MARKET WRAPS
Watch For:
ISM Report on Business Manufacturing PMI for December; FOMC Minutes
Today's Top Headlines/Must Reads:
- Russia Blames Troops' Cellphone Use for Deadly Ukrainian Strike
- Job-Openings Report to Give Snapshot of Labor Demand
- Natural-Gas Prices Plunge as Unseasonably Warm Weather Is Forecast
- Hong Kong Stock Exchange Woos Global Companies After Expanding China Link
- Auto Industry Expected to Post Worst U.S. Sales Year in More Than Decade
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Opening Call:
Stock futures rose on Wednesday ahead of a busy few days of top drawer economic data and commentary.
Equity futures were firmer as traders awaited a flurry of U.S data in coming sessions that may test the market's hopes that the Federal Reserve is near the end of its monetary tightening cycle.
"The market continues to price in the likelihood of a further 0.25% interest rate rise from the Fed in February, with a terminal rate of around 5% later in the year," Interactive Investor said.
"As time progresses and the time lag from previous rate rises diminishes, the full effects of the tightening should become clearer, with the major concern remaining that the aggressive hiking policy so far could tip the world's largest economy into recession," it added.
The positive tone today was being helped by a 2.9% jump for Hong Kong's Hang Seng following reports that Beijing was considering further support for China's embattled property sector, according to Bloomberg.
Economic Insight
Interest rates will continue to rise in the first quarter of 2023, despite easing inflation pressures, although they are likely to fall later in the year, ING said.
Read more here
Chip Makers
Chip makers' ongoing efforts to diversify their production sites geographically amid rising geopolitical risk would likely weigh on the industry's efficiency, Citi said.
Read more here
Read Global Chip Sector Downturn Likely to Persist Through 1H
Stocks to Watch
Amazon.com entered into a $8 billion unsecured loan with several lenders, the tech giant and online retailer said in a filing with the Securities and Exchange Commission. The stock rose 1.2% in premarket trading.
Apple rose 1%. Shares dropped 3.7% on Tuesday, and the market capitalization of the iPhone maker closed below $2 trillion for the first time since March 8, 2021, according to Dow Jones Market Data.
Great Elm Group said Tuesday that it sold its durable medical equipment business for $80 million to QHM Holdings, a wholly-owned subsidiary of Quipt Home Medical Corp. Shares climbed 33% in after-hours trading.
NGL Energy Partners raised its guidance for fiscal 2023 adjusted Ebitda, saying it guided for it to be greater than $630 million from its prior outlook of more than $600 million. Shares rose 7.9% in after-hours trading.
Phathom Pharmaceuticals said the FDA has decided to not take action on the company's new drug application for vonoprazan. The company said it no longer expects product launches for H. pylori or erosive esophagitis in the first quarter. Shares dropped 27% in after-hours trading.
Rivian Automotive produced 24,337 vehicles in 2022, missing its production goal for the year of 25,000 . The stock was up 1% in premarket trading.
Tesla was rising 0.2% in premarket trading. Shares declined more than 12% on Tuesday after fourth-quarter deliveries missed analysts' expectations.
Vera Therapeutics on Tuesday issued positive topline results from its Phase 2b trial of atacicept in patients with immunoglobulin A nephropathy. Shares dropped 63% in after-hours trading.
Other Movers
American depositary receipts of Alibaba gained 6.5% after Ant Group received approval from Chinese authorities to expand its consumer finance business. Alibaba owns 33% of Ant
Forex:
This week's U.S. ISM manufacturing report and U.S. nonfarm payrolls figures could sway the market's interest-rate expectations and move the dollar, Danske Bank said.
"There is room in our view to discount more Federal Reserve hikes near-term, so if the numbers come out strongly, we should see a further rebound in the dollar," the bank added, noting the dollar's gains on Tuesday.
Bonds:
A negative correlation between stocks and bonds could return in 2023 if the major catalyst for markets becomes recession rather than prospects of the Federal Reserve raising interest rates, Swissquote said.
This would mean investors selling stocks due to recession fears and returning to bonds instead, it added.
"U.S. sovereign bonds gained yesterday as an indication that the latest market moves were backed by recession fears, rather than hawkish Federal Reserve expectations," Swissquote said, adding that the dollar didn't really react to falling yields while U.S. stocks underperformed European counterparts.
"That could be a gamechanger for the stock-bond correlation this year."
Energy:
Crude oil prices were sliding 1.6% in early European trading as the market digested news about higher covid cases in China and how this will affect oil demand.
Global indicators such as Tuesday's China Caixin PMI, as well as potential for a recession in the U.S., also point to hesitancy from oil investors, SPI Asset Management said.
Metals:
Metals markets were mixed in early London trading, with investors looking ahead to today's release of minutes from the last Fed meeting.
Three-month copper was up 0.8% while nickel was down 2%. Gold futures, meanwhile, were 1% higher, helped by a sliding dollar.
Gold should have a strong start to 2023 as much of Wall Street goes defensive, Oanda said, noting safe-haven flows as recession risks rise.
TODAY'S TOP HEADLINES
Elon Musk's Twitter Says It Plans to Expand Political Ads Allowed on Platform
Twitter Inc. said it plans to expand the political advertising it allows on the social-media platform after banning most political ads in 2019, in the latest policy change by new owner Elon Musk.
The company also said Tuesday that it is relaxing its policy for cause-based ads in the U.S. Such ads call for people to take action, educate and raise awareness in connection with the following categories: civic engagement, economic growth, environmental stewardship and social-equity causes.
EV Startup Rivian Missed 2022 Production Target
Rivian Automotive Inc. fell short of its 25,000-vehicle production target for 2022, capping a challenging year for the electric-truck startup.
Rivian said in a regulatory filing that it produced 10,020 completed vehicles in the final three months of 2022, bringing its total for the year to 24,337. The company delivered 20,332 of those vehicles to customers.
India's Face-Off With Big Tech Will Intensify in 2023
The standoff between India and U.S. tech giants will intensify in 2023 as New Delhi cooks up its own regulatory medicine for the world's second most populous internet market-an unusual concoction of Europe's strict antitrust approach and Chinese-style government surveillance.
Three significant pieces of legislation likely to pass in 2023 will harden positions on both sides.
South Korean Chip Stocks Rally After Tax-Break Plan
South Korean semiconductor stocks rallied Wednesday after the government's plan to offer bigger tax breaks for chip makers in 2023.
Shares in Samsung Electronics Co. and SK Hynix Inc. jumped more than 4% and 7%, respectively, outperforming the benchmark Kospi's gain of about 1%.
Job-Openings Report to Give Snapshot of Labor Demand
The Labor Department's November report on job openings and turnover is expected to show how demand for workers fared toward the end of 2022.
The U.S. labor market remains historically strong, with employers adding an average of 392,000 jobs a month in 2022 through November, according to the Labor Department. The pace of job growth was more than double that of 2019, the year before Covid-19 hit the U.S. economy.
Natural-Gas Prices Plunge as Unseasonably Warm Weather Is Forecast
A sharp rise in temperatures has erased the effects of last month's winter storm. Now forecasts for more unusually warm weather are melting down natural-gas prices.
Natural-gas futures for February delivery dropped 11% on Tuesday to end at $3.988 per million British thermal units. That is down more than 50% from summer highs and is about what gas cost a year ago, when temperatures were also warmer than normal and before Russia's invasion of Ukraine jolted energy markets.
Hong Kong Stock Exchange Woos Global Companies After Expanding China Link
Hong Kong is making a pitch to multinational companies to list on its stock market, despite heightened tensions between China and the West.
The city's stock exchange hopes a new initiative that allows mainland Chinese investors to trade shares of international companies will present a compelling case for some of the world's largest businesses to raise funds in the Asian financial hub.
Auto Industry Expected to Post Worst U.S. Sales Year in More Than Decade
The U.S. auto industry is expected to report a decline in overall sales for 2022, a year that was challenging for car companies and buyers alike as supply-chain snarls left dealerships with little inventory to sell.
On Wednesday, General Motors Co., Toyota Motor Corp. and other auto makers are scheduled to release their year-end sales results, in the midst of growing concern over an economic slowdown that could further damp demand for cars and trucks and put pressure on profits this year. Ford Motor Co. plans to report its 2022 sales on Thursday.
UK Grocery-Price Inflation Leads to Highest Ever Christmas Sales
U.K. grocery-price inflation in December has led to the first ever breach of the 12 billion pound ($14.36 billion) grocery sales mark for Christmas, though sales volumes slipped, according to the latest report by market-research firm Kantar.
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01-04-23 0611ET
