Following the Federal Reserve’s revised outlook for interest rates, trading became highly volatile, leading to a panic during the regular session. Jeff Buchbinder, LPL Financials’ chief equity strategist, attributed Wednesday’s market slump to “stretched positioning and sentiment,” which made stocks susceptible to a selloff. He noted that the significant rise in inflation expectations and the consequent bond selloff provided a convenient trigger. With the tech sector’s support waning, no other groups were able to compensate for the gap. Investors are now eagerly awaiting the GDP report, with futures indicating a cautious rebound.

European markets experienced significant declines, mirroring global trends. The Swedish Riksbank announced a 25-basis-point rate cut, while Norway’s central bank opted to keep its policy rate unchanged but hinted at potential rate reductions starting in March 2025. The Bank of England is also set to discuss its monetary policy decisions later in the day. Amid these developments, shares of British public services provider Serco Group rose by approximately 6.77%, whereas French broadcaster Canal+ saw its shares drop by 10.39%. Investors are closely watching these central bank actions and their implications for the broader market.

Asia-Pacific stocks and currencies experienced a decline amid a broader market sell-off. This downturn followed the Bank of Japan’s decision to maintain its policy rate at 0.25% for the third consecutive meeting. In reaction to this decision, Japan’s Nikkei 225 fell by 0.69%, and the Topix decreased by 0.22%. South Korea’s Kospi index dropped 1.95%, while the Kosdaq index declined 1.89%. Australia’s S&P/ASX 200 saw a 1.7% drop, Hong Kong’s Hang Seng index fell by 0.36%, and China’s CSI 300 index managed a slight increase. Investors are closely monitoring these developments as they reassess their positions in the market.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell include CAN, KMX, CTAS, CAG, DRI, FDS, LW, & PAYX. After the bell reports include AVO, FDX, & NKE.

News & Technicals’

The Federal Open Market Committee (FOMC) voted 11-1 on Wednesday to reduce the federal funds rate to a range of 4.25%-4.5%. Cleveland Fed President Beth Hammack was the sole dissenter, advocating for maintaining the current rates. Despite the rate cut, Fed Chair Jerome Powell emphasized that interest rates are still significantly restraining economic activity and indicated that the Fed plans to continue cutting rates. However, Powell noted that further rate cuts would depend on more substantial progress in reducing inflation. The new quarterly forecasts revealed that several officials now anticipate fewer rate cuts next year compared to their earlier projections, and they expect slower progress on inflation in 2025. Additionally, Powell addressed a question regarding the Fed’s potential response to possible tariffs from the Trump administration.

Micron Technology shares plummeted by 15% following the release of disappointing guidance for the second quarter. Despite this, the company reported in-line revenue results and exceeded quarterly earnings expectations, with adjusted earnings per share of $1.79 on revenue of $8.71 billion, surpassing analysts’ forecasts of $1.75 per share. Year to date, Micron’s shares have risen by 22%, although this lags behind Nasdaq’s 29% gain. In its earnings report, Micron emphasized growth opportunities in data centers and artificial intelligence ventures, particularly those involving Nvidia’s processors.

On Thursday, the 10-year U.S. Treasury yield increased slightly, rising over one basis point to 4.516%, following the Federal Reserve’s indication that fewer rate cuts might be expected next year. This rise came after the yield surpassed 4.5% in the previous session; a level often associated with heightened market volatility. In contrast, the 2-year Treasury yield fell by more than two basis points to 4.331%. According to the CME FedWatch tool, the likelihood of another rate cut at Fed’s first policy meeting in January has dropped to below 10%. Investors are closely monitoring these developments as they reassess their expectations for future monetary policy.

During his annual “Direct Line” Q&A session with Russian citizens on Thursday, President Vladimir Putin acknowledged that inflation is a significant issue in Russia and that the economy is overheating. He described inflation as an “alarming signal” and emphasized that both the government and the Russian central bank are working towards achieving a “soft landing” for the economy. Despite these challenges, Putin expressed confidence in the overall performance of the economy, projecting a growth rate of 3.9-4% for the year.

Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School, described the recent stock sell-off on Wall Street as “healthy.” He explained that the Federal Reserve’s cautious outlook on future rate cuts served as a “reality check” for investors. Siegel noted that the market had been in a “runaway situation,” and the Fed’s stance reminded investors that interest rates would not drop as low as they had hoped when the easing cycle began. He remarked that the market’s previous optimism was excessive, making the sell-off unsurprising. Siegel also predicted that the Fed would likely reduce the number of rate cuts next year, possibly implementing just one or two reductions.

As we attempt to achieve a relief rally keep in mind the revised outlook for interest rates will keep price volatility challenging and option prices higher than normal for a while so plan carefully.  Today we have another big day of market-moving economic data that will kick off with the GPD report so buckle up it could be another very bumpy day.

Trade Wisely,

Doug

U.S. stock futures rebounded on Wednesday morning as traders anticipated the Federal Reserve’s December interest rate decision. The Dow Jones Industrial Average has been experiencing its worst downturn in 46 years, primarily due to a shift from traditional economy stocks to technology stocks, which are underrepresented in the Dow compared to broader market indices. The Federal Reserve is expected to announce its policy decision at 2:00 p.m. ET, with Fed funds futures indicating a 95% probability of a quarter percentage point rate cut, according to the CME FedWatch tool. This potential rate cut has heightened market interest and influenced trading activity.

European stocks saw gains on Wednesday, buoyed by economic data and corporate news. The U.K. reported a 2.6% rise in inflation for November, aligning with market expectations. Investors anticipate that the Bank of England will maintain its current interest rates at its final monetary policy meeting of the year on Thursday. In corporate news, shares of French carmaker Renault surged by 6% following reports of potential merger talks between Nissan and Honda, in which Renault holds a minority stake. This development contributed to the positive sentiment in the market.

Investors in Asia closely monitored Japan’s trade data ahead of an upcoming Bank of Japan rate decision. Japan’s exports saw a year-on-year increase of 3.8% in November, while imports fell by 3.8%, significantly missing expectations. This mixed economic data influenced regional markets differently. The Nikkei 225 closed 0.72% lower, reflecting investor caution. In contrast, South Korea’s Kospi rose by 1.12%, and Hong Kong’s Hang Seng index increased by 0.95%. Australia’s S&P/ASX 200 experienced a slight decline of 0.06%. Meanwhile, China’s CSI 300 gained 0.51% as investors awaited the People’s Bank of China’s loan prime rate announcement on Friday.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include ABM, BIRK, GIS, JBL, & TTC. After the bell reports include LEN, MLKN, MU, SCS, & WS.

News & Technicals’

Despite inflation remaining above target, a robust 3% economic growth rate, and a strong labor market, futures market traders are almost certain that the Federal Open Market Committee (FOMC) will lower its benchmark overnight borrowing rate by 25 basis points, bringing it to a target range of 4.25% to 4.5%. This anticipated rate cut contrasts with the typical response of raising rates or maintaining the current level under such economic conditions. To justify this decision, Chair Jerome Powell and the committee will need to communicate their rationale effectively. Former Boston Fed President Eric Rosengren recently expressed his opposition to a rate cut at this meeting, highlighting the complexity of the decision.

U.S. Treasury yields edged higher on Wednesday as investors awaited the Federal Reserve’s latest interest rate decision and guidance on the economic outlook. The yield on the 10-year Treasury note rose by two basis points to 4.40%, while the 2-year Treasury yield increased by one basis point to 4.25%. Market participants are keenly watching the post-meeting statement and the press conference with Fed Chairman Jerome Powell for insights into the central bank’s monetary policy stance and its assessment of the broader economy. These communications are expected to provide crucial clues about future policy directions.

Nissan shares soared by 24% while Honda Motor stock declined, following reports that the two Japanese automakers are considering a merger. According to the Nikkei newspaper, Honda and Nissan are exploring the possibility of operating under a holding company and are expected to sign a memorandum of understanding soon. Joe McCabe, president and CEO of AutoForecast Solutions, commented to CNBC that Nissan requires a “revitalization” after its partnership with Renault deteriorated. This potential merger could mark a significant shift in the automotive industry landscape.

Novo Nordisk’s popular diabetes medication, Ozempic, may have an unexpected side effect. Danish health authorities announced on Monday that they are requesting the European Union’s drug regulator to review findings from two Danish studies. These studies suggest a link between Ozempic and an increased risk of non-arteritic anterior ischemic optic neuropathy (NAION), a rare eye condition that can cause vision loss due to reduced blood flow to the optic nerve.

As we catch a very needed relief rally in the DIA and IWM plan carefully if you intend to add new positions with the FOMC interest rate decision coming at 2 PM Eastern.  Also keep in mind that we have a pending GDP report on Thursday and the Core PCE figures coming Friday morning as well as the possible government shutdown midnight on Friday unless a deal is reached in Congress.

Trade Wisely,

Doug

Stock futures declined following the longest DIA losing streak since 2018. Traders are eagerly awaiting the Federal Reserve’s next rate decision, which will be announced at the end of the central bank’s final two-day policy meeting of 2024, starting Tuesday. According to CME Group’s Fed Watch tool, there is a 95% probability of a quarter-point rate cut on Wednesday. Wall Street is particularly focused on insights into future policy moves that will be discussed during the meeting and in Chair Jerome Powell’s press conference afterward.

Early Tuesday, European markets were mostly in negative territory as investors focused on upcoming central bank meetings. The Bank of England is set to meet on Thursday, with markets currently anticipating only a slim chance of a final rate cut for the year. Despite the overall negative trend, Germany’s DAX index was up by 0.2%, following Chancellor Olaf Scholz’s loss in a confidence vote in the German parliament on Monday, which has triggered a snap election scheduled for February 23. Key data releases in Europe on Tuesday include U.K. unemployment figures and Germany’s Ifo business climate and economic sentiment index.

Asia-Pacific markets showed mixed performance, reflecting the varied gains seen on Wall Street. In a significant move, Chinese leaders announced plans to increase the country’s budget deficit to 4% of GDP in 2025, aiming to sustain economic growth at around 5% next year, according to a Reuters report. The CSI 300 in China fell by 0.26%, and Hong Kong’s Hang Seng Index decreased by 0.16%. Conversely, Australia’s S&P/ASX 200 rose by 0.78%. Japan’s Nikkei 225 and Topix both declined by 0.24%, while South Korea’s Kospi and Kosdaq dropped by 1.29% and 0.58%, respectively.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell include HEI, & WOR. After the bell reports include CALM, & NEOG

News & Technicals’

Respondents to the CNBC Fed Survey for December are confident that the Federal Reserve will cut rates on Wednesday, with 93% predicting a quarter-point reduction. However, only 63% believe this is the appropriate action for the Fed to take. The survey, which included 27 respondents such as economists, strategists, and fund managers, also highlighted concerns about the impact of President-elect Donald Trump’s tariffs and threatened deportations on the economic outlook. These factors have tempered optimism among some forecasters. Economist Robert Fry expressed his uncertainty, stating, “I can’t remember being this uncertain about the inflation outlook.”

U.S. Treasury yields edged slightly higher as investors awaited key economic data ahead of the Federal Reserve’s upcoming interest rate decision. By 5:51 a.m. ET, the yield on the 10-year Treasury had risen by over 2 basis points to 4.418%, while the 2-year Treasury yield increased by more than 2 basis points to 4.272%. The U.S. retail sales figures for November, set to be released on Tuesday, are expected to provide new insights into consumer behavior and spending. This will be followed by the latest building permit and housing starts on Wednesday, just before the Fed announces its interest rate decision later that day.

An index of Asian currencies dropped to its lowest level in over two years due to growing pessimism about China’s economic outlook and expectations that Trump’s second administration will strengthen the U.S. dollar. The yen, which had weakened beyond the 154 level against the dollar overnight, ended a six-day losing streak. The yen’s sharp decline over the past week has led strategists to caution that further weakening could prompt verbal intervention from authorities and increase pressure on the Bank of Japan to raise interest rates. However, traders are currently pricing in less than a 20% chance of a rate hike in December, according to swaps market data.

Volkswagen, Mercedes-Benz Group, and BMW have recently issued profit warnings, attributing their concerns to economic weakness and sluggish demand in China, the world’s largest car market. This challenging situation is further exacerbated by the potential imposition of U.S. tariffs on European autos, which could significantly impact Germany’s economy. Germany, being Europe’s largest exporter of passenger cars to the U.S., exported 23 billion euros ($24.2 billion) worth of cars last year, representing 15% of its total exports to the U.S., according to Eurostat and ING Research. The introduction of tariffs would therefore worsen the already difficult circumstances for Germany’s top original equipment manufacturers (OEMs).

The DIA losing streak looks to continue today despite the T2122 indicator signaling a short-term oversold condition.  Market breath continues to be extremely concerning as the tech giants soar to record highs seemingly sucking all the energy out DOW and Russell indexes.  If a pullback begins be prepared for a possible quick substantial decline.

Trade Wisely,

Doug

On Monday, stock futures saw a slight rise to potentially breaking a seven-day losing streak, for the Dow Jones Industrial Average. Following a broad rally after President-elect Donald Trump’s November victory, the market has recently shifted to a narrower, tech-led movement. Joe Mazzola, head of trading and derivatives at Charles Schwab, noted that the market’s breadth is diminishing, with the rally becoming more concentrated in a few names. He expressed uncertainty about the sustainability of this trend but suggested it might continue through the end of the year. Investors are also looking ahead to the Federal Open Market Committee’s meeting on Tuesday and Wednesday, where officials are expected to lower the benchmark interest rate again.

European markets saw a decline as traders prepared for the final week of central bank actions for the year and the listing of three French media companies in Europe. France’s CAC 40 index fell by 0.58%, influenced by Moody’s unexpected decision to downgrade the country’s credit rating from Aa2 to Aa3, citing concerns over weakened public finances due to ongoing political instability. Investors were also focused on Berlin, where a vote of confidence in Chancellor Olaf Scholz was scheduled, potentially paving the way for snap elections in February.

Asia-Pacific markets experienced a downturn, reversing earlier gains as investors anticipated key decisions from major central banks, including the Bank of Japan and the People’s Bank of China. Despite a 3% year-over-year increase in China’s retail sales, the figure fell short of the 5% growth forecasted by economists. This underperformance contributed to declines across various indices: mainland China’s CSI 300 dropped by 0.54%, Hong Kong’s Hang Seng index fell by 1%, South Korea’s Kospi decreased by 0.22%, Japan’s Nikkei 225 saw a marginal decline, the Topix index experienced a larger loss of 0.3%, and Australia’s S&P/ASX 200 fell by 0.56%.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell no notable reports. After the bell reports include CMP, & MITK.

News & Technicals’

Monday, U.S. Treasury yields remained relatively stable as investors anticipated the Federal Reserve’s final meeting of the year. The 10-year Treasury yield decreased slightly by over 1 basis point to 4.381%, after surpassing 4.4% on Friday. Similarly, the 2-year Treasury yield dipped by less than 1 basis point to 4.234%. Investors were largely expecting a 25-basis-point interest rate cut from the FOMC on Wednesday, with a 97% probability according to the CME FedWatch tool. Market participants are keenly awaiting the Fed’s updated policy statement and Fed Chair Jerome Powell’s press conference for insights into future interest rate decisions. During this blackout period, Fed officials are restricted from making public comments ahead of the meeting.

Softbank CEO Masayoshi Son is set to announce a $100 billion investment in the U.S. over the next four years during a visit to President-elect Donald Trump’s Mar-a-Lago residence in Palm Beach, Florida. This substantial investment could be sourced from various Softbank-controlled entities, including the Vision Fund, capital projects, and Arm Holdings, where Softbank holds a majority stake. Not all of the funds will be newly raised; some will include previously announced investments, such as Softbank’s recent $1.5 billion investment in OpenAI, the company behind ChatGPT. This move underscores Softbank’s commitment to expanding its footprint in the U.S. tech sector.

The Bank of Japan (BOJ) is expected to maintain its benchmark interest rate at 0.25% during its upcoming two-day meeting this week, as it seeks more clarity on domestic wage and spending trends. According to a survey conducted between December 9-13, a slim majority of 13 out of 24 economists (54%) predict that the BOJ will keep rates unchanged, while the same number anticipate a rate hike in January. The BOJ, which last raised rates in July, has indicated its willingness to tighten monetary policy further if wage growth and prices meet its projections. BOJ Governor Kazuo Ueda recently suggested that another rate hike is approaching, contingent on economic data aligning with expectations, but he also highlighted potential risks, such as wage trends next year and changes in U.S. economic policy.

Russia’s central bank is anticipated to implement a significant rate hike later this week as inflation continues to escalate in its war-impacted economy. Despite multiple rate increases aimed at curbing inflation, the consumer price index rose to 8.9% in November, up from 8.5% in October, primarily due to rising food prices. The inflationary pressure has been exacerbated by a weaker ruble, following new U.S. sanctions in November, which has increased the cost of imports. As a result, economists expect the Central Bank of Russia (CBR) to raise interest rates by 200 basis points at its meeting on December 20, bringing the key interest rate to 23%. This move reflects the ongoing economic challenges Russia faces since its invasion of Ukraine in 2022.

Although the Dow is breaking a seven-day losing streak the tech sector stocks continue to reign supreme.  However, there is concern about how much longer that can continue unless market breath picks up.  This week investors will be focused on the FOMC decision on Wednesday, GDP on Thursday and the Core PCE numbers coming on Friday. Also keep in mind that the current CR will run out on Friday at midnight and the government could shut down unless Congress acts.

Trade Wisely,

Doug

U.S. stock futures declined on Thursday, following the Nasdaq Composite’s milestone of closing above the 20,000 mark for the first time. The S&P 500 saw a gain of 0.8%, while the Dow Jones Industrial Average lagged, dropping by approximately 99 points, or 0.2%. Hackett noted that current market expectations are high, with valuations at their peak since the tech bubble. Despite supportive seasonal and technical factors through year-end, investors are expected to be more selective next year, carefully weighing risks and rewards. On the economic front, the producer price index report for November anticipated to show a 0.2% monthly increase, and weekly jobless claims are set to be released on Thursday morning.

European markets experienced a slight dip on Thursday morning as investors awaited the European Central Bank’s (ECB) final monetary policy decision of the year. The Stoxx Europe 600 index edged down by less than 0.1%, while the euro saw a notable increase of 0.7% against the Swiss franc following an unexpected 50-basis-point rate cut by the Swiss National Bank. Analysts surveyed by Bloomberg anticipate that the ECB will reduce its policy rate by 25 basis points for the fourth time this year. Additionally, the ECB is expected to release its quarterly macroeconomic projections, providing insights into future growth and inflation trends.

Asia-Pacific markets mostly saw gains on Wednesday, buoyed by positive momentum from Wall Street. Investors in the region reacted to Australia’s latest jobs data, which revealed an 8-month low unemployment rate of 3.9% for November. Despite this, Australia’s S&P/ASX 200 dipped by 0.28%. In Japan, the Nikkei 225 and Topix indices rose by 1.21% and 0.86%, respectively. South Korea’s President Yoon Suk Yeol, addressing public pressure, stated he would not resign, coinciding with a 1.62% rise in the Kospi index and a 1.1% increase in the Kosdaq. Meanwhile, China’s CSI 300 climbed 0.99%, and Hong Kong’s Hang Seng index advanced by 1.28%.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include CEIN. After the bell reports include AVGO, COST, & RH.

News & Technicals’

President Joe Biden announced the commutation of sentences for nearly 1,500 offenders and the pardoning of 39 others, marking the largest number of clemencies granted in a single day, according to the White House. In a statement, Biden emphasized America’s foundation on the promise of possibility and second chances. The White House noted that Biden has issued more sentence commutations at this point in his presidency than any recent predecessors in their first terms. Biden hinted at further actions, stating that his administration would continue to review clemency petitions and take additional steps in the coming weeks.

Oil prices edged higher for the fourth consecutive day amid potential tighter restrictions on Russian and Iranian oil flows. Brent crude hovered around $74 per barrel, having climbed over 3% in the past three sessions. U.S. Treasury Secretary Janet Yellen suggested that low oil prices might enable further sanctions on Russia, while Donald Trump’s national security adviser nominee indicated a strategy of maximum pressure on Iran. Despite these developments, the International Energy Agency (IEA) warned of a potential oil supply glut next year, contrasting with the U.S. Energy Information Administration’s (EIA) forecast of balanced markets. This comes even as OPEC+ has decided to postpone increasing output.

China reaffirmed its recent policy adjustments and emphasized plans to stimulate growth during a high-level economic planning meeting that concluded on Thursday, as reported by state media. Using language reminiscent of the 2008 global financial crisis, Beijing highlighted an increased urgency to bolster its struggling economy and brace for a potential trade war with the U.S., with Donald Trump returning to the White House. Since late September, Chinese officials have intensified stimulus efforts, but recent economic data shows these measures have not been enough to counter ongoing deflationary pressures. This has raised investor expectations that Beijing will further enhance its stimulus initiatives to revive growth. Notably, the country’s consumer price inflation dropped to a five-month low in November.

Adobe’s stock dropped by 8% following the release of its revenue estimates for the fiscal first quarter, which fell short of expectations. The company projected revenues between $5.63 billion and $5.68 billion, below the consensus estimate of $5.73 billion as reported by LSEG. Despite this, Adobe’s adjusted earnings per share and revenue for the previous quarter exceeded analysts’ forecasts, highlighting a mixed financial outlook for the company.

The market chose to celebrate the rising inflation in the CPI with Nasdaq Composite’s Milestone of 20,000 as big tech surged higher.  Keep in mind that today we have more inflation data with the PPI report as well as jobless claims.  Plan your risk carefully.

Trade Wisely,

Doug

Stock futures remained nearly flat on Wednesday with investors waiting the release of new U.S. inflation data. Traders are particularly focused on November’s consumer price index (CPI) reading, expected in the morning. According to economists polled by Dow Jones, the CPI, which measures a basket of goods and services, is anticipated to rise by 0.3% from October and 2.7% year-over-year. Excluding the more volatile food and energy prices, the core CPI is projected to increase by 0.3% month-over-month and 3.3% from the previous year. This data precedes the producer price index report, due on Thursday morning, and both reports are among the last significant economic indicators before the Federal Reserve’s policy meeting next week.

European markets experienced mixed results on Wednesday as traders processed disappointing corporate updates and anticipated the latest U.S. inflation data. Shares of Inditex, the Spanish clothing giant and owner of Zara, dropped by 6% following the release of its interim nine-month and quarterly results. German online retailer Zalando saw a significant decline, falling as much as 10% after announcing its agreement to acquire the fashion group About You. Meanwhile, the U.K. and the European Union are proactively strengthening their cooperation to prepare for potential trade and defense challenges with the incoming U.S. administration. A senior EU diplomat mentioned that the bloc could benefit from closer ties with the U.K. due to Britain’s historical “special relationship” with the United States.

Asia-Pacific markets showed mixed performance on Wednesday as investors reacted to various regional developments. China commenced its annual economic work conference, setting the stage for next year’s economic policies and growth targets. In response, Hong Kong’s Hang Seng index reversed earlier gains, closing 0.76% lower, while China’s CSI 300 index dipped by 0.17%. Conversely, South Korea’s blue-chip Kospi index surged by 1.02%, reflecting investor optimism. Japan’s markets saw modest gains, with the Nikkei 225 rising slightly and the Topix increasing by 0.29%. Meanwhile, Australia’s S&P/ASX 200 index fell by 0.47%, ending the day at 8,353.6.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include CGNT, PLAB, & REVG. After the bell reports include ADBE, NDSN, & OXM.

News & Technicals’

Federal Reserve Chair Jerome Powell is expected to complete his term leading the U.S. central bank, despite earlier suggestions that he might be pressured to resign. This assurance came from Scott Bessent, a prominent hedge fund manager and President-elect Donald Trump’s nominee for Treasury secretary. Bessent confirmed his support for Powell during a conversation with CNBC following a meeting with Senator Mike Crapo of Idaho, stating, “As the President said on Sunday, and I’m in complete agreement with him, that Jay Powell will serve out his term.”

U.S. Treasury yields remained relatively stable on Wednesday as investors awaited the release of November’s consumer price index (CPI) data. By 5:50 a.m. ET, the 10-year Treasury yield had edged up to 4.236%, increasing by more than 1 basis point, while the 2-year Treasury yield also rose by 1 basis point to 4.166%. According to a Dow Jones survey of economists, the CPI is expected to rise by 0.3% from October and 2.7% year-over-year. These inflation figures are among the final significant economic data points before the Federal Reserve’s monetary policy meeting next week, where the central bank will announce its next interest rate decision and provide guidance on future policy and economic outlook on December 18.

Alphabet’s shares saw an uptick on Tuesday following the unveiling of “Willow,” the company’s latest quantum computing chip. While the full potential of quantum computing, such as large-scale simulations and code breaking, may not be realized for years or even decades, the announcement generated significant excitement. Prominent technology leaders, including Tesla CEO Elon Musk and OpenAI CEO Sam Altman, praised the development on social media, highlighting the industry’s anticipation for future advancements in quantum technology.

Major insurance stocks have declined by over 6% since their closing prices last Tuesday, following the tragic shooting of Brian Thompson, CEO of UnitedHealth Group’s insurance division. This drop includes shares of UnitedHealth Group, CVS Health, and Cigna, which are among the largest private health insurers in the U.S. According to Jared Holz, Mizuho’s health-care equity strategist, this stock performance seems to be influenced by renewed negative rhetoric surrounding insurers and their business practices.

As we wait for the new U.S. Inlfation data anything is possible. Keep in mind that tomorrows PPI report could be also be market-moving so plan your risk carefully!

Trade Wisely,

Doug

Tuesday morning, stock futures hover near the flatline following a pullback in the S&P 500 and Nasdaq Composite from their record highs. Nvidia shares declined after a Chinese regulator announced an investigation into the chip giant for potential antimonopoly law violations. Investors are also awaiting the National Federation of Independent Business’s small business survey, set to be released Tuesday morning. The key event this week is the U.S. consumer price index report, due on Wednesday, which could significantly impact the Federal Reserve’s decisions on interest rates at their upcoming meeting on December 17-18.

On Tuesday, European markets traded in negative territory, pulling back from the previous day’s mostly positive session. This retreat came as investors prepared for the upcoming U.S. inflation report. Basic resources stocks were the hardest hit, losing around 1% due to disappointing Chinese import and export figures. As a result, traders are now keenly anticipating the U.S. inflation data set to be released on Wednesday.

China stocks showed mixed performance amid overall gains in Asia-Pacific markets. Investor sentiment was buoyed by Beijing’s announcement of “more proactive” fiscal measures and “moderately” looser monetary policy for the upcoming year, aimed at boosting domestic consumption. The CSI 300 index in China rose by 0.74%, reflecting positive market reactions. However, Hong Kong’s market dipped slightly by 0.2%. In contrast, South Korea’s market saw significant gains, with the Kospi rising 2.43% and the small-cap Kosdaq surging by an impressive 5.52%. Meanwhile, Australia’s S&P/ASX 200 fell by 0.36%, and Japan’s Nikkei 225 increased by 0.53%.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include ASO, AZO, DBI, FERG, GIII, OLLI, & UNFI. After the bell reports include PLAY, GME, & STFX

News & Technicals’

China is expected to raise its budget deficit to the highest level in three decades and implement the deepest interest-rate cuts since 2015, following strong stimulus signals from its top leaders. Economists predict that next year’s fiscal deficit target could reach 4% of GDP, the widest since a significant tax reform in 1994. Historically, Beijing has maintained its budget deficit ratio at or below 3%. A larger fiscal deficit indicates that the government will increase borrowing to fund higher public expenditure, potentially boosting domestic demand as companies and households cut back on spending and investment.

Prosecutors in New York have charged Luigi Mangione, an Ivy League graduate, with the murder of UnitedHealthcare CEO Brian Thompson, according to court records. This charge was filed just hours after Mangione was arraigned in a Pennsylvania courtroom on gun and other charges following his arrest earlier Monday at a McDonald’s in Altoona, Pennsylvania. Mangione is accused of fatally shooting Thompson as the CEO was heading into an investor meeting for UnitedHealth Group, the parent company of his health insurance giant.

Oracle shares dropped by 7% in extended trading on Monday after the company reported fiscal second-quarter results that missed analysts’ expectations and provided a weaker-than-anticipated forecast. Despite this, Oracle announced a new agreement with Meta, enabling the social media giant to utilize its infrastructure for projects related to the Llama family of large language models. Even with the recent decline, Oracle’s stock has surged over 80% this year, on track for its best annual performance since 1999.

Tesla is facing a lawsuit from the family of Genesis Giovanni Mendoza-Martinez, who died in a 2023 collision involving a Model S sedan in Walnut Creek, California. The lawsuit claims that Tesla’s “fraudulent misrepresentation” of its Autopilot technology contributed to the crash. Mendoza-Martinez’s brother, Caleb, who was a passenger, sustained serious injuries. The family’s attorneys allege that Tesla and its CEO, Elon Musk, have exaggerated or made false claims about the Autopilot system for years to generate excitement about the company’s vehicles and improve its financial condition.

Trade Wisely,

Doug

U.S. stock futures edged lower on Monday following a strong performance by the S&P 500 and Nasdaq Composite, produced three winning weeks in a row. This cautious start to the week comes ahead of key inflation data set to be released, which will provide crucial insight into the Federal Reserve’s upcoming policy decisions. The November jobs report, which showed stronger-than-expected growth, has already influenced market sentiment. With the Fed in a blackout period before its policy-setting meeting, investors are keenly awaiting the November consumer price index (CPI) data due on Wednesday. Economists surveyed by Dow Jones anticipate a slight increase in pricing pressures, with expected monthly and yearly rises of 0.3% and 2.7%, respectively, up from the previous month’s 0.2% and 2.6%.

European markets opened the week with mixed results as investors navigated ongoing geopolitical turmoil. Major regional bourses pared back most of their earlier gains, though European luxury stocks saw a boost, with Gucci-owner Kering rising as much as 4% at one point. The market’s attention was also focused on the Middle East, where the recent ousting of Syrian President Bashar al-Assad by rebel forces has created uncertainty. Western leaders have responded cautiously to the overthrow, concerned about the potential for a power vacuum and increased instability in the region.

China’s recent announcement of “more proactive” fiscal measures and “moderately” looser monetary policy aimed at boosting domestic consumption had mixed effects on regional markets. Before the news, mainland China’s CSI 300 index saw a slight decline of 0.17%, while Hong Kong’s Hang Seng index surged nearly 3%. In South Korea, political turmoil following President Yoon Suk Yeol’s survival of an impeachment vote and the aftermath of his brief martial law declaration led to significant market drops. The Kospi index fell by 2.78%, and the small-cap Kosdaq plummeted 5.19% to 627.01 as investors remained cautious. Meanwhile, Japan’s Nikkei 225 experienced a modest increase of 0.18%, and Australia’s S&P/ASX 200 ended the day with marginal gains.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include MOMO. After the bell reports include BRZE, AI, CASY, MDB, ORCL, PHR, MTN, TOL, YEXT.

News & Technicals’

Since Donald Trump became president-elect, nearly $10 billion has flowed into U.S. exchange-traded funds (ETFs) that invest directly in Bitcoin. This surge, totaling about $9.9 billion in net inflows, reflects investor optimism that Trump’s favorable stance on the crypto sector will drive market growth. Major issuers like BlackRock Inc. and Fidelity Investments have been key beneficiaries of this trend. Additionally, Trump’s recent appointments of a digital-asset supporter as the head of the U.S. securities regulator and the first-ever White House czar for artificial intelligence and crypto have further fueled expectations of a booming crypto market.

On Monday, the 10-year U.S. Treasury yield inched up by approximately 1 basis point to 4.17%, as investors evaluated the potential impact of recent jobs data on the Federal Reserve’s upcoming interest rate decision. Similarly, the 2-year Treasury yield rose by 1 basis point to 4.11%. This slight increase comes after a dip last week. Investors are now turning their attention to key economic indicators due later this week, including fresh inflation data on Wednesday and the latest producer price index on Thursday. Additionally, business confidence and mortgage data releases are expected, although no major data points are scheduled for Monday.

President-elect Donald Trump has stated that he does not intend to replace Federal Reserve Chair Jerome Powell, whose term extends until May 2026. In an interview at Trump Tower, Trump responded to a question about Powell’s potential replacement by saying, “No, I don’t think so. I don’t see it.” He added that while Powell might comply if directly told to step down, he would likely resist if merely asked. This exchange highlights the ongoing dialogue about the Federal Reserve’s leadership as Trump prepares to take office.

Over the weekend, significant political upheavals occurred globally: Syria’s President Bashar Al-Assad reportedly fled to Russia, ending 50 years of Assad family rule; South Korea’s president survived an impeachment vote after declaring martial law for the first time in over 40 years; and France’s government collapsed following a no-confidence vote, a first in over 60 years. These events could cast a shadow over the typical year-end market rally, which usually sees markets climb. The full impact of these political developments remains uncertain, contributing to market volatility. However, positive U.S. economic data supports the case for a market rise. Traders are optimistic that the U.S. Federal Reserve will act as the market’s “Santa Claus” this year, with an 85% chance of a 25 basis points rate cut next week, according to the CME FedWatch tool, which is likely to boost markets.

Trade Wisely,

Doug

This morning, US equity futures experienced fluctuations as investors took a breather from a record-breaking rally. Despite this pause, Bitcoin surged past $100,000 following President-elect Donald Trump’s appointment of a crypto advocate as the next head of the Securities and Exchange Commission. The S&P 500 marked its 56th record close of 2024, with the Dow and QQQ also reaching new highs, largely driven by gains in big tech. Federal Reserve Chairman Jerome Powell noted that the risks from the labor market had diminished, allowing Fed officials to cautiously lower interest rates toward a neutral level that neither stimulates nor restrains economic growth.

European stocks saw an uptick, particularly in France, following the ousting of Prime Minister Michel Barnier’s government in a no-confidence vote the previous day. The market’s positive movement was driven by gains in travel and banking stocks, although industrials and health care sectors experienced minor losses. In a significant development, Shell and Norway’s Equinor announced their intention to merge their British offshore oil and gas assets, forming a new energy company based in Aberdeen, Scotland. This merger is poised to make the new entity the largest independent producer in the U.K. North Sea.

Asia-Pacific markets showed mixed performance amid significant political upheaval. In South Korea, lawmakers moved to impeach President Yoon Suk Yeol just a day after he declared martial law, with a vote scheduled for Saturday evening, according to local reports. This political instability contributed to a 0.90% drop in the Kospi and a 0.92% decline in the Kosdaq. Meanwhile, Australia’s S&P/ASX 200 saw a modest gain of 0.1%, Japan’s Nikkei 225 rose by 0.30%, but Hong Kong’s Hang Seng index fell by 1.1%.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include CRMT, BMO, BF>B, CAL, CM, DG, GMS, SIG, & TD, After the bell reports include AGX, ASAN, COO, DOCU, COMO, GTLB, GWRE, HCP, HPE, LULU, WOOF, RBBK, IWT, SMAR, SWBI, PATH, ULTA, VEEV, VSCO, & ZIMZ.

News & Technicals’

Wednesday night, Bitcoin’s price surged past the highly anticipated $100,000 mark for the first time ever. This milestone followed new closing records for the S&P 500 and Nasdaq Composite, coinciding with President-elect Trump’s announcement of his SEC chair pick and Fed Chair Jerome Powell’s comparison of Bitcoin to gold. Bitcoin has now risen over 140% in 2024 and 48% since the election. Mike Novogratz, CEO of Galaxy Digital, remarked to CNBC that the digital asset ecosystem is on the verge of becoming a mainstream financial force.

American Eagle has revised its full-year sales forecast downward and provided holiday guidance that fell short of expectations. While the retailer experienced robust demand during the back-to-school season, it noted a slowdown in consumer spending between key shopping periods. Despite this, the Aerie brand continued to perform well, with comparable sales increasing by 5%, building on a 12% rise from the previous year.

Shell and Equinor are set to establish a joint venture in Aberdeen, Scotland, aiming to sustain fossil fuel production and ensure energy security in the U.K. The deal, expected to be finalized by the end of next year pending approvals, will create the U.K. North Sea’s largest independent producer. This strategic move underscores the companies’ commitment to maintaining a stable energy supply while navigating the evolving energy landscape.

Vivek Ramaswamy, co-leading President-elect Trump’s new Department of Government Efficiency alongside Elon Musk, announced that any “last minute spending spree” under Biden’s Inflation Reduction Act (IRA) or CHIPS Act will be closely scrutinized. He specifically mentioned the recent $6.6 billion loan to electric vehicle maker Rivian Automotive. Ramaswamy emphasized that any significant increase in spending and “dollars out the door” during the final days of Biden’s term could be considered “indefensible” and potentially a “fiduciary breach.”

After yesterday’s record-breaking rally futures hint at a possible rest as the bulls catch their breath.  However, the index charts all indicate bullish patterns with no signs that the bears gaining ground.  That said, the decline in the T2122, T2108, T2107 indicators as the market extends is suggesting a substantial divergence is developing. Should the bears find a reason to attack the divergence could result in a swift and substantial pullback so have a plan in pace to protect capital and profits if those profit-takers find reason to run for the door.

Trade Wisely,

Doug

Tech stocks spearhead a rise in US equity futures as traders anticipated comments from Federal Reserve Chair Jerome Powell for insights into future interest rate movements. The Nasdaq 100 index contracts saw a 0.7% increase, driven by favorable earnings reports within the tech sector. Meanwhile, S&P 500 contracts also moved up, following the benchmark’s achievement of its 55th record high for the year on Tuesday. Additionally, the dollar gained strength, and 10-year Treasury yields rose, reflecting broader market dynamics.

European stocks were on the rise early Wednesday as investors prepared for a no-confidence vote in France’s National Assembly. The French CAC 40 index increased by 0.4% in morning trading, reflecting cautious optimism amid a politically turbulent week in France. The autos sector led the gains, climbing 1.2% following a report from Italian newspaper Corriere della Sera that Stellantis is considering outgoing Apple CFO Luca Maestri for its CEO position. Conversely, stocks in the healthcare, food and beverage, and basic resources sectors were trading lower.

South Korean markets experienced a significant downturn on Wednesday as political pressure intensified on President Yoon Suk Yeol following his brief imposition and subsequent lifting of a martial law decree. Concerns over financial instability prompted the Bank of Korea to announce plans to enhance short-term liquidity and implement measures to stabilize the foreign exchange market as needed. The Kospi index declined by 1.44%, and the Kosdaq fell by 1.98%. In contrast, Japan’s Nikkei 225 remained nearly flat, while Mainland China’s CSI 300 and Australia’s S&P/ASX 200 saw modest declines of 0.54% and 0.38%, respectively.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include CPB, CHWY, DLTR, FL, HRL, RY, & THO. After the bell reports include AVAV, AEO, CHPT, DSGX, FIVE, GEF, NCNO, PVH, S, CXM, SNPS, & VRNT.

News & Technicals’

Attention Wednesday will be focused on Powell’s upcoming speech and the latest US data on services and manufacturing as the market anticipates Friday’s crucial labor market update. Fed Bank of San Francisco President Mary Daly mentioned that while a December rate reduction isn’t guaranteed, it remains a possibility. Guy Miller, chief strategist at Zurich Insurance, noted that the Fed has been clear in its signaling so far, suggesting that if a pause is considered, Powell might hint at it to avoid surprising the market. This comes amid a significant surge in US stocks, with the S&P 500 index climbing 27% this year.

French markets remained relatively stable ahead of Wednesday’s no-confidence vote, which poses a threat to the current government. The CAC 40 index saw a slight rise, marginally outperforming the broader European Stoxx 600 index. Meanwhile, the yield premium on French bonds compared to their German counterparts held steady, and the euro experienced a slight weakening. This stability in the markets was anticipated by Nannette Hechler-Fayd’herbe, EMEA chief investment officer at Lombard Odier.

Investors in South Korea are closely evaluating the future political landscape after the opposition Democratic Party announced plans to pursue treason and impeachment charges against President Yoon for his illegal declaration of martial law. In response to the potential instability, the Bank of Korea has committed to boosting short-term liquidity and taking proactive measures in the currency markets to maintain stability. Charu Chanana, chief investment strategist at Saxo Markets, noted that while some uncertainty remains, the swift actions by Korean authorities could help limit the regional impact.

U.S. airline executives are preparing to defend their seating fees before a Senate panel on Wednesday, following accusations from the subcommittee that the industry has been generating billions in revenue through “junk” fees. The Biden administration, along with some lawmakers, has vowed to address these fees, specifically targeting the airline industry for reductions. According to a report released on November 26 by the Senate Permanent Subcommittee on Investigations, American, Delta, United, Spirit, and Frontier airlines collectively amassed $12.4 billion in seating fees from 2018 to 2023.

The bulls are running hard this morning but keep in mind Jerome Powell speaks this afternoon, and anything is possible.  Bank of America published a report to their customers to exercise caution as you head toward the Friday jobs report suggesting the market may be getting ahead of itself considering the pending government shutdown on the 20^th and big shakeup expected as the new administration takes control.  Of course, stay with the trend but watchful for a change as the market continues to wildly extend.

Trade Wisely,

Doug