market trading, extending Friday’s losses after BofA downgraded the stock to neutral with a $12.40 price target.

Aehr Test Systems (AEHR) rose over +2% in pre-market trading, extending Friday’s gains after the company reported upbeat Q2 results. 

MetLife Inc (MET) slid about -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Monday - January 9th

Jefferies Financial (JEF), Concentrix (CNXC), Commercial Metals (CMC), Acuity Brands (AYI), WD-40 (WDFC), PriceSmart (PSMT), Tilray (TLRY), AZZ (AZZ), Q And K Intl (QK), Oramed (ORMP), Pure Cycle (PCYO), Blade Air Mobility (BLDE), VOXX (VOXX), Lifecore Biomedical (LFCR), Byrna Technologies (BYRN).

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