MARKET WRAPS
Watch For:
Housing Starts for November; FedEx earnings; Nike earnings
Today's Headlines/Must Reads:
- Bank of Japan Lets a Benchmark Rate Rise, Causing Yen to Surge
- Stock Picking Makes a Comeback in Market Turbulence
- Dollar Stores Lead a Surge in New Retail Openings
- Palantir's SPAC Bets Backfire, Hitting Company's Growth
- Kim Yo Jong Blasts Skeptics of North Korea's Military Advances
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Stock futures were volatile on Tuesday as Treasury yields rose after the Bank of Japan delivered a surprise tweak to monetary policy.
The BoJ doubled the cap on the country's 10-year bond, from 0.25% to 0.5%, causing the yen to jump more than 3% while whacking equities in the region and U.S. stock futures.
"It's important not to underestimate the impact this could have, because tighter BoJ policy would remove one of the last global anchors that's helped to keep borrowing costs at low levels more broadly," DB added.
"The rise in global yields suggests markets are now definitely putting thoughts of a dovish pivot later in 2023 on the back burner, with sovereign bond yields rising globally," SPI Asset Management said.
"Against this backdrop, investors are trying to find the central bank's endgame, which is proving further bad news for equities, and with the BoJ raising the last low rate anchor, it's not helping to calm year-end stormy seas," SPI added.
Stocks to Watch
Blucora said it plans to return up to $450 million to shareholders through a tender offer and share buybacks. The stock advanced 15% off hours.
Entrada Therapeutics received a clinical hold notice from the FDA regarding its investigational drug application for a potential treatment of Duchenne muscular dystrophy. Shares plunged 32% off hours.
Heico posted higher sales and profit in the latest quarter. Its shares added 2% off hours.
Steelcase posted a rise in profit for its fiscal third quarter, but earnings and revenue missed analysts' forecasts. Its shares added 1.4% off hours.
Super Micro Computer will be added to the S&P MidCap 400 index, effective Thursday, S&P Dow Jones Indices said. Shares gained 4.6% premarket.
Forex:
The dollar could be in for a rough ride over the coming weeks if weak U.S. data increase speculation that the Federal Reserve may be coming closer to ending its rate-rising cycle, Commerzbank said.
Some deterioration in recent U.S. data is "more likely to fuel skepticism that the Fed might be overdoing its restrictive approach," Commerzbank added.
Energy:
Oil prices fell 0.5% in Europe on worries that China's reopening could send the nation's cases soaring.
Health models have predicted that China's cases and death toll from the virus could soar as the nation reopens without high vaccination rates, with some models suggesting the death toll could reach nearly one million.
"A massive China reopening bounce is giving way to a reality check as investors come to grips with numerous zero-Covid offramp economic and medical issues that China is simply unprepared to handle," SPI Asset Management said.
Thermal Coal
Thermal-coal prices should remain elevated over the next two months, Jefferies said.
Prices for the fuel have been boosted by colder weather and rising natural gas prices in Europe, which has caused a sharp increase in European imports of thermal coal.
"Imports should continue to increase as we head deeper into winter," Jefferies added.
Even still, Jefferies favor metallurgical coal used in steel over thermal coal on a three-plus month horizon because of a widening in the premium paid for the latter to more than $125/ton.
Metals:
Metals prices were inching higher despite caution in other asset classes as worries over the state of the global economy mount.
"Markets have given back all of the gains from early December's softer PPI and CPI inflation prints," Peak Trading Research said, adding that a hawkish Federal Reserve is a headwind for risk assets and commodity markets.
TODAY'S TOP HEADLINES
Dollar Stores Lead a Surge in New Retail Openings
Dollar stores, boosted by demand for less expensive groceries and goods in underserved rural areas, are far outpacing other retailers in opening new stores.
Bricks-and-mortar shopping has rebounded strongly since the height of the pandemic, with many companies now adding new locations. Leading the pack are the two largest U.S. dollar-store chains, Dollar General Corp. and Dollar Tree Inc., which combined expect to have opened more than 1,300 net new stores by the end of the fiscal year that ends in late January, according to the companies.
Palantir's SPAC Bets Backfire, Hitting Company's Growth
Palantir Technologies Inc. helped fuel the SPAC boom with an unusual strategy. The data-analysis company invested more than $400 million in startups that simultaneously signed deals to buy Palantir's software. Palantir got a surge of revenue growth that it trumpeted to investors.
The bets have backfired.
Sam Bankman-Fried's Lawyers Hash Out His Transfer to U.S. After Confusion in Court
NASSAU, Bahamas-FTX founder Sam Bankman-Fried inched closer to being transferred into U.S. custody to face criminal charges related to the cryptocurrency exchange's collapse, after a chaotic court hearing here Monday in which his local lawyer appeared at odds with his U.S. legal team.
Mr. Bankman-Fried has agreed to be extradited, according to a person familiar with the matter, and plans were being fleshed out by his legal team after the day's court proceedings. Mr. Bankman-Fried's lawyers hope to have a new hearing on the matter as early as Tuesday, the person said.
Vice Media Set to Miss Revenue Projection by Over $100 Million Amid Stalled Sale Talks
Vice Media is expecting to miss a 2022 revenue goal by more than $100 million, according to people familiar with the situation, a blow for the new-media company as it pursues a sale.
The company presented a revenue target of over $700 million at an off-site with senior employees earlier this year, one of the people said. The expected shortfall would leave Vice with around $600 million in revenue for the year, roughly flat compared with 2021, the people said.
Stock Picking Makes a Comeback in Market Turbulence
It's finally a good time to be a stock picker.
About 55% of actively managed large-cap mutual funds are on pace to beat their benchmarks this year, according to an analysis by Goldman Sachs Group Inc. through Nov. 16. That would mark the largest share since 2007, when 71% of funds did so.
Bank of Japan Lets a Benchmark Rate Rise, Causing Yen to Surge
TOKYO-The Bank of Japan made a surprise decision to let a benchmark interest rate rise to 0.5% from 0.25%, pushing the yen higher and ending a long period in which it was the only major developed-nation central bank not to increase rates.
The BOJ said the yield on the 10-year Japanese government bond could rise as high as 0.5% from a previous cap of 0.25%. The central bank has set a target range around zero for the benchmark government bond yield since 2016 and used that as a tool to keep overall market interest rates low.
China PBOC Keeps Benchmark Lending Rates Unchanged
China's benchmark loan rates remained unchanged this month, according to a statement released by the central bank on Tuesday, despite more signs of weakness in the world's second-largest economy.
The one-year loan prime rate stood at 3.65% while the five-year rate was 4.3%, both unchanged for a fourth straight month, the People's Bank of China said in the statement.
Lawmakers Unveil Spending Package in Race to Avert Shutdown
WASHINGTON-Lawmakers early Tuesday unveiled a spending bill for fiscal 2023 as they race to pass the measure by the end of the week in the last act of the Democratic-controlled Congress.
The bill is the product of months of behind-the-scenes haggling and carries an additional $44.9 billion to support the war in Ukraine, $40.6 billion for disasters like drought and hurricanes as well as special money earmarked for projects in lawmakers' home districts. It includes policy provisions, such as updating the 1887 Electoral Count Act to try to make it harder to block the certification of a presidential election and avoid a repeat of the Jan. 6, 2021, attack on the Capitol.
Ukraine Needs Greater Military Aid Next Year, Says Zelensky
Ukraine's President Volodymyr Zelensky said he would work to boost international support for his country's war effort in the new year, as U.S. lawmakers sought $44.9 billion for Kyiv in a spending bill for 2023.
Russia is betting Western backing for Kyiv will wane as the war drags on and the costs of arming Ukraine and keeping its economy afloat grow. The U.S. has already provided nearly $32 billion in aid to Ukraine since Moscow's full-scale invasion in February, including almost $20 billion in arms and other security assistance. The 2023 spending bill, which includes security, economic and humanitarian aid for Ukraine, awaits approval by Congress.
Spending Bill Energizes Kevin McCarthy's GOP Critics in Speaker Race
WASHINGTON-The impending passage of a spending bill later this week is helping to fuel opposition to Republican leader Kevin McCarthy (R., Calif.) in his run for House speaker.
Many House Republicans, including Mr. McCarthy, have said they oppose the current spending bill, arguing instead to start talks early next year when they control the chamber and have more leverage on spending cuts. Mr. McCarthy has told Republicans he is a "hell no" on the bill and urged GOP senators to pass a short-term deal to hand the reins to the new Republican majority early next year. But detractors say Mr. McCarthy and other party leaders haven't done enough to block it.
Kim Yo Jong Blasts Skeptics of North Korea's Military Advances
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12-20-22 0630ET
