Zinger Key Points
- After a robust third quarter, the economy is in for some softness in the current quarter.
- An economist says the Fed will begin to cut rates in middle of 2024 and take down the fed funds rate by 75 basis points at end of the year.
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Stocks appear on track to open Thursday’s session on a firm note. However, the trading direction will likely hinge on the personal consumption expenditure index, which is deemed the Fed’s preferred inflation gauge. With the OPEC+ set to announce its decision on oil output, oil and energy stocks could be in the spotlight. Earnings news, especially from the tech sector, has mostly been positive.
Data reinforcing the market’s timeline for a fed rate cut could help the stocks rally in the final session of a strong November. This should bode well as the market enters a seasonally stronger month when it typically benefits from the Santa Claus rally.
Cues From Wednesday’s Trading:
U.S. stocks meandered to a narrowly mixed close on Wednesday as the mood turned cautious following a report showing that GDP rose more than estimated in the third quarter. A Fed official also ignited worries about the rate outlook. Cleveland Fed President Loretta Mester reupped Fed’s data-dependent stance, which was a rude shock to traders beginning to price in rate cuts in 2024.
The major averages opened higher but declined steadily until late-morning trading. The Dow Industrials recovered and moved into positive territory only to retrace much of its gain in late trading and ended marginally higher. The S&P 500 and the Nasdaq Composite indices consolidated below the unchanged line in the mid-session before falling further in late trading. The latter two averages ended modestly lower.
Small-caps outperformed on Wednesday, with the Russell 2,000 Index closing firmly in the green.
Among the S&P sector classes, communications services, consumer staples, energy, and utility stocks served as drags. On the other hand, real estate and financial stocks gained ground.
| Index | Performance (+/-) | Value |
| Nasdaq Composite | -0.16% | 14,258.49 |
| S&P 500 | -0.09% | 4,550.58 |
| Dow | +0.04% | 35,430.4 |
| Russell 2000 | +0.61% | 1,803.81 |
Analyst Color:
Comerica Chief Economist Bill Adams suggested in a recent note that the path may be clear for the Fed to cut rates in 2024. The analysts see the central bank taking down the fed funds rate by 75% points in 2024, with the first quarter-point cut coming in June 2024.
Explaining his rationale, Adams said most October data points, including retail sales, industrial production, new home sales, and job growth, slowed down, pointing to a slowdown in GDP growth in the fourth quarter. He also noted that the highly influential Fed Governor Christopher Wallace said on Tuesday that the cooler growth since the end of the third quarter will make the Fed feel more confident that they have raised interest rates enough to keep inflation moving back toward their two percent target.
Futures Today
Futures Performance On Thursday
| Futures | Performance (+/-) |
| Nasdaq 100 | +0.27% |
| S&P 500 | +0.23% |
| Dow | +0.49% |
| R2K | +0.10% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY rose 0.26% to $455.81, and the Invesco QQQ ETF QQQ gained 0.28% to $390.90, according to Benzinga Pro data.
Upcoming Economic Data:
The Bureau of Economic Analysis is due to release its personal income and spending report for October at 8:30 a.m. ET. Analysts, on average, expect personal income and spending to rise at a month-over-month rate of 0.2% each. This compares to the 0.3% and 0.7% growth, respectively, in September.
The month-over-month increase in the core personal consumption expenditure index is expected to slow from 0.3% to 0.2%, and the annual rate will likely ease from 3.7% to 3.5%.
The Labor Department’s weekly jobless claims report is expected to show that the number of individuals claiming unemployment benefits was at 220,000 in the week ending November 25, up from 209,000 in the week ending November 18. The report is scheduled to be released at 8:30 a.m. ET.
New York Fed President John Williams, a member of the rate-setting committee, is due to speak at 9:05 a.m. ET.
ISM-Chicago is due to release the results of its November survey of business activity at 9:45 a.m. ET. The region’s business activity may have continued to contract, with the purchasing managers’ index for November estimated at 45.4 compared to the October reading of 44.
The National Association of Realtors will release the pending home sales data at 10 a.m. ET. Pending home sales may have declined 2% month-over-month in October vis-a-vis a 1.1% increase in September.
The Treasury will auction four- and eight-week bills at 11:30 a.m. ET.
See Also: Best Futures Trading Software
Stocks In Focus:
- Nutanix, Inc. NTNX shares rose over 9% in premarket trading following the release of its quarter results.
- The other stocks reacting to earnings include Okta, Inc. OKTA (down over 3%), PVH Corp. PVH (down over 4%), Salesforce, Inc. CRM (up nearly 9%), Snowflake Inc. SNOW (over 8%), Zuora, Inc. ZUO (up nearly 7%), and Victoria’s Secret & Co. VSCO.
- Hewlett Packard Enterprise Company HPE rose about 4.7% after announcing a tie-up with Nvidia Corp. NVDA to offer an enterprise-class, full-stack generative AI solution.
- Big Lots, Inc. BIG, Cracker Barrel Old Country Store, Inc. CBRL, The Kroger Co. KR, Royal Bank of Canada RY, and The Toronto-Dominion Bank TD are among the notable companies reporting before the market open.
- Those reporting after the market close include Ambarella, Inc. AMBA, Dell Technologies Inc. DELL, PagerDuty, Inc. PD, Ulta Beauty, Inc. ULTA, UiPath Inc. PATH and Zumiez Inc. ZUMZ.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures rose 0.73% to $78.43 in early European session as the OPEC+ announcement looms. The commodity settled Wednesday’s session up 1.90%.
On Thursday, the benchmark 10-year Treasury note fell 0.023 percentage points to 4.294%.
In the currency market, the U.S. dollar is seen firmer ahead of the inflation data from the U.S.
Most Asian markets advanced on Thursday, led by the Australian, New Zealand and South Korean markets. Private sector activity data released from China showed both manufacturing and non-manufacturing activity coming in weaker than expected.
European stocks traded higher by late trading on Thursday as weak domestic data raised hopes for rate cuts.
Read Next: Fed Beige Book Reveals Economic Slowdown Amid Rising Consumer Price Sensitivity
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