MARKET WRAPS

Watch For:

Consumer Price Index for December; Weekly Jobless Claims

Today's Top Headlines/Must Reads:

- December Inflation Report to Show Whether Price Increases Continued to Moderate

- Why Investors May Be Too Optimistic About Inflation

- Amazon Appeal to Union Victory in New York Rejected

- Nelson Peltz Plans Proxy Fight Against Disney

- FTX Customer Names to Remain Sealed for Time Being

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Opening Call:

Moves for stock index futures were minimal early Thursday, as traders eschewed fresh bold bets ahead of the crucial CPI report for December.

"Building optimism about the inflation outlook...[has driven] a significant rally in sovereign bonds, providing a less volatile rates environment and allowing risk to thrive," SPI Asset Management said.

The CPI report "could be a make-or-break moment for the market sentiment, " said Swissquote Bank.

"Overall, a data set in line with the soft expectations, or ideally softer, should further boost the Fed doves, increase the bets of a 25bp hike in February, pull the Treasury yields and the dollar further down and give a further boost to equities. If, however, the CPI print is higher than expected...then we could see a sharp repricing in favour of a 50bp at the next FOMC meeting," Swissquote added.

There will also be a batch of Fed officials making comments today.

Read Barron's 3 Fed Presidents Are Speaking Today. Don't Expect a Different Message on Rates.

The fourth-quarter corporate earnings season kicks into gear on Friday, with big banks, including JPMorgan, Citigroup, and Bank of America presenting their results.

Financial sector profits are expected to fall 6.3%, according to S&P Global Market Intelligence, with earnings for the whole S&P 500 forecast to contract 2.8%.

Stocks to Watch

Bed Bath & Beyond jumped more than 20% in premarket trading, building on a 69% surge Wednesday.

KB Home declined 2.6% after the home builder reported weaker-than-expected fourth-quarter earnings, and net orders of 692 dropped sharply from 3,529 a year earlier and missed estimates.

Marvell Technology narrowed its forecast range for fourth-quarter revenue to $1.4 billion, plus or minus 3%. Analysts surveyed by FactSet expect $1.4 billion.

Roku fell 3.9% after shares of the streaming device company were downgraded to Underperform from Hold at Jefferies, the Fly reported.

American depositary receipts of Taiwan Semiconductor Manufacturing rose 1.6% after the chip maker reported record fourth-quarter profit. Taiwan Semi warned, however, of waning demand in 2023.

Walt Disney was rising 1.5% in premarket trading. The company is gearing up for a boardroom battle with activist investor Nelson Peltz after the company opposed the billionaire's efforts to join its board.

Yield10 Bioscience said it signed a memorandum of understanding for a potential biofuel partnership with Mitsubishi In after-hours trading. Shares soared 57%.

RF Industries and Rocky Mountain Chocolate Factory are expected to report after the close.

Forex:

The dollar hovered just above recent seven-month lows against a basket of currencies, but relatively benign inflation data, in line with expectations, would likely prompt renewed falls, ING said.

"A number in line with consensus probably allows the risk rally to continue. China reopening and lower energy prices are all encouraging this reallocation towards risk and should today's CPI number oblige, DXY could make a move towards the 102 area."

Bonds:

Pimco continues to see a strong case for investing in bonds, after yields reset higher in 2022 and with an economic downturn looking likely in 2023.

"Fixed income markets today can offer broad opportunities to build resilient portfolios with the potential for both attractive returns and mitigation against downside risks," Pimco said.

Pimco's baseline is a modest recession and moderating inflation, but its investment committee discussions focused on the wide range of plausible scenarios and asset price returns in those scenarios.

"Although we expect disinflation, U.S. Treasury Inflation-Protected Securities (TIPS) could perform well given uncertainty over where core inflation settles versus current pricing."

Energy:

Oil prices were little changed in Europe as traders balanced a surge in U.S. inventories against Chinese demand hopes.

Energy traders are looking past the build in U.S. crude stocks, which was likely driven by refinery shutdowns on the gulf coast due to recent cold weather, ING said. Optimism about Chinese demand was providing support, it added.

"A number of signs, including an increase in crude oil import quotas, suggest a recovery in Chinese oil demand this year."

Natural Gas

Natural gas has seen a shaky start to 2023, with U.S. prices falling to their lowest level in more than a year just halfway through the winter season, which is typically a period of high demand for the heating fuel.

There is "nothing unusual in U.S. gas demand versus what we have seen in the past few years," professional services network EY said, pointing out that U.S. prices are "very much affected" by what's happening outside the country.

Read more here

Read European Natural Gas Prices Have Likely Fallen Too Far

Metals:

Copper prices slipped as traders took a breather after five days of gains and awaited the U.S. CPI data.

Optimism about China's reopening, coupled with a weaker dollar, have fueled a rally for copper and other base metals whose demand is highly dependent on China.


TODAY'S TOP HEADLINES


Amazon Appeal to Union Victory in New York Rejected

A federal labor official has upheld the unionization of Amazon.com Inc. workers in Staten Island, N.Y., rejecting an appeal by the e-commerce giant, which tried to challenge last year's vote to organize.

Cornele Overstreet, a regional director with the National Labor Relations Board who has overseen the case, ruled on Wednesday that Amazon hadn't provided sufficient evidence to overturn the election results, according to an NLRB spokeswoman.


Subway Explores Sale That Could Value Sandwich Chain at More Than $10 Billion

Sandwich chain Subway has retained advisers to explore a sale of the closely held company, according to people familiar with the situation.

The process, which is in the early stages, is expected to attract potential corporate buyers and private-equity firms, and could value Subway at more than $10 billion, the people said. Still, it is possible there won't be a sale or other deal.


FTX Customer Names to Remain Sealed for Time Being

The identities of some nine million FTX account holders will remain under wraps pending more information about how valuable the customer list could be to potential buyers of the bankrupt cryptocurrency exchange's assets.

Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., on Wednesday temporarily extended a sealing order sought by FTX, saying the company presented enough evidence to show its customer list is a commercial trade secret that should be kept confidential. After three months, FTX can renew its request to keep customer identities redacted from filings in its chapter 11 bankruptcy case.


Nelson Peltz Plans Proxy Fight Against Disney

Activist investor Nelson Peltz plans to mount a proxy fight for a seat on Walt Disney Co.'s board, adding to the challenges Robert Iger faces after he recently returned to the role of chief executive at the beleaguered entertainment giant.

Disney revealed the activist's intentions Wednesday afternoon in a statement that said that it is opposed to having him join the board. It also said that current director Mark Parker would become chairman, succeeding Susan Arnold.


Climate Startup Removes Carbon From Open Air in Industry First

One of the most important technologies to address climate change got a boost Thursday when a startup said it pulled carbon dioxide from the open air and stored it underground. The company has cashed in on the effort, potentially creating a viable business model that could kick-start a new industry.

Climeworks AG is a leader in the race to remove carbon dioxide from the atmosphere, using a process known as direct-air capture. Customers, including Microsoft Corp., paid a significant premium to buy carbon credits generated by Climeworks, allowing them to effectively offset their own emissions.


TSMC's Fourth-Quarter Net Profit Hit New Record

Taiwan Semiconductor Manufacturing Co. said Thursday that fourth-quarter net profit rose to a new record thanks to growing demand for high-speed computing and better margins.

The world's largest contract chip maker said net profit for the quarter ended Dec. 31 rose 78% from a year earlier to 295.90 billion Taiwan dollars (US$9.72 billion). That beat the estimate of NT$288.08 billion from a poll of analysts by S&P Global Market Intelligence.


December Inflation Report to Show Whether Price Increases Continued to Moderate

The Labor Department's inflation report for December will show whether price increases continued to slow after reaching their fastest pace in 40 years in mid-2022.


Why Investors May Be Too Optimistic About Inflation

In December 1974, celebrated historian and sometime presidential speechwriter Arthur M. Schlesinger Jr. summed up the problem with contemporary forecasters in a single, very long sentence in The Wall Street Journal: "To this moment most economists, businessmen and government officials obstinately regard inflation not as the structural vulnerability of contemporary capitalism but rather as the accidental result of unlucky coincidences requiring only patience, time (and unemployment) for its alleviation."

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01-12-23 0627ET