Stocks rested though the bears briefly made an appearance after the China credit downgrade but we quickly shook off the mounting debits as traders bought the dip in the tech giant’s.  The labor market data in the JOLTS report pointed to a slowing economy but encouraged the bulls as bond yields fell that additional rate hikes are unlikely.  Today we have more labor data pending in the ADP along with Mortgage, Trade, Productivity, and Petroleum data along with a handful of notable reports to inspire traders.  Corporate buybacks will begin winding down as their blackout period begins next week so plan your risk accordingly. 

Overnight Asian markets shook off the China downgrade with the Nikkei leading the buying up 2.04% with only the Shanghai seeing modest selling.  European markets trade green across the board this morning with the DAX extending its record high. U.S. futures also point to a resurgence of buyers after a brief two-day rest ahead of earnings and economic data. 

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AI, BF.B, CPB, CHPT, CHWY, DSGX, GME, GEF, OLLI, OXM, SMTC, SPWH, THO, UNFI, VEEV, VRNT.

News & Technicals’

The world is facing a major change in 2024, according to the Danish investment bank. The bank said that the past decade’s trends are coming to an end, and that the future will be shaped by some unexpected events that could have a huge impact on the financial markets. These events are unlikely but possible, and the bank warned that investors should be prepared for them. Some of the events that the bank predicted are: a global cyberattack, a new pandemic, a war between China and Taiwan, a collapse of the European Union, and a massive solar storm. These events could disrupt the global economy, politics, and society, and create new opportunities and challenges for the financial sector.

Generative artificial intelligence, which can create realistic texts, images, and sounds, is attracting a lot of attention and investment from Big Tech companies. However, these models also consume a lot of water, which raises environmental concerns. A study by Shaolei Ren, a researcher at the University of California, Riverside, revealed that ChatGPT, a popular chatbot developed by OpenAI, uses 500 milliliters of water for every 10 to 50 prompts, depending on the location and time of its deployment. The water is needed to cool down the servers that run the model, which requires a lot of computing power. The study suggests that generative AI models should be designed and deployed more efficiently, and that their water footprint should be taken into account when evaluating their social and economic impacts.

The U.S. consumer spending, which has been the main driver of the economic growth, is facing a challenge from the high interest rates on credit cards, according to some economists. Carl Weinberg, an economist at High Frequency Economics, told CNBC that consumer spending is being financed by credit cards, where interest is “over the top, out of control, off the hook right now”. He predicted that consumers will cut back on their spending in the new year, as their debt burdens increase. However, he did not expect this to push the U.S. economy into a recession. Monica Defend, the head of the Amundi Investment Institute, had a more pessimistic view. She said that she sees a coming pullback in consumer spending as sufficient to trigger a recession in the first half. She cited the weak consumer confidence, the rising inflation, and the uncertainty over the fiscal and monetary policies as the main factors behind her forecast.

Stocks rested a second day largely shaking of the credit downgrade of China as the tech giant’s found their footing as buyer bought the dip. The JOLTS report showed signs of slowing economy, weakening bond yields as odds of additional rate hikes shrink. However, some doubts emerged about whether markets are too optimistic about rate cuts with the higher for longer theme gaining some attention. Today traders will look for inspiration in a handful of notable earnings as well as Mortgage Apps, ADP, International Trade, Productivity and Petroleum data on the economic calendar.  Corporate buybacks continue but keep in mind their blackout period is quickly approaching so a last ditch effort may well surge the market higher the rest to of the week.

Trade Wisely,

Doug