Five things you need to know before the market opens on Tuesday December 20:
1. — Stock Futures Lower, Treasury Yields Jump After Bank of Japan Policy Shift
U.S. equity futures edged modestly lower Tuesday as investors looked to snap a four-day losing streak on Wall Street amid persistent concerns over a near-term recession and an overnight jump in Treasury bond yields.
With just eight trading days left in what is shaping up to be the worst year for U.S. stocks since 2008, investors are having to navigate both a weakening economy and muted earnings projections alongside the Federal Reserve‘s determination to continue raising benchmark interest rates to fight the fastest inflation in decades.
Morgan Stanley analysts noted yesterday that S&P 500 earnings could come in sharply below the Street consensus of $231 per share next year, with the resultant weakness pulling the benchmark some 20% lower from its current levels.
Fourth quarter earnings are expected to fall 1.1% from last year, to a collective tally of $452.1 billion, with analysts keenly focused on near-term outlooks from the world’s biggest companies.
A big overnight move in the bond market will add to today’s complications, as well, after the Bank of Japan made notable changes to its policy of controlling longer-term interest rates. The BoJ widened the band for 10-year yields to 50 basis points — on either side of current levels — from 25 basis points, sending the yen to a multi-month high against the U.S. dollar.
Benchmark 10-year Treasury note yields reacted in kind, rising 7 basis point from yesterday’s close to trade at 3.657% overnight, while 2-year notes jumped to 4.281%.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, fell 0.77% to 103.997.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating an 8 point opening bell dip while those linked to the Dow Jones Industrial Average are priced for a 20 point slide The tech-focused Nasdaq Composite is looking at a 45 point decline.
The surge in the yen pushed Japan’s Nikkei 225 2.46% lower on the session, to a two-month low of falling 1.05% to close at a six week low of 26,568.03 points while the region-wide MSCI ex-Japan index fell 1% heading into the final hours of trading.
In Europe the Stoxx 600 was marked 0.45% lower in early Frankfurt trading while the FTSE 100 was down 0.14% in London.
2. — Housing Starts In Focus Amid Record Slump In Homebuilder Sentiment
The U.S. Census Bureau will publish November housing starts data Tuesday following the release of figures yesterday that confirmed the longest slump in homebuilder sentiment on record.
The National Association of Home Builders’ benchmark survey of single-family home building confidence fell for a twelfth consecutive month in December — to essentially the lowest levels since the Covid pandemic — as mortgage rates surge in parallel with the Fed’s aggressive interest rate hikes and demand continues to slump.
That weakness is likely to be reflected in today’s November housing starts, which are forecast to fall to an annualized rate of 1.4 million, with a slightly larger pullback in building permits.
“The divergence between current and expected future
sales supports our view that home sales will find a floor
by the end of the first quarter,” said Ian Shepherdson of Pantheon Macroeconomics. “But that
would still leave sales extremely depressed by past
standards, and we still think home prices need to fall
some 15-to-20% before they fully adjust to the scale of
the collapse in demand.”
3. — Sam Bankman-Fried To Make Second Attempt To Surrender to U.S. Authorities
Sam Bankman-Fried remains in custody of Bahamian officials Tuesday following a bizarre court hearing that saw his lawyer reverse plans to surrender to U.S. authorities.
Bankman-Fried, the founder of the crypto trading firm FTX, faces an eight count indictment brought by prosecutors in the Southern District of New York for his role in the firm’s collapse and was due to end his extradition fight on Monday and return to the United States.
His local lawyer, however, told the judge presiding the case, Magistrate Shaka Serville, that he was unaware of the plan and demanded to see details of the indictment.
is currently being held by Bahamian authorities in Nassau at the country’s notorious Fox Hill prison and was denied bail last week, just hours after his arrest by requested by prosecutors in the Southern District of New York.
Reports now suggest Bankman-Fried will surrender to U.S. authorities in the coming days, with the aim of seeking a bail hearing as he prepares his defense against fraud and conspiracy charges that could see him imprisoned for more than 100 years if convicted.
Sam Bankman-Fried remains in custody of Bahamian officials Tuesday following a bizarre court hearing that saw his lawyer reverse plans to surrender to U.S. authorities.
Bankman-Fried, the founder of the crypto trading firm FTX, faces an eight count indictment brought by prosecutors in the Southern District of New York for his role in the firm’s collapse and was due to end his extradition fight on Monday and return to the United States.
His local lawyer, however, told the judge presiding the case, Magistrate Shaka Serville, that he was unaware of the plan and demanded to see details of the indictment.
is currently being held by Bahamian authorities in Nassau at the country’s notorious Fox Hill prison and was denied bail last week, just hours after his arrest by requested by prosecutors in the Southern District of New York.
Reports now suggest Bankman-Fried will surrender to U.S. authorities in the coming days, with the aim of seeking a bail hearing as he prepares his defense against fraud and conspiracy charges that could see him imprisoned for more than 100 years if convicted.
4. — FedEx Edges Higher With Eyes On Costs Into Q2 Earnings
FedEx (FDX) – Get Free Report shares nudged higher in pre-market trading ahead of the package delivery group’s closely-tracked earnings report after the closing bell.
FedEx pulled its full-year earnings forecast in September following an unscheduled update that showed first quarter earnings of $3.44 per share, well south of the Street consensus forecast of $5.14 per share, with revenues pegged at $23.2 billion.
CEO Raj Subramaniam, who is facing notable pressure from activist shareholders since taking over from the iconic Fred Smith earlier this year, vowed to “aggressively accelerating cost reduction efforts” amid what he described as ‘significantly worsening’ global headwinds.
Analysts expect FedEx to post a second quarter bottom line of $2.83 per share, with revenues essentially flat to last year at $23.74 billion.
FedEx shares were marked 0.13% higher in pre-market trading to indicate an opening bell price of $169.00 each.
5. — Nike Earnings To Highlight Inventory Pressure to Profit Margins
Nike (NKE) – Get Free Report shares edged higher in pre-market trading ahead of the spots apparel giant’s second quarter earnings, also expected after the closing bell.
Analysts expect Nike to post a bottom line of 65 cents per share on revenues of $12.57 billion, although profit margins are likely to be squeezed by the group’s efforts to pare down the $9.7 billion in inventory it compiled by the end of the August quarter.
Nike said shifting the goods will likely narrow margins by between 2% and 2.5%, while the strong U.S. dollar, which hit a fresh 20-year peak against its global currency peers earlier this autumn, will likely clip $4 billion from its annual revenue forecast.
CFO Matthew Friend said the inventory surge “reflects the combination of late delivery for the past two seasons plus early holiday orders that are now set to arrive earlier than planned and a prior year that was impacted by factory closures in Vietnam and Indonesia,”
Nike shares were marked 0.63% higher in pre-market trading to indicate an opening bell price of $103.70 each.
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