Markets are pricing in a rate cut 17/12/2024

HOT stories for today
 

Stocks on the move:

• Micron Technology (MU, +6%): Citi predicts continued softness (ongoing weakness) in the Dynamic Random Access Memory (DRAM) market, leading to subdued (light) first-quarter earnings and guidance. However, Citi remains optimistic (confident) that robust (strong) data center demand will help balance out weakness in consumer electronics.
• Capri Holdings (CPRI, +3.7%): Shares gained after Women’s Wear Daily reported that the luxury fashion retailer is collaborating (working) with Barclays to explore potential buyers for its Versace and Jimmy Choo brands.
• Super Micro Computer (SMCI, -8.3%): Shares dropped sharply (tumbled) following a Bloomberg report stating that the company hired investment bank Evercore ISI to raise capital through equity and debt. Concerns are mounting (rising) over Super Micro's missed deadlines for filing its annual and quarterly reports, fueling fears (adding to worries) that the data center firm could face Nasdaq delisting, despite CEO Charles Liang’s assurances to the contrary.
• Honeywell (HON,+3.7%): Shares rose after the conglomerate (industry giant) announced that its board is evaluating (exploring) a potential spinoff (separation) of its high-margin aerospace unit. The move aligns with a proposal (plan) from activist investor Elliott Management, which urged Honeywell in November to split into two separate entities.

Today’s action

• Asia-Pacific markets opened with a mixed performance on Tuesday, following a similar pattern on Wall Street as investors anticipate the U.S. Federal Reserve's upcoming rate decision. According to Reuters, Chinese leaders plan to raise the budget deficit to a record 4% of GDP for 2025, aiming to sustain economic growth at around 5%. This would significantly increase from the 3% target set for 2024.
• U.S. stock futures dipped early Tuesday, with Dow futures down 68 points (0.16%), S&P 500 futures slipping 0.12%, and Nasdaq-100 futures edging 0.03% lower. The Dow Jones Industrial Average recently logged its longest losing streak since 2018. Traders are widely expecting a quarter-point rate cut when the Federal Reserve concludes its final two-day policy meeting of 2024 on Wednesday, with CME Group’s Fed Watch tool showing a 95% probability of such a move. The meeting begins Tuesday, and markets remain focused on its outcome.

Wahtclist: MU, HON, TSLA, NVDA, SMCI, MARA, AMZN
 

Bitcoin

• Bitcoin continued its upward momentum on Dec. 16, reaching a new all-time high above $107,700. The rally was driven by intense spot market activity and the reappearance of the Coinbase Premium during the U.S. trading session.
• Robust buying in the U.S. session followed a weekend surge marked by significant spot trading on Binance and high perpetual futures volumes on KuCoin. The rally was further bolstered by reports of new Bitcoin acquisitions by MicroStrategy and Semler Scientific, adding to the positive sentiment. Independent Bitcoin researcher Timothy Peterson suggested that Bitcoin's price could climb to $115,000, citing ETF fund flows as a key factor driving the bullish outlook.
  Watchlist: Bitcoin: 100 000-107 000, Ethereum: 3500-4200, Solana: 202-265

Forex

• The Japanese Yen (JPY) continues to face downward pressure, driven by fading expectations of a December rate hike from the Bank of Japan (BoJ). Rising U.S. Treasury yields, supported by speculation of a less dovish Federal Reserve and optimistic market sentiment, further dampen the appeal of the safe-haven currency. Ahead of this week’s critical FOMC and BoJ policy meetings, the JPY remains in a bearish consolidation phase after hitting a multi-week low against the U.S. Dollar during Tuesday’s Asian session. The prevailing sentiment suggests that Yen’s downside bias will likely persist soon.
• In contrast, the EUR/USD pair recorded mild gains of nearly 1.0510 during Tuesday’s Asian session but continued to exhibit a bearish outlook. The pair remains below its 100-day EMA, with a weak RSI indicator reinforcing the downside bias. Resistance is seen in the 1.0600-1.0610 range, while initial support is at 1.0433. Gains appear limited as the European Central Bank (ECB) hints at further rate cuts if inflation aligns with its 2% target, signaling a cautious policy stance.
  Watchlist: EUR/USD: 1.0300-1.0650, USD/JPY: 149-157

Basic Materials

• WTI prices held steady around $70.20 during Tuesday's early Asian session, with traders awaiting the Federal Reserve's interest rate decision on Wednesday. Concerns over weak spending data from China weigh on the outlook for global demand, limiting upside potential. However, geopolitical risks may provide support, capping further declines in the crude oil benchmark.
• Meanwhile, gold (XAU/USD) remains range-bound, trading near a one-week low as it struggles to find momentum. Elevated U.S. Treasury yields, driven by expectations that the Federal Reserve will maintain a cautious stance on rate cuts, continue to support the U.S. Dollar and pressure the non-yielding metal. Geopolitical uncertainties lend some support to gold, but a bullish equity market tone further limits its appeal ahead of the Fed's upcoming meeting.
  Watchlist: GOLD 2530-2790, US Oil: 65.00-73.00

The TEFS Analyst team wishes you a successful day!