December 1, 2023

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Daily Markets: Fed Signals Potential Easing in Rate Hikes

Today’s Big Picture

Asia-Pacific equity markets ended today’s session up across the board following U.S. markets’ positive reaction to Fed Chair Powell’s comments about the possibility of a 50-basis point (bps) rate hike in December instead of another 75-bps rise. India’s SENSEX gained 0.29%, South Korea’s KOSPI rose 0.30%, China’s Shanghai Composite advanced 0.45%, Hong Kong’s Hang Seng was up 0.75%, and Taiwan’s TAIEX and Japan’s Nikkei closed 0.90% and 0.92% ahead, respectively. Australia’s ASX All Ordinaries set the pace rising 0.98% led by Non-Energy Materials. By mid-day trading, European equity indices are up across the board.

U.S. futures point to a lower open later this morning as investors seem to be pausing slightly on their rush to push markets toward new highs on the possibility of the Fed dialing back the aggressiveness for its rate hike regime. Per the CME FedWatch Tool, futures are currently pricing in a 78% chance of the Fed going 50 bps. It is not lost on us that this figure has only moved from 75% to 78% on yesterday’s comments from Fed Chair Powell and that it has been at 75% at least since November 23. 

While news that the Fed is exploring letting up on the rate hike accelerator pedal is positive, it should be noted the Fed remains committed to raising rates until “real signs of progress emerge on inflation.” Given Q4 GDP estimates north of 4%, a robust employment market, and current government spending that continues to subsidize elevated prices, the path forward to returning inflation to the Fed’s 2% target is poised to be a longer one. 

Given labor market tightness and wage pressures, it’s also one that is likely to take more than simply raising rates to get there. Months ago, Powell warned there could be some pain on that path, and the coming data could indicate when that pain may begin. 

Data Download

International Economy

The au Jibun Bank Japan Manufacturing PMI fell to 49 in November from 50.7 in October, contracting for the first time since January 2021 and at the steepest pace in two years amid cooling demand conditions and severe inflationary pressures.

The Caixin China General Manufacturing PMI unexpectedly edged up to 49.4 in November from 49.2 in October, above market forecasts of 48.9. However, this was the fourth straight month of fall in factory activity, amid a new wave of COVID cases and tough curbs in many parts of the country. For the month, new orders were under pressure, and foreign sales remained weak.

The S&P Global Eurozone Manufacturing PMI was revised slightly lower to 47.1 in November from a preliminary of 47.3, although it remained above 46.4 in October, which was the lowest reading since May 2020. Figures pointed to a fifth straight month of falling factory activity, with all of the monitored eurozone nations showing a contraction. 

Retail sales in Germany sank 2.8% MoM in October, the biggest decline so far this year and much worse than market forecasts of a 0.6% fall. Declines were seen in sales of groceries (-1.2%), non-food (-4.5%), namely clothing, shoes, and furnishings, online, and mail orders (-1.8%). Compared to a year earlier, retail sales dropped 5%. 

The S&P Global/CIPS UK Manufacturing PMI was revised slightly higher to 46.5 in November from a preliminary of 46.2 and compared to 46.2 in October. The reading still pointed to the fourth straight month of falling factory activity as companies reported lower output, weaker new work intakes, and reduced employment.

Domestic Economy

We have a very big day on the economic calendar that brings several updates on the domestic manufacturing economy, layoffs, consumer spending, and inflation. Those take the form of the November Challenger Job Cuts Report, November manufacturing PMI data from S&P Global (SPGI) and the Institute for Supply Management (ISM), the October figure for Personal Income & Spending, and the Personal Consumption Expenditure (PCE) Price Index for October.

Following Fed Chair Powell’s comments yesterday that the Fed is “watching the data,” what we learn this morning will not only shape how trading begins December, but it could alter the size of what’s expected by the Fed in the coming months. Most will likely focus on the October PCE Price Index, the consensus for which is +5.9% YoY vs. September’s +6.2%, to gauge progress on the Fed’s efforts thus far. Some, including us, will also be watching ISM’s November manufacturing PMI data given the close relationship it has with revenue per share for the S&P 500. Should that number fall into contraction territory, a reading below 50, we are likely to see another round of revenue and EPS cuts ahead. 


Despite what didn’t sound to some as positive news from the Fed, markets had a strong showing yesterday with the Dow rising 2.18%, the Russell 2000 gaining 2.72%, the S&P 500 up 3.09%, and the Nasdaq Composite closing 4.41% higher. Unsurprisingly, Technology (5.02%) and Communications Services (4.23%) led yesterday’s rally with support from Consumer Discretionary (3.45%). 

Looking under the hood of Sector returns shows that many sectors (as represented by the SPDR Select Sector ETF suite of products) had very few names losing ground yesterday and that larger capitalization names drove much of the returns. For example, Microsoft (MSFT)Apple (AAPL), and Nvidia (NVDA) accounted for close to 97% of Technology sector returns yesterday. Similarly, Tesla (TSLA)Amazon (AMZN), and Home Depot (HD) accounted for just under 65% of yesterday’s action in Consumer Discretionary.

Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -4.81%
  • S&P 500: -14.39%
  • Nasdaq Composite: -26.70% 
  • Russell 2000: -15.98%
  • Bitcoin (BTC-USD): -62.90%
  • Ether (ETH-USD): -64.81%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Big Lots (BIG), Designer Brands (DBI), Dollar General (DG), and Kroger (KR) will be among the handful of companies reporting their latest quarterly results.

October quarter results at Salesforce (CRM) topped consensus expectations and the company guided current quarter EPS to 1.35-1.37 vs. the $1.35 consensus. Revenue for the current quarter is seen coming in between $7.932-8.032 billion vs. the $8.04 billion consensus. During the company’s conference call, it reiterated the unpredictable macro environment and foreign currency market, which had a greater-than-expected impact on its October quarter results. The company also announced that co-Chief Executive Bret Taylor will leave the company effective January 31, and co-CEO and company founder Marc Benioff will take over as sole CEO.

With the Macau Gaming Inspection and Coordination Bureau reporting November 2022 gross revenue fell 56% YoY to HKD 3.0 billion, a far sharper decline compared to October 10.7% fall, shares of Wynn Resorts (WYNN), Las Vegas Sands (LVS), MGM Resorts (MGM) and other gaming companies could be under pressure today. 

Electrek reports Tesla (TSLA) is planning a massive ramp-up in Model Y production output from Gigafactory Texas in Q1 2023.

As part of its longer-term EV plans, Ford Motor (F) shared will invest an additional £149M ($180M) to raise electric vehicle power unit capacity at its engine factory in northern England by 70%.

Costco Wholesale (COST) reported its total November sales rose 5.3% YoY to $19.17 billion with US comparable sales (excluding the impacts from changes in gasoline prices and foreign exchange) up 4.6%. For the month, its e-commerce sales fell 8.9% YoY. 

CNH Industrial (CNHI) announced effective December 31 of this year it will cease all Construction Equipment sales activities in China. 

Orthofix (OFIX) received an unsolicited, non-binding indication of interest from two private equity fund sponsors to acquire all the outstanding equity of the company for $23 per share in cash.

The board of General Electric (GE) approved a spin-off of its healthcare business, GE Healthcare Holding. The healthcare unit is expected to be converted into a corporation and renamed GE HealthCare Technologies before the spin-off.

Reports suggest next week Taiwan Semiconductor (TSM) will announce plans to manufacture advanced 4-nanometer chips at its new Arizona plant set to open in 2024.


As we head into the holiday season the near-term IPO calendar is fairly light so there are no significant IPOs slated to price this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Ambarella (AMBA), American Outdoor Brands (AOUT), ChargePoint (CHPT), Marvell (MRVL), Ulta Beauty (ULTA), and Zscaler (ZS) are among the names expected to report quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Friday, December 2

  • Germany: Import/Exports – October
  • Eurozone: PPI – October
  • US: Employment Report – November 

Thought for the Day

“December – the month of joy, happiness, and to finish what you started.” 


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.