U.S. equities are mixed in pre-market trading, but the markets are on track to post weekly gains for the holiday-shortened week. Trading is likely to be subdued in today's abbreviated session, and a dormant economic calendar is unable to provide any sway. Equity news is also in short supply, but shares of Activision Blizzard are suffering in the wake of a report that Microsoft's $69 billion bid to acquire the video game maker could face some legal scrutiny from regulators. Meanwhile, the retail sector is likely to garner some focus, as incoming data on how this year's Black Friday is shaping up may be of heightened interest. Treasury yields are higher, and the U.S. dollar is ticking to the upside. Crude oil and gold prices are trading higher. Asia finished out the week mixed, and Europe is higher in lackluster trading.
As of 8:50 a.m. ET, the December S&P 500 Index future is 1 point below fair value, the DJIA future is 22 points above fair value, and the Nasdaq Index future is 41 points south of fair value. WTI crude oil is up $1.04 at $79.98 per barrel and Brent crude oil is gaining $0.72 to $85.96 per barrel. The gold spot price is advancing $1.50 to $1,747.10 per ounce. Elsewhere, the Dollar Index is increasing 0.3% to 106.34.
Shares of Activision Blizzard Inc. (ATVI $77) are seeing pressure after Politico reports that the Federal Trade Commission is likely to file an antitrust lawsuit to block Microsoft's (MSFT $248) $69 billion takeover of the video game maker. If regulators decide to move forward with the case, it could come as soon as next month, according to people familiar with the investigation.
The markets are also eyeing any incoming sales reports from this year's Black Friday, as a record 166.3 million people are expected to shop over the long weekend, according to the National Retail Federation. The focus on the holiday shopping season comes amid some disappointing results and warnings of sluggish sales from some retail behemoths like Target Corporation (TGT $163) and Macy's Inc. (M $23).
Earnings season is in its final stages, and Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her article, Disappearing Act: Earnings, how earnings weakness is starting to materialize across a broader swath of industries, with hits coming from a strong dollar, weaker demand, and aggressive monetary policy.
Treasury yields higher amid dormant economic calendar
Treasury yields are higher, with the economic calendar void of any releases today, as the yield on the 2-year note is up 1 basis point (bp) to 4.51%, the yield on the 10-year note is gaining 4 bps to 3.74%, and the 30-year bond is 5 bp higher at 3.77%.
Market volatility has continued this week amid the release of the rest of the October inflation picture, and stocks are on track to add to last week's rally that came in the wake of the softer-than-expected Consumer Price Index (CPI) data. Schwab's Liz Ann Sonders discusses in her latest article, Swing, Swing: Wild Week, how a better-than-expected October CPI report provided some relief and support for equities, but investors should be wary of low-quality leadership and, to some extent, crypto stress.
Inflation has been the driving factor behind the aggressive monetary policy from the Federal Reserve. The increase in bond yields and this year's rally in the U.S. dollar have fostered the choppiness in the markets. Schwab's Chief Fixed Income Strategist Kathy Jones discusses the bond and currency markets in her article, Markets to Fed: Slow Down, You Move Too Fast, noting how if these trends continue, the Fed may end up slowing its pace of tightening—but not stopping it. Additionally, as noted in the latest Schwab Market Perspective: Stress Cracks, as the Federal Reserve continues to ratchet up the pressure with higher interest rates, cracks are beginning to appear beneath the surface of the U.S. economy.
Please note: all U.S. markets will trade in an abbreviated session today in observance of the Thanksgiving holiday, with the equity markets closing at 1:00 p.m. ET and the bond markets ending trading at 2:00 p.m. ET.
Europe higher in lackluster session
Stocks in Europe are trading higher in afternoon action as investors continue to process the Fed's meeting minutes that indicated a tilt toward the possibility of less aggressive rate increases in the future. The markets also continue to assess this week's inflation data and its implications for interest rates going forward. Spain's PPI rose 26.1% y/y last month, well below expectations and down from the 35.6% rise posted in September. Recent lower-than-expected U.S. consumer and wholesale price reports have increased optimism that central banks, led by the Fed in the U.S., may be able to temper the aggressiveness in their rate-hike campaigns. The relentless rise in prices has been a key driver in the aggressive Bank of England (BoE) and European Central Bank (ECB) monetary actions, as well as across the globe. However, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses in his latest article, Central Banks Stepping Down, how central banks seem to be stepping down from aggressive rate hikes, and this could lead to a year-end "Santa Pause" rally for stocks. The focus on inflation is also coming amid hopes of a positive holiday shopping seas, as preliminary Black Friday transactions, as measured by Barclaycard, showed that spending levels are in line with 2021 levels. In other economic news in the region, consumer confidence in Germany deteriorated, while business sentiment in Italy improved.
The U.K. FTSE 100 Index is up 0.3%, France's CAC-40 Index, Italy's FTSE MIB Index and Switzerland's Swiss Market Index are ticking 0.1% higher, while Germany's DAX Index and Spain's IBEX 35 Index are little changed.
Asia mixed to close out week
Stocks in Asia were mixed as concerns regarding China’s response to its growing COVID outbreak continued to be in focus. In his latest article, Risk for 2023: China Reopening, Schwab's Jeffrey Kleintop notes that Chinese officials may be preparing to bring an end to China's zero-COVID policy but reopening the world's second-largest economy could bring inflationary challenges. Investors also continued to digest the inflation data being released, with Japan reporting that consumer prices in Tokyo rose 3.6%, ahead of expectations and the highest since April 1982. The persistent rise in prices has been a main factor in the aggressive measure taken by central banks across the world, led by the Fed, as well as the Reserve Bank of Australia’s (RBA) decision to raise interest rates for a second-straight meeting. In the minutes from its November meeting this week, RBA members gave arguments in favor of either a 25 bp or 50 bp rate hike this month. While they did not rule out returning to larger increases, the medium-term inflation expectations did remain consistent with inflation returning to target, and members said they saw value in tightening in a consistent manner.
Japan's Nikkei 225 Index was 0.4% lower, with the yen gaining ground versus the U.S. dollar. China's Shanghai Composite Index increased 0.4%, while the Hong Kong Hang Seng Index lost 0.5%, and India's S&P BSE Sensex 30 was little changed. Meanwhile, South Korea's Kospi Index nudged 0.1% lower, and Australia's S&P/ASX 200 Index gained 0.2%.
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