Nasdaq, S&P 500 Futures Waver As Hawkish Fed Minutes Leave Investors Data-Watching: Analyst Thinks Weak Santa Claus Rally Signals 'Potential Warning'

Benzinga - by Shanthi Rexaline, Benzinga Editor.

U.S. stock futures are slightly higher on Thursday following the lackluster performance seen in recent sessions. With the Federal Reserve pouring cold water on the market’s hope for expeditious rate cuts, the mood will likely revert to data-dependency. Against the backdrop, investors could remain keyed in on the day’s two labor market reports on private payrolls and jobless claims. Wednesday’s JOLTS survey results showed that job openings came in slightly below expectations in November.

The spotlight will be on small-cap stocks as they plummeted on Wednesday. Traders may also watch the spike in crude oil prices and the uptick seen in bond yields.

Cues From Wednesday's Trading:

The FOMC minutes released Wednesday served to intensify the uncertainty surrounding the rate outlook and aggravated the weakness seen in the market in the recent sessions.

The Fed meeting minutes were ”another attempt by the Fed to walk back some of the overly-dovish interpretation of the December FOMC meeting,” said Allianz Investment Management Senior Investment Strategist Charlie Ripley.

“At the end of the day, the Fed believes market conditions may have gotten ahead of themselves and minutes moving expectations back as the probability of a March rate cut continues to decline,” he added.

The major averages opened lower and continued to move roughly sideways at depressed levels before closing notably lower for the session.

The indices pulled back toward their lowest levels in either mid- or late-December.

Most S&P 500 sectors, except utility, energy and communication services stocks, moved to the downside on Wednesday.

US Index Performance On Wednesday

Analyst Color:

Expecting a rate cut in the first quarter could prove to be a pipedream, according to a Morgan Stanley analyst. The firm expects stable rates at least until the first half of the year. Ellen Zentner, chief U.S. economist at the firm, said she sees six-month core consumer price inflation likely increasing in the first quarter, prompting the Fed to watch and wait.

“Unless there is an unexpectedly sharp economic downturn or weakening in the labor market, rate cuts are more likely to begin in June,” she added.

As the market momentum falters, Ryan Detrick of Carson Group suggested that declines during the official Santa Claus period are a bad omen for January’s performance. “Higher in Jan only 40% of the time. Q1 is flat on avg. Full yr up a median of 3.0%,” he said.

Stocks were officially lower during the Santa Claus Rally period.

This doesn't happen often, but it has been a potential warning before.

Higher in Jan only 40% of time.

Q1 flat on avg.

Full yr up a median of 3.0%.

Of course, S&P 500 was up 9 wks in a row and due for a break. pic.twitter.com/C0kAgMMSZt

— Ryan Detrick, CMT (@RyanDetrick) January 4, 2024

Futures Today

Futures Performance On Thursday

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.08% to $469.17 and the Invesco QQQ ETF (NASDAQ:QQQ) gained 0.10% to $398.72, according to Benzinga Pro data.

Upcoming Economic Data:

ADP is scheduled to release the private payroll report for December at 8:15 a.m. ET. Economists, on average, expect job gains of 115,000 compared to the 103,000 jobs added in November. Although the ADP report could give directional cues toward the non-farm payroll reports, both numbers are not perfectly correlated.

The Labor Department is due to release its weekly jobless claims report at 8:30 a.m. ET. The number of individuals claiming unemployment benefits may have come in at 216,000 in the week ended Dec. 30 compared to 218,000 in the previous reporting week.

S&P Global will release its final U.S. service sector purchasing managers’ index at 9:45 a.m. ET. The consensus estimate calls for a reading of 51.3 for the December service sector PMI, up from 50.8 in November.

The Energy Information Administration is due to release its weekly petroleum status report at 11 a.m. ET.

The Treasury will auction four- and eight-week notes at 11:30 p.m. ET.

See also: Best Futures Trading Software

Stocks In Focus:

• Advanced Micro Devices, Inc. (NASDAQ:AMD) climbed nearly 0.80% in premarket trading after KeyBanc analysts raised the price target from $140 to $170.
• Intel Corp. (NYSE:INTC) added over 1% after the company announced the appointment of an outside to helm its data center business.
• Cal-Maine Foods, Inc. (NASDAQ:CALM) slumped over 6% following its quarterly results announcement.
• Micron Technology, Inc. (NASDAQ:MU) and MongoDB, Inc. (NASDAQ:MDB) moved on analysts’ actions.
• Conagra Brands, Inc. (NYSE:CAG) and Walgreens Boots Alliance, Inc. (NASDAQ:WBA) are among the companies due to announce their quarterly results ahead of the market opening.

Crude oil futures climbed 1.06% to $73.47 in early European session on Thursday, adding onto Wednesday's 3.30% jump amid supply concerns.

The benchmark 10-year Treasury note rose 0.054 percentage points to 3.961% on Thursday.

Most Asian markets declined on Thursday, as the U.S. market continued to bleed. The Japanese market, which opened for the first time this year, fell moderately and China stocks also retreated, while the Hong Kong market ended flat with a negative bias. On the other hand, the Indian, Indonesian, Malaysian and New Zealand markets bucked the downtrend.

European stocks advanced on Thursday, with the Euro Stoxx 50 Index rising modestly in late-morning trading.

Cryptocurrencies continued to trade lower amid the uncertainty over SEC approval for a spot Bitcoin (CRYPTO: BTC) ETF approval.

Reflecting the modest pickup in risk appetite, all risky currencies gained ground Thursday.

Read Next: Chip Stocks At ‘Premium Valuations’: Why Bank Of America Is Bullish On Semiconductors In 2024

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