MARKET WRAPS
Watch For:
Retail Sales for November; Weekly Jobless Claims; Industrial Production & Capacity Utilization for November; Canada Housing Starts for November
Today's Headlines/Must Reads:
- November Retail Sales Report to Show Holiday Spending Trends
- Powell's Inflation Outlook at Odds With Markets
- Crypto Startups, Investors Seek to Move Past FTX
- China's Economy Struggled in Zero Covid's Final Month
- Beijing's Parcel Pileup Shows Strain of Zero-Covid Exit
- Elon Musk Sold More Than $3.5 Billion Worth of Tesla Shares
- Warner Bros. Discovery Raises Restructuring-Cost Estimate by Up to $1 Billion
Follow WSJ markets coverage here
Stock futures on Thursday pointed to a second straight decline after the Federal Reserve opted to close out the year with a more aggressive posture than investors anticipated.
Not only did the Fed's dot plot for 2023 come in higher than forecast, Jerome Powell spent his press conference pushing back on the idea the central bank will cut rates next year.
The Bank of England and European Central Bank each are expected to join the Fed in lifting interest rates by a half point.
There's also a big slate of economic data including retail sales.
European Reaction to Fed's Latest Moves
The dollar edged higher while equities fell as European markets reacted to the Fed's plans to raise rates above 5% next year, higher than previously expected.
Read more here
China Outlook
Goldman Sachs slashed its 2022 China GDP growth forecast to 2.6% from 3.0% and raises its 2023 growth forecast to 5.2% from 4.5%.
"We cautioned that the economic impact could be negative during the initial stage of reopening before the boost to consumption and services kicks in," GS said, referring to the weaker-than-expected November economic indicators released Thursday.
Stocks to Watch
CleanSpark's fourth-quarter losses widened with the majority of losses being due to impairment of goodwill and bitcoin balances. Shares fell 3.5% to $2.20 in after-hours trading.
Lennar's shares slipped 2.2% off hours despite having reported better-than-expected revenue in the latest quarter.
Miromatrix Medical said Wednesday that the Food and Drug Administration placed on clinical hold the company's investigational new drug application for its miroliverELAP treatment for acute liver failure. Shares dropped 15% in after-hours trading.
Nordson's fiscal fourth-quarter revenue increased 14% from a year ago, helped by strong demand in nearly all of its end markets. Its shares added 2.6% off hours.
Novavax plans to sell up to $125 million in stock, along with a $125 million offering of convertible senior notes, due in 2027. Shares fell 11% in after-hours trading.
RCI Hospitality said it is expanding its footprint in Texas and Colorado. Its shares climbed 4.8% off hours.
Tesla shares dropped 2.6% premarket after Elon Musk sold more than $3.5 billion worth of stocks this week in his second round of sales since buying Twitter.
Warner Bros. Discovery said it expects to face as much as $4.1 billion to $5.3 billion in pre-tax restructuring charges as it continues to cut costs and cancel programming commitments following the combination of Discovery Inc. and AT&T's WarnerMedia unit. Shares dipped 0.7% in after-hours trading.
Weber's shares slipped 0.9% off hours after it said sales fell again in its fiscal fourth quarter.
Forex:
The Fed's rate increase and decision to pencil in plans to raise rates above 5% next year--higher than previously expected--has caused the dollar to halt its downtrend, ING said.
However, it didn't prompt a significant rebound, likely due to Jerome Powell's "reluctance to explicitly protest easing financial conditions."
ING said "the modest bearish flattening of the U.S. yield curve after the announcement should now create a less unfavourable environment for the dollar."
UniCredit Research said the Fed's decision to make clear that "its work is not over yet" was widely expected and failed to notably boost the dollar.
It said markets would remain cautious ahead of the European Central Bank decision, with a 50 basis-point rate rise widely expected.
UniCredit said the impact on EUR/USD is dependent on comments about how much further tightening is needed and on plans for quantitative tightening.
---
Sterling was lower ahead of a BOE policy decision, with the key interest rate widely expected to be raised by 50 basis points to 3.5%, a slower pace than in November.
"The swap market is fully pricing in a 50 basis points hike today, and we doubt the reaction in sterling will be meaningful," ING said.
EUR/GBP may see more impact from potential surprises from the ECB's decision, while some stabilisation or modest recovery by the dollar may cap GBP/USD and prevent 1.2500 from being tested before year-end.
Read Sterling Could Fall Versus Euro After BOE, ECB Decisions
Bonds:
J.P. Morgan Asset Management's "best idea" in fixed income is to use every backup in yields to add high quality duration to portfolios.
"The evidence is clear that, historically, yields peak somewhere at or before the last rate hike," JPM said, adding that bond yields then tend to fall very quickly, especially at the front end of the curve.
JPM said that there is "tremendous interest" among clients in adding broad market bonds to their portfolios. Investment-grade corporate bonds top JPM AM's list, while government bonds now offer the highest real yield since the financial crisis.
Energy:
Oil prices were close to 1% lower in Europe in reaction to the Fed's latest predictions on the course for interest rates, with the declines in crude futures threatening to halt three days of gains for Brent.
The Fed's outlook came despite softening inflation data, which investors had hoped would make officials less hawkish on rates.
"Talk to any trader, and they will tell you they are at odds with the Fed inflation outlook," SPI Asset Management said.
Metals:
Gold futures in Europe fell post-Fed, reversing most of its gains from recent days, with the strong dollar further weighing on the bullion.
Oanda said the recent gains in the precious metal were mainly driven by hopes that the U.S. central bank could wrap up its rate increases in February next year, but this no longer seems to be the case after Wednesday's FOMC decision.
TODAY'S TOP HEADLINES
EY Looks at Backup Plans on Split Amid Higher Costs, Slower Growth
Ernst & Young's leaders are looking at backup plans for the firm's split to address rising funding costs and a potential slowdown in growth that could imperil the rich payouts promised to partners, according to people familiar with the matter.
Leaders of the accounting powerhouse are talking to private-equity firms as they draw up plans for the sale of EY's consulting arm, the people familiar with the matter said. Options include using private debt, which would involve private-equity funds in an initial public offering, or delaying the effort beyond the current target at the end of 2023, the people said.
Elon Musk Sold More Than $3.5 Billion Worth of Tesla Shares
Elon Musk sold more than $3.5 billion worth of Tesla Inc. stock this week in his second round of sales since buying Twitter Inc.
Mr. Musk sold nearly 22 million Tesla shares over a three-day period ending Dec. 14, according to a regulatory disclosure made public Wednesday.
Warner Bros. Discovery Raises Restructuring-Cost Estimate by Up to $1 Billion
Warner Bros. Discovery Inc. said it expects to face as much as $1 billion more in restructuring charges than it had forecast less than two months ago, as the company continues to cut costs and cancel programming commitments following the combination of Discovery Inc. and AT&T Inc.'s WarnerMedia unit.
The company, whose holdings include movie and television studios, CNN and HBO, and Discovery channels such as Food Network and HGTV, said in a filing on Wednesday that it expects to incur pretax restructuring charges of as much as $5.3 billion through 2024. In late October, it had said it anticipated as much as $4.3 billion in restructuring charges.
Senate Passes Bill Banning TikTok From Government Devices
WASHINGTON-The Senate passed by unanimous consent a bill that would ban federal employees from downloading or using the social-media app TikTok on government devices, in the face of mounting national-security concerns.
The legislation would still have to pass the House and be signed by the president to become law. A similar bill passed the Senate in a previous Congress but never moved forward in the House.
FTX Digital Executive Warned of Client Fund Transfers to Alameda, Documents Show
A top executive of FTX's Bahamas subsidiary warned that country's securities authority days before the company filed for bankruptcy Nov. 11 of customer fund transfers to Alameda Research, a cryptocurrency trading firm tied to FTX, according to documents made public Wednesday. The warning prompted the regulator to immediately seek a criminal investigation, according to the documents.
Securities Commission Executive Director Christina Rolle requested that the financial crimes unit of the Royal Bahamas Police Force open an investigation into the subsidiary, FTX Digital Markets Ltd., the same day based on the warning of FTX Digital Chairman Ryan Salame.
November Retail Sales Report to Show Holiday Spending Trends as High Inflation Eased
A report on November U.S. retail sales will show consumer-spending trends on goods and dining out during the holiday season-and whether shoppers benefited from easing inflation.
Retail sales, a measure of spending at stores, online and in restaurants, surged by a seasonally adjusted 1.3% in October, the Commerce Department said last month.
After the Fed, the ECB, Bank of England Set to Lift Rates
(MORE TO FOLLOW) Dow Jones Newswires
12-15-22 0643ET
