U.S. stocks are rising in pre-market trading, looking to rebound from yesterday's drop. Action remains subdued in the final days of the year with volumes appearing to remain muted. The equity front continues to offer little headlines, though Cal-Maine Foods missed earnings estimates. The economic calendar is also relatively quiet, but jobless claims were released, showing a slight uptick in first-time unemployment filings. Treasury yields are mixed, while the U.S. dollar is dropping. Crude oil prices are lower, and gold is trading higher. Asia finished mostly lower after yesterday's downturn in the U.S., and Europe is mostly higher, though conviction appears constrained by uncertainty regarding the ultimate global impact of aggressive monetary policy tightening across the world.
As of 8:56 a.m. ET, the March S&P 500 Index future is 30 points above fair value, the Nasdaq Index future is 126 points north of fair value, and the DJIA future is 176 points ahead of fair value. WTI crude oil is decreasing $0.71 to $78.25 per barrel, and Brent crude oil is declining $0.70 to $83.29 per barrel. The gold spot price is up $2.10 to $1,817.90 per ounce. Elsewhere, the Dollar Index is falling 0.5% to 104.02.
Cal-Maine Foods Inc. (CALM $62) reported fiscal Q2 earnings-per-share (EPS) of $4.07, below the $4.24 FactSet estimate, as revenues surged 110% year-over-year (y/y) to $802 million, above the Street's forecast of $798 million. The company said its results reflect the current market environment characterized by record average selling prices for conventional eggs, primarily due to reduced supply related to the outbreak in the U.S. of highly pathogenic avian influenza, and good customer demand. CALM said both conventional egg and specialty egg prices jumped y/y, with the former more than doubling. However, the company noted higher costs across various inputs including feed, labor, packaging, and distribution, due to weather-related shortfalls, the ongoing disruptions related to COVID-19, and the impact of the war in Ukraine and its impact on the export markets.
Equity news remains light in the final days of 2022, which has the S&P 500 tracking for a decline of nearly 20% for the year. Although the index is down for the month of December, it is still solidly higher for the quarter, which would be the first quarterly advance since Q4 2021. However, the Nasdaq is heading toward a Q4 drop. The markets continue to wrestle with the ultimate impact of aggressive Fed actions to try to combat inflation after earlier this month downshifting from a string of four-straight 75-basis point (bp) rate hikes to a 50-bp increase. The deceleration remained unusually aggressive, and the Fed signaled that restrictive policy will likely have to remain in place for longer and at a potentially higher "terminal rate" than expected.
Schwab's Chief Investment Strategist Liz Ann Sonders discusses in our latest, Schwab Market Perspective: When Will the Fed Brake?, how inflation trends are moving in a favorable direction, but the change is likely too slow for the Fed to take its foot off the brake anytime soon.
Jobless claims accelerate slightly
Weekly initial jobless claims (chart) came in at a level of 225,000 for the week ended December 24, in line with the consensus Bloomberg estimate and compared to the prior week's unrevised 216,000 level. The four-week moving average dipped by 250 to 221,000, and continuing claims for the week ended December 17 rose by 41,000 to 1,710,000, north of estimates calling for 1,690,000. The four-week moving average of continuing claims increased by 25,250 to 1,679,500.
Treasury rates are mixed, as the yield on the 2-year note is ticking 1 bp higher to 4.36%, while the yields on the 10-year note and the 30-year bond are dipping 1 bp to 3.87% and 3.97%, respectively.
Treasury yields have moved higher in 2022 amid the aggressive monetary policy tightening by the Fed and Schwab's Chief Fixed Income Strategist Kathy Jones discusses in her article, Fixed Income Outlook: Bonds Are Back, how we see opportunities in 2023 for the bond market to provide attractive yields at lower risk than we've seen for several years.
The only item on tomorrow's economic calendar is initial jobless claims for the week ended December 24, forecasted to show 225,000 first-time unemployment applications were filed.
Europe mostly higher but conviction appears constrained
Stocks in Europe are mostly higher in afternoon action, which remains muted in the final days of a down 2022. Conviction seems to be remaining hamstrung as the markets continue to grapple with uncertainty regarding the implications of high inflation that has fostered aggressive tightening of monetary policies around the world, and the ongoing war in Ukraine. Also, the markets are wrestling with uncertainty regarding the potential economic and inflation impacts of the reopening in China as it eases COVID restrictions despite rising cases. Economic data remains on the lighter side, with Eurozone money supply growing at a smaller rate than anticipated for November, and Spain's retail sales dropping for last month. The euro and British pound are rising versus the U.S. dollar, while bond yields in the Eurozone are lower, but rates in the U.K. are moving higher.
Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses his Top Global Risks of 2023, highlighting our top five risks that may define the global markets, considering that a new year almost always brings surprises of one form or another.
The U.K. FTSE 100 Index is little changed, France's CAC-40 Index and Spain's IBEX 35 Index are rising 0.5%, Germany's DAX Index is advancing 0.7%, Italy's FTSE MIB Index is increasing 0.6%, and Switzerland's Swiss Market Index is ticking 0.1% higher.
Asia mostly lower as global markets remain uneasy
Stocks in Asia finished mostly to the downside following the negative lead-in from the U.S. yesterday and as the global markets continue to grapple with the economic impact of aggressive monetary policy tightening across the world. The monetary policy actions have been joined by the recent decision from the Bank of Japan (BoJ) to tweak its bond purchase program. The monetary policy decisions have boosted volatility in the global currency and bond markets. Also, geopolitical concerns have accelerated, with tensions rising between South Korea and North Korea, as well as uncertainty regarding how rising COVID cases may impact China's recent decision to ease restrictions and reopen sooner than had been expected. The markets declined despite some positive economic data out of South Korea, with its industrial production unexpectedly rising and retail sales accelerating. In his latest article, Global Outlook: Recovery and Risk, Schwab's Jeffrey Kleintop notes how markets may continue to see volatility in 2023 as they navigate between global economic growth and inflation fears, with central banks' decreasing rate hikes and China's reopening.
Japan's Nikkei 225 Index decreased 0.9%, with the yen trimming recent losses versus the U.S. dollar. Elsewhere, China's Shanghai Composite Index declined 0.4%, and the Hong Kong Hang Seng Index traded 0.8% lower. South Korea's Kospi Index fell 1.9%, and Australia's S&P/ASX 200 Index lost 0.9%. India's S&P BSE Sensex 30 Index bucked the trend, advancing 0.4% amid some strength in banking stocks.
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