MARKET WRAPS
Watch For:
Wholesale inventories for November; Fed's Williams speech; EIA
Weekly Petroleum Status Report
Today's Headlines/Must Reads
- The Fed Launched a Bank Rescue Program Last Year. Now, Banks
Are Gaming It.
- Importers Face Surging Shipping Costs, Delays as Red Sea
Diversions Pile Up
- AI Helps U.S. Intelligence Track Hackers Targeting Critical
Infrastructure
Opening Call:
Stock index futures were mixed on Wednesday, as markets saw
cautious trading ahead of the December inflation report on
Thursday.
Inflation and its impact on bond markets and the Federal
Reserve's monetary policy trajectory remains the primary focus for
investors - at least until Friday, when some of the big banks will
kick off the fourth-quarter 2023 earnings season.
Economists forecast that annual headline CPI inflation will inch
up from 3.1% in November to 3.2% last month. The core reading,
which strips out more volatile items like food and energy, is
expected to fall from 4% to 3.8%.
"Early optimism seen throughout financial markets may be
difficult to maintain given the uncertainty within markets as we
head into a crucial second half of the week," Scope Markets
said.
Fundstrat said it expected that "January should prove positive,
but much of this strength might come about in the last week of
January...the month might prove to be a bit choppier than either
bulls or bears would like in the short run."
Overseas
Major stock indexes were mixed, although Japan's Nikkei 225
climbed 2% to a new 34-year high.
Premarket Movers
Hewlett Packard Enterprise reached an agreement to acquire
Juniper Networks for about $14 billion. Juniper shares rose 0.8%
after rising 22% on Tuesday.
Coinbase declined 1.6% and Marathon Digital fell 3.3% as Bitcoin
traded about 2% lower. The SEC on Tuesday said its X account was
compromised, disavowing a post from moments earlier that said the
agency had approved the first Bitcoin exchange-traded funds to come
to market.
Intuitive Surgical was up 4.9% after it said it expected
fourth-quarter sales of $1.93 billion, higher than analysts'
expectations of $1.87 billion.
Post-Close Movers
Aehr Test Systems said slowing electric-vehicle sales growth is
weighing on orders of Aehr's silicon-carbide devices. Shares fell
16%.
Smart Global posted record margins in the first quarter. Shares
rose 10%.
WD-40 reported higher sales and earnings for its fiscal first
quarter. Shares rose 6.5%.
Forex:
The euro-dollar exchange rate looks comfortable at current
levels, sticking to a narrow range around 1.0930 and showing few
signs of moving too far away from this mark so far this week, DZ
Bank Research said.
Until Thursday U.S. inflation data, EUR/USD "should hardly be
able to be dissuaded from its sideways range" as focus centers on
the likely timing and extent of interest-rate cuts by the Fed and
the European Central, DZ Bank Research said.
Bonds:
Investors could demand more compensation for the risk of owning
long-term bonds given rising public debt and a more uncertain
inflation outlook, BlackRock said.
Markets are currently grappling with the prospect that neutral
rates--the interest rate that neither stimulates nor restricts
economic activity--could be settling higher following the Covid-19
pandemic.
"We think neutral rates are higher in both the U.S. and Europe,
partly due to looser fiscal policy and the investment demands tied
to the low-carbon transition."
Energy:
Oil futures edged higher following reports of a
larger-than-expected crude inventories drawdown in the U.S.
"U.S. crude oil inventories fell by 5.2 million barrels, which
is larger than the market was expecting," ING said, citing API
data.
"However, large builds were once again seen on the products
side, with gasoline and distillate stocks increasing by 4.9 million
barrels and 6.9 million barrels, respectively."
Meanwhile, the EIA raised its 2024 U.S. crude oil production
forecast to an average of 13.2 million barrels a day, and predicted
a further increase to 13.4 million barrels a day in 2025.
Metals:
Base metals and gold were higher as investors awaited U.S.
inflation data for hints on the timing of potential interest-rate
cuts and China's trade data, which could offer more clarity on
demand prospects.
"Metals prices are likely to struggle to make up ground unless
this week's U.S. inflation data comes in significantly lower and/or
Chinese import data is much stronger than expected," Commerzbank
Research said.
Still, "the downside potential for prices is likely to be
limited by expectations of interest rate cuts, which are likely to
be reinforced by a weakening U.S. economy."
Metals Demand
Investors are possibly too excited about the impact of the
energy transition on metals demand , while underappreciating the
impact from growth in India and Southeast Asia, Jefferies said.
"We agree that renewable energy infrastructure and EVs will
contribute to global demand, but we would also argue that demand
related to the urbanization and industrialization of India and
Southeast Asia will be at least as important."
Mining Stocks
The biggest risk to miners this year is a potential U.S.
recession, Jefferies said. "We have heard arguments as to why
commodity prices might rise even if there is a recession, but we
are very skeptical about this view. History is on our side on
this."
TODAY'S TOP HEADLINES
Boeing CEO Says Company Needs to Acknowledge 'Our Mistake'
Boeing CEO David Calhoun said the company needs to acknowledge
its mistake as the aircraft maker reels from a door-plug failure
that has resulted in roughly 170 of its planes being grounded and
spooked its customers.
In his first remarks since the accident, Calhoun indicated a
misstep by the aircraft maker played a role. "We are gonna approach
this-No. 1-acknowledging our mistake," Calhoun said Tuesday in an
address to employees just days after the incident on an Alaska
Airlines flight.
U.S. Battery Producer Enticed to Set Up Shop in the EU
An American startup says it can cut reliance on China for key
parts of electric vehicle batteries. European Union money means it
will build its first factory in Europe instead of the U.S.
Rochester, N.Y.-based GDI will announce on Wednesday it is
getting a EUR20 million, or $21.8 million, loan from the European
Investment Bank, the lending arm of the European Commission. The
battery-part manufacturer said the funds will allow it to build its
first manufacturing plant in Lauenförde, Germany, which is expected
to start producing from 2025 and be scaled up to a gigafactory by
2028.
Walmart Expands Drone Delivery in Dallas as It Races Amazon
Drones are more likely to be buzzing overhead this year if you
live in Dallas.
Walmart plans to offer drone delivery to most of the region this
year, a major expansion of its effort in recent years to provide
the delivery option to some customers in several states.
Global Economic Growth to Slow for Third Straight Year, World
Bank Says
The World Bank expects global economic growth to decelerate for
the third year in a row to a "sorry record by the end of 2024,"
hampered by tight monetary policy, restrictive financial
conditions, and "feeble global trade and investment."
It sees the global economy expanding 2.4% in 2024, slowing from
last year's growth rate of 2.6%-and nearly three-quarters of a
percentage point lower than the average pace between 2010 and 2019,
the World Bank said in its latest Global Economic Prospects report,
released Tuesday.
Spending Bill Won't Be Done in Time, Senate Republicans Warn
WASHINGTON-Congress may need to pass another short-term bill to
avoid a partial government shutdown in less than two weeks,
potentially forcing House Speaker Mike Johnson (R., La.) to break a
vow he made to GOP colleagues swearing off such measures.
Senate Minority Leader Mitch McConnell (R., Ky.) said the
dwindling days left before the deadline meant Congress would have
to take up a stopgap bill, known as a continuing resolution or CR,
to keep the government open as work continues on full-year fiscal
2024 legislation. The current interim spending law funds some parts
of the government through Jan. 19 and the rest through Feb. 2.
What to Watch in the Iowa Republican Presidential Debate
The fifth GOP presidential debate could be the most contentious
and meaningful yet as Ron DeSantis and Nikki Haley have just days
before the Iowa caucuses to make the case they are best positioned
to challenge Donald Trump for the nomination.
Only DeSantis and Haley will be on the CNN stage Wednesday night
in Des Moines because the former president and Republican
front-runner is again skipping the debate. This time, he will
compete for attention at the same time during a Fox News forum,
also in Iowa.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Aritzia 3Q
Economic Calendar:
Nothing scheduled
Stocks to Watch:
Fairfax Financial Holdings Prices Private Offering of an
Additional $200M of Its 6.000% Senior Notes Due Dec. 7, 2033
Hydro One Prices C$800M Offering of Medium-Term Notes Under
Sustainable Financing Framework; Prices C$550M of 4.39% Notes Due
2034; Prices C$250M of 3.93% Notes Due 2029; Expects Offering to
Close Jan. 12
Lucara Diamond Signs Amended Documentation in Relation to $220M
Senior Secured Project Financing Debt Package Executed in July
2021; Karowe Underground Expansion Project Remains Fully Financed;
Repayment Profile Has Been Extended in Line With the Rebase
Schedule Released July 17; Lucara Diamond's Largest Shareholder,
Nemesia, Has Agreed to Enter Into a Shareholder Guarantee and an
Amendment to Shareholder Standby Undertaking
Expected Major Events for Wednesday
07:45/FRA: Nov Industrial production index
08:59/JPN: Nov Provisional Labour Survey - Earnings, Employment
& Hours Worked
09:00/ITA: Nov Retail Sales
12:00/US: 01/05 MBA Weekly Mortgage Applications Survey
15:00/US: Nov Monthly Wholesale Trade
15:00/US: Dec Online Help Wanted Index
15:30/US: 01/05 EIA Weekly Petroleum Status Report
23:50/JPN: Dec International Reserves / Foreign Currency
23:50/JPN: Dec Provisional Trade Statistics for 1st 20 days of
Month
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Wednesday
Aritzia Inc (ATZ.T) is expected to report $0.41 for 3Q.
Avalon Advanced Materials Inc (AVL.T) is expected to report for
1Q.
Caldwell Partners International Inc (CWL.T) is expected to
report for 1Q.
Cogeco Communications Inc (CCA.T,CGEAF) is expected to report
$1.76 for 1Q.
Cogeco Inc (CGO.T) is expected to report for 1Q.
FRMO Corp (FRMO) is expected to report for 2Q.
KB Home (KBH) is expected to report $1.70 for 4Q.
Madison Pacific Properties Inc - B Share (MPC.T) is expected to
report for 1Q.
Ocean Biomedical Inc (OCEA) is expected to report for 3Q.
Richardson Electronics Ltd (RELL) is expected to report $0.01
for 2Q.
SeaChange International Inc (SEAC) is expected to report for
3Q.
Sonic Foundry Inc (SOFO) is expected to report $-0.39 for
4Q.
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This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
January 10, 2024 06:09 ET (11:09 GMT)
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