MARKET WRAPS
Watch For:
CPI for November; FOMC meeting; Earnings from FedEx; Eli Lilly & Co. 2024 Guidance Call
Today's Top Headlines/Must Reads:
- What to Watch in CPI Report
- U.S. Companies Are Finding It Hard to Avoid China
- An Aggressive Style of Share Buyback Is Having a Moment
Opening Call:
Stock futures held broadly steady on Tuesday in cautious trading ahead of inflation data that may impact the debate at this week's Federal Reserve policy meeting.
The central bank is widely expected to leave borrowing costs unchanged at a range of 5.25% to 5.50% at the conclusion of its two-day meeting on Wednesday.
The European Central Bank and the Bank of England are also expected to stand pat on interest rates following their meetings on Thursday.
"Investors are in a holding pattern ahead of a slew of economic data and interest rate decisions and that's kept market activity pretty subdued," AJ Bell said.
"Although no one expects any surprises from central bankers in terms of their decision, it will be their tone and choice of words with the power to send any anticipated Santa rally hurtling in the other direction," AJ Bell added.
Traders also will be keeping an eye on a $21 billion auction of 30-year bonds by the Treasury. Last month's 30-year auction was not well-received and sparked a spike in yields and volatility in stocks.
"Treasury yields look to be starting to turn back higher, and I suspect the CPI report might prove to be the catalyst for TNX [the CBOE 10 Year Treasury Note Yield Index index] getting back over 4.30%," Fundstrat said.
"This would likely prevent stocks from making too much further headway given recent correlation trends. However, yields have indeed risen over the last few trading days and stocks thus far have not been affected."
Premarket Movers
Alphabet was down 1.1% as Google lost an antitrust case filed by Epic Games after a California federal jury decided the search giant maintained a monopoly in its app store's distribution and payments market. Google said it would appeal the decision.
AstraZeneca is buying U.S.-based Icosavax for up to $1.1 billion, expanding its late-stage pipeline for vaccines and immune therapies. AstraZeneca's U.S.-listed shares rose 1.6%.
Ford was rising 0.2% following a report that said it would be reducing production of its electric F-50 Lightning pickup truck by about half in 2024.
Hasbro said it would cut 1,100 jobs , or nearly 20% of its workforce, its second round of job cuts announced this year, WSJ reported. The company warned weaker sales trends have persisted into the holiday season and are likely to continue into 2024. Shares fell 3.2%. Shares of Mattel declined 1.8%.
Lucid was down 3% after it said CFO Sherry House resigned, effective immediately, "to pursue other opportunities."
Oracle's revenue grew 5% in the fiscal second quarter, but sales missed Wall Street's estimates. The company's profit increased but fell short of expectations. Shares were falling 8%.
Forex:
The euro was mildly stronger against the dollar after the currency pair was fairly range-bound around the 1.0750 mark on Monday, Danske Bank Research said.
The range-bound trade was "in anticipation of the release of U.S. CPI later today" as well as Wednesday's Fed meeting, Danske said.
Sterling edged lower after data showed U.K. wage growth slowed slightly more than expected to 7.3% in the three months to October, but it benefits from expectations that the Bank of England will cut interest rates later than the Fed or ECB, MUFG said.
The BOE will be encouraged by the data but wages remain elevated, it said.
"The higher starting point for inflation in the U.K. and less evidence so far of a slowdown in core and service inflation gives the BOE's pushback against rate cut expectations more credibility amongst market participants."
Bonds:
Jefferies expects 2024 to be the year of fixed income and sees rates and credit outperforming equities.
"With the economy slowing and central banks embarking on a rate cutting cycle, we would favour an overweight position in sovereign and credit bonds."
Jefferies said valuation also favors fixed income assets over equities. One big caveat, though, is that there is a wall of issuance, particularly from the U.S., which hits the market next year, hence long positions should be concentrated toward the front end of the curve.
It said gross issuance in the U.S. will be close to $4 trillion "which is unprecedented," adding that Europe will also see higher gross issuance, "though the scale is nowhere close to that of the U.S."
Investor concerns stem from who would buy this debt, and the direct implications of increased issuance will be steeper curves.
Energy:
Oil prices edged higher after a Norwegian tanker in the Red Sea off the coast of Yemen was struck by a missile fired by Houthi rebels, raising concerns over shipping disruptions in the Middle East.
The U.S. Central Command said the tanker was attacked on Monday by an anti-ship cruise missile launched from a Houthi-controlled area of Yemen while passing through the Bab-el-Mandeb Strait.
For the last seven weeks, crude prices have fallen on lingering oversupply concerns and skepticism around OPEC+ supply cuts. This week, traders will watch out for OPEC and the IEA's monthly reports as well as rate decisions from major central banks.
Metals:
Base metals and gold prices were higher ahead of the consumer price inflation print.
Commonwealth Bank of Australia said a weaker inflation print would lead to the market expecting earlier rate cuts from the Fed, weighing on the dollar.
TODAY'S TOP HEADLINES
Macy's Billion-Dollar Question: What's More Valuable, Real Estate or the Business?
A potential buyout of Macy's by an investor group revives an old theory: that much of the value in retail lies in real estate.
Macy's shares surged Monday after a Wall Street Journal report that Arkhouse Management and Brigade Capital Management submitted a buyout proposal Dec. 1 valued at $5.8 billion. The investors proposed to acquire Macy's stock they didn't already own for $21 a share, a roughly 32% premium to where shares closed the day before.
Choice Hotels Launches Hostile Bid For Wyndham
Choice Hotels is launching a hostile takeover offer for Wyndham Hotels & Resorts, after repeatedly being rebuffed in its effort to strike a friendly deal.
Choice on Tuesday will publicly unveil a so-called exchange offer for Wyndham stock, according to people familiar with the matter, appealing directly to its rival's shareholders.
High-Yield Bonds Are Worth a Look as Stocks Get More Expensive
The stock market is looking increasingly risky, but that doesn't mean the only alternative is to buy Treasury bonds. Corporate debt, especially high-yield securities, looks particularly appealing.
It isn't the best time to buy the S&P 500, which is up about 20% in 2023 and trading far more expensively than at the start of the year relative to the profits its component companies are expected to produce. Stocks could drop because the current high interest rates are likely to slow the economy, potentially prompting analysts to lower their forecasts for profits.
House Speaker Johnson Insists Ukraine Aid Package Include U.S. Border Measures
WASHINGTON-House Speaker Mike Johnson (R., La.) said Monday he was sticking to his position that any package delivering aid to Kyiv would have to include strict new border-security measures, underscoring the stalemate gripping Congress on the eve of a visit by Ukrainian President Volodymyr Zelensky.
The new House speaker is scheduled to meet with Zelensky on Tuesday as part of a push by Ukraine's president for continued military aid. Republicans and Democrats have been at odds over the national-security package for months, as a rising isolationist and America First wing of the Republican Party gains traction and as public support for a war now almost two years old starts to wane.
Supreme Court Agrees to Consider Special Counsel's Request to Rule Quickly on Trump's Immunity
WASHINGTON-Special counsel Jack Smith asked the Supreme Court on Monday to take up Donald Trump's claim that he is immune from prosecution and can't face criminal charges related to efforts to overturn the November 2020 election, in an unusual effort to expedite a judgment crucial for moving the case speedily toward trial.
Hours later, the Supreme Court agreed to fast-track its consideration of whether to hear the case, suggesting that a decision could come within weeks on whether the former president's trial will begin as scheduled in March. In a brief order, the high court directed Trump's lawyers to respond by Dec. 20 to Smith's petition to hear the case.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Transcontinental 4Q
Economic Calendar (ET):
Nothing scheduled
Stocks to Watch:
Mullen Group Announces Budget, Business Plan for 2024; Sees Reasons to Be Cautious About Prospects for Sectors of Economy It Services; Sees Little Evidence of Sustained Economic Growth, Expects Demand Next Year in Line With Current Levels;
Sees Potential Opportunity on Supply Side as Rivals Struggle Under Pressures Including High Debt; to Return Cash to Shareholders via Monthly Dividends, Share Buyback;
Dividends to Stay at C$0.06/Common Shr Each Month, C$0.72 on Annualized Basis;
Sees Quarterly Rev Close to Early Projections of C$500.0M; Projecting Quarterly OIBDA Above C$80.0M, FY Range at C$325.0M-C$330.0M; Results to be Finalized in Early February 2024
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NexGen Updates At-the-Market Equity Program; May Sell Up to C$500M of Stock
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TransAlta Declares Quarterly Dividends on Preferred Shares; Declares C$0.17981 Div on Series A Shrs; Declares C$0.43958 Div on Series B Shrs; Declares C$0.36588 Div on Series C Shrs; Declares C$0.50609 Div on Series D Shrs; Declares C$0.43088 Div on Series E Shrs; Declares C$0.31175 Div on Series G Shrs
Expected Major Events for Tuesday
(MORE TO FOLLOW) Dow Jones Newswires
12-12-23 0610ET
