Pre-Market Brief: Stocks Mixed As Strong Economic Data Fuel Rate Hike Worries

Oleksandr Pylypenko - Barchart - Fri Dec 23, 2022

March S&P 500 futures (ESH23) are trending up +0.17% this morning after three major U.S. benchmark indices closed sharply lower on Thursday, with the technology-heavy Nasdaq dropping the most after stronger-than-expected U.S. economic data exacerbated worries that the Federal Reserve would stick to its hawkish tightening path for longer. Three major U.S. stock indexes were weighed down primarily by losses in the Technology, Oil & Gas, and Consumer Goods sectors.

The Commerce Department’s reading revealed that the U.S. economy grew at a 3.2% annualized rate last quarter, above the prior reading of 2.9% last month, rebounding faster than previously estimated. Also, the Labor Department report showed claims for state unemployment benefits increased to 216K last week, stronger than expectations of 222K, bolstering fears that the Fed funds target rate could rise higher and stay there longer than previously anticipated.

“Strong economic data, especially strong labor market data, keep the Fed's foot on the economic brake. The Fed doesn't just want or need to see lower inflation. They believe that, in order to bring it down and keep it down sustainably, you're going to need to see more weakness in the labor market, which would come with more weakness in the economy,” said Liz Ann Sonders, a Chief Investment Strategist at Charles Schwab.

Meanwhile, U.S. rate futures have priced in a 69.0% chance of a 25 basis point rate increase and a 31.0% chance of a 50 basis point hike at February's monetary policy meeting.

Today, all eyes are focused on the U.S. Core PCE Price Index data in a couple of hours. Economists, on average, forecast that November’s Core PCE Price Index will stand at +0.2% m/m and +4.7% y/y, compared to the previous values of +0.2% m/m and +5.0% y/y.

Also, investors will likely focus on the U.S. Core Durable Goods Orders data, which was at +0.5% m/m in October. Economists foresee the new figure to be +0.1% m/m.

U.S. Personal Spending data will be reported today. Economists foresee this figure to stand at +0.2% m/m in November, compared to October’s value of +0.8% m/m.

U.S. Michigan Consumer Sentiment data will come in today. Economists expect December’s figure to be 59.1, compared to 56.8 in November.

U.S. New Home Sales data will be reported today as well. Economists estimate this figure to be 600K in November, compared to the previous value of 632K.

In the bond markets, United States 10-Year rates are at 3.701%, up +0.80%.

The Euro Stoxx 50 futures are up +0.31% this morning in thin holiday-affected trading volumes, with market participants digesting more regional growth and confidence data. Today, global investors will also likely focus on the U.S. economic data for more clues on the direction of prices as 2023 approaches.

Spain’s GDP, Italy’s Business Confidence, and Italy’s Consumer Confidence data were released today.

The Spanish GDP has been reported at +0.1% q/q and +4.4% y/y in the third quarter, compared to expectations of +0.2% q/q and +3.8% y/y.

The Italian December Business Confidence stood at 101.4, weaker than expectations of 102.7.

The Italian December Consumer Confidence came in at 102.5, stronger than expectations of 98.5.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.28%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.03%.

China’s Shanghai Composite today closed lower as the country grapples with rising COVID-19 cases in the wake of Beijing disassembling its severe zero-COVID strategy to curb the virus. Concerns over the near-term impact of China’s COVID wave dragged Chinese stocks lower.

At the same time, Japan’s Nikkei 225 Stock Index closed lower after data showed core CPI rose to +3.7% y/y in November, the highest level since 1981, as surging costs for oil and other commodities fueled price pressures in the world’s third-largest economy. On the ground of this, the Bank of Japan might consider adjusting its policies that have kept interest rates ultra-low to spur growth. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.08% to 20.74.

“Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of Japan’s 2% target by mid-2023,” Capital Economics economist Marcel Thieliant said in a report.

Pre-Market U.S. Stock Movers

Expion360 Inc (XPON) spiked over +143% in pre-market trading after being selected to be the ‘exclusive’ lithium-ion battery supplier for an overland trailer to be branded and sold by a top U.S. sports utility vehicle manufacturer.

Tesla Inc (TSLA) rose about +0.6% in pre-market trading after CEO Musk promised to pause his share sales until 2024.

AMC Entertainment Holdings Inc (AMC) plunged over -6% in pre-market trading, extending yesterday’s losses after the company announced a $110M equity raise along with plans for a reverse split and a proposal to convert its “APE” units to shares.

Bit Digital Inc (BTBT) climbed more than +3% in pre-market trading, extending yesterday’s gains after the company announced that it had begun Ethereum staking operations.

DBV Technologies (DBVT) gained over +38% in pre-market trading after the company announced that the FDA lifted the partial clinical hold on VITESSE Phase 3 pivotal trial.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Friday - December 23rd

Siemens Gamesa ADR (GCTAY), Sprott Physical Gold and Silver Trust (CEF), Neogen (NEOG), Eve Holding (EVEX), Mitek (MITK), Oramed (ORMP), Gold Royalty (GROY), Blade Air Mobility (BLDE), Mesabi Trust (MSB), Byrna Technologies (BYRN), Inotiv (NOTV), CEL-SCI (CVM), Phenixfin (PFX), PharmaCyte Biotech (PMCB), RF Industries (RFIL), Dynasil of America (DYSL), Learning Tree (LTRE), CD International Enterprises (CDIIQ).

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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.