U.S. equities are modestly higher but near the unchanged mark in pre-market action. The economic calendar is robust today, as personal income and spending rose, but durable goods orders fell noticeably. Reads on new home sales and consumer sentiment are slated for release after the opening bell. Treasury yields are higher, and the U.S. dollar is ticking lower, while crude oil and gold prices are trading to the upside. News on the equity front is in short supply, but Meta Platforms is garnering attention after it agreed to settle a class action lawsuit for $725 million. Asia finished lower amid some disappointing data out of Japan, while markets in Europe are mixed and near the flatline as trading winds down heading into the long holiday weekend.
As of 9:01 a.m. ET, the March S&P 500 Index future is 1 point above fair value, the Nasdaq Index future is even with fair value, and the DJIA future is 127 points ahead of fair value. WTI crude oil is increasing $1.91 to $79.40 per barrel, and Brent crude oil is gaining $1.72 to $83.39 per barrel. The gold spot price is rising $12.50 to $1,807.80 per ounce. Elsewhere, the Dollar Index is moving 0.3% lower to 104.29.
Meta Platforms Inc. (META $117) is in focus, as the parent of Facebook has agreed to pay $725 million to settle a class action lawsuit that claimed that the social media company gave third parties access to user data without their knowledge or consent. The lawsuit came after Facebook disclosed in 2018 that information on roughly 87 million individuals was wrongly shared with Cambridge Analytica.
The equity markets have been volatile as of late and this week is shaping up to add to the choppiness, with the S&P 500 and the Nasdaq on track to posting a third week of losses. The uncertainty comes amid worries over the economic impact of aggressive monetary policy tightening from the Fed, which has caused recession worries and volatility in the markets to ratchet higher. The Schwab Center for Financial Research discusses the recent volatility in the latest article, , Stock Market Volatility: Fed Concerns to the Fore. Additionally, Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her article, U.S. Outlook: How Many More Times, Fed?, how Powell, among other Fed officials, has seemingly shifted his attention from the rear-view mirror to the windshield. She points out how inflation is a lagging indicator, but the impact of monetary policy changes is in the future.
Personal income rises and durable goods orders tumble, more data on deck
Personal income (chart) rose 0.4% month-over-month (m/m) in November, above the Bloomberg consensus forecast calling for a 0.3% increase, while October's figure was unrevised at a 0.7% rise. Personal spending gained 0.1%, below the Street's expectation for a 0.2% advance, and compared to the prior month's upwardly adjusted 0.9% increase. The September savings rate as a percentage of disposable income was 2.4%, up from October's negatively revised 2.2% rate.
The PCE Deflator rose 0.1% m/m, matching expectations, and compared to October's upwardly adjusted 0.4% gain. Compared to last year, the deflator was 5.5% higher, in line with estimates, and compared to the prior month's upwardly adjusted 6.1% rise. Excluding food and energy, the PCE Core Price Index rose 0.2% m/m, matching forecasts, and compared to October's positively revised 0.3% rise. The index was 4.7% higher y/y, in line with estimates, and after October's unadjusted 5.0% rise.
November preliminary durable goods orders fell 2.1% m/m, far more than the Bloomberg expectation of a 1.0% decrease, and versus the prior month's downwardly revised 0.7% gain. Excluding transportation, orders grew 0.2% versus the expected flat reading and compared to the prior month's negatively revised 0.1% increase. Finally, nondefense capital goods orders excluding aircraft—considered a proxy for capital spending—increased 0.2% m/m, north of expectations of an unchanged reading, and versus the prior month's downwardly revised 0.3% rise.
Treasury rates are higher, as the yield on the 2-year note is rising 7 basis points (bps) to 4.32%, while the yields on the 10-year note and the 30-year bond rate are up 5 bps at 3.72% and 3.78%, respectively.
Although coming well off highs, Treasury yields and the U.S. dollar remain higher for the year amid this backdrop 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.
After the opening bell, we will get a look at the final December University of Michigan Consumer Sentiment Index, forecasted to remain at the preliminary reading of 59.1, but above November's 56.8 level. Finally, the busy day will also deliver the release of November new home sales, expected to post a 5.1% m/m decline to 600,000 units.
Please note: The U.S. bond markets will close early at 2:00 p.m. ET today, and all U.S. markets will be closed Monday, December 26, in observance of the Christmas holiday.
Europe rangebound as markets wind down into the holiday
European stocks are mixed and near the unchanged mark in afternoon action, as trading is light with investors looking ahead to the holiday weekend. The markets have been grappling with the recent aggressive monetary policy tightening with moves from the European Central Bank (ECB), the Bank of England (BoE), and Swiss National Bank following in the footsteps of the Fed in the U.S. The moves by the Fed and ECB were milder than the recent 75-bp rate increases, and Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses in his 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.
In economic news, France's PPI jumped in November and was well above forecasts, while producer prices in Spain rose at a slower-than-expected pace last month, and the nation's Q3 GDP was revised upward on a y/y basis. Elsewhere, consumer confidence in Italy jumped, but business sentiment continued to deteriorate. The euro and the British pound are higher versus the U.S. dollar, while bond yields in the Eurozone and the U.K. are rising.
The U.K. FTSE 100 Index, Spain's IBEX 35 Index and Switzerland's Swiss Market Index are nudging 0.1% higher, France's CAC-40 Index, and Italy's FTSE MIB Index are declining 0.3%, while Germany's DAX Index is little changed.
Asia lower in lackluster trading session
Stocks in Asia finished lower in subdued trading, and as the markets digested disappointing data out of Japan. Core inflation in the Asian nation rose 3.7% y/y, inline with forecasts but hitting a fresh 40-year high. The report puts more focus on the Bank of Japan (BoJ) after this week's decision by the central bank to widen the cap on the 10-year Japanese Government Bond yields, in a move intended to improve market functioning while maintaining accommodative financial conditions. This action sparked global volatility in the currency and bond markets and comes after a host of monetary policy tightening measures across the globe. Stocks in Hong Kong pared back some after rallying recently, as property and technology issues saw pressure. Mainland Chinese equities also dipped as COVID cases continue to rise in the country, dampening optimism regarding progress on a reopening. 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 fell 1.0%, with the yen slightly pulling back from recent strength versus the U.S. dollar that has come following the BoJ's actions. China's Shanghai Composite Index declined 0.3%, and the Hong Kong Hang Seng Index lost 0.4%. Elsewhere, Australia's S&P/ASX 200 Index shed 0.6%, South Korea's Kospi Index tumbled 1.8%, and India's S&P BSE Sensex 30 Index traded 1.6% lower.
