Fed members once again suggesting higher for longer translated into Japan’s stock market experiencing a notable downturn, leading the regional declines on Wednesday. The Nikkei 225, a benchmark index for the Japanese stock market, fell by 1.63% to close at 38,202.37. Similarly, the Topix index, which represents a broader range of stocks, also suffered a decline, closing 1.45% lower at 2,706.43.

European markets showed a cautiously optimistic picture in the mid-morning trading session. The Stoxx 600 index, which tracks a broad spectrum of companies across Europe, saw a modest increase of 0.4% by 11:15 a.m. London time. Notably, shares of Siemens Energy, a major German industrial manufacturing firm, surged by up to 12.8% following the company’s announcement of an improved outlook for 2024, buoyed by the robust performance of its power grid business.

U.S.s tock futures indicate a relatively flat to slightly bearish open as Fed comments worry investors. Meanwhile, the futures for the S&P 500 and the Nasdaq 100 remained largely unchanged, as earnings data rolled out. The highlight in the economic calendar will be the remarks of several more Fed members commenting on the ongoing inflation fight.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include ACMR, AFRM, BUD, ASC, ATHM, BCO, BR, CHH, CLVT, DIN, EDIT, EMR, EVER, FOXA, GFF, HAIN, DINO, HLLY, INGR, IMXI, INSW, KMT, KRNT, LCII, MCFT, NFE, NYT, NL, ODP, PAYO, PFGC, STWD, SUN, TBLA, TEVA, TPG, UBER, PRKS, VVV, VCEL, VERX, VSH, & WWW. After the bell include ARM, ACAD, ABNB, AMC, DOX, AAP, ATO, AZEK, BGS, BYND, BKH, BMBL, CE, CAKE, CPK, CLSK, CMP, CXW, CXT, CYTK, DUOL, ECPG, ET, EXAS, FNF, FLNC, FWRD, GNK, HL, HLIO, HPK, HMN, HUBS, IIPR, CART, JXN, JRVR, KNTK, KVYO, KGS, MNKD NWSA, NUS, OSUR, PYCR, PRIM, QNST, HOOD, RGLD, SBGI, SITM, SEDG, SLF, RUN, SUPN, TTD, TKO, MODG, COOK, TTEC, VSTO, VTLE, WTS, WES, & ZD.

News & Technicals’

Investors are closely scrutinizing the remarks made by Federal Reserve officials, seeking insights into the central bank’s interest rate trajectory for the current year. The consensus among Fed representatives this week has largely reaffirmed the central bank’s monetary policy stance, as outlined at the end of their most recent meeting. This has been reflected in the Treasury yields, with the 10-year Treasury yield experiencing a slight increase of over 1 basis point, reaching 4.479% as of 6:08 a.m. ET. Similarly, the 2-year Treasury yield also edged up by just over 1 basis point, standing at 4.839%. These movements in the yields are indicative of the market’s response to the Federal Reserve’s signals and the ongoing evaluation of economic indicators by investors.

The geopolitical landscape has been increasingly strained as the United States intensifies its trade restrictions and sanctions on China, with national security as the cited rationale. This escalation has had tangible economic repercussions, particularly in the wake of the Ukraine conflict. Trade interactions between the two powers have diminished by approximately 12%, and foreign direct investments have seen a more pronounced decline of 20% when compared to the figures within their respective economic blocs. The International Monetary Fund (IMF) has projected that, should the current rifts remain unaddressed, the global economy could potentially face a contraction as severe as 7% of the world’s GDP in what could be considered an extreme fallout scenario. This forecast serves as a stark reminder of the far-reaching implications that diplomatic tensions can have on international economic stability.

The United States has taken a significant step in its ongoing strategy to limit China’s technological advancement by revoking specific licenses for chip sales to Huawei. This action, announced on Tuesday, aligns with previous measures where export licenses have been withdrawn as part of a broader regulatory process. While the Commerce Department spokesperson refrained from discussing the particulars of the licenses affected, the confirmation of the revocation underscores the U.S. government’s firm stance on export controls to Huawei. Despite these regulatory challenges, Huawei’s consumer division is experiencing a revival, particularly following the launch of its Mate 60 Pro smartphone in August, which suggests resilience and adaptability in its business operations amidst tightening restrictions.

In a remarkable turn of events for the cryptocurrency world, the majority of customers affected by the collapse of the FTX exchange have been given a beacon of hope. A recent court filing has revealed that not only are these customers poised to recover their lost funds, but they may also receive additional compensation. FTX has reported an obligation of approximately $11.2 billion to its creditors. However, the exchange has managed to secure a substantial pool of assets, ranging between $14.5 billion and $16.3 billion, earmarked for distribution among the claimants. In an unprecedented move, customers with claims of $50,000 or less are set to receive about 118% of their validated claim value. This generous reimbursement plan is expected to cover around 98% of all creditors, signaling a significant recovery operation underway within the FTX financial landscape.

Rising bond yields due to higher for longer Fed comments have given rise to a bit of caution this morning.  However, with a huge number of earnings plan for price volatility and intraday whipsaws to continue.

Trade Wisely,

Doug