Stock Market Update

The S&P 500 futures are up 48 points and are trading 0.8% above fair value, the Nasdaq 100 futures are up 217 points and are trading 1.0% above fair value, and the Dow Jones Industrial Average futures are up 310 points and are trading 0.7% above fair value.

Contracts linked to the S&P 500, Nasdaq 100, and Dow industrials indicate a higher open on the first session of the year. Solid pre-open gains in mega cap names with no specific catalysts have contributed to the upside bias. 

A drop in market rates has also supported the positive skew. The 2-yr yield is down three basis points to 4.21% and the 10-yr yield is down five basis points to 4.52%.

The MBA Mortgage Applications Index for December 17-31 dropped 21.9%. Other data today include the weekly jobless claims report at 8:30 ET, the final December S&P Global US Manufacturing PMI at 9:45 ET, the November Construction Spending at 10:00 ET, and weekly EIA Crude Oil Inventories at 10:30 ET.

In corporate news:

• Tesla (TSLA 410.16, +6.32, +1.6%): CEO Musk says "We have now confirmed that the explosion was caused by very large fireworks and/or a bomb carried in the bed of the rented Cybertruck and is unrelated to the vehicle itself. All vehicle telemetry was positive at the time of the explosion"
• Apple (AAPL 250.61, +0.19, +0.1%) offering iPhone discounts, according to Reuters
• Citigroup (C 71.10, +0.71, +1.0%) and Bank of America (BAC 44.32, +0.37, +0.8%): will leave global climate alliance, according to Bloomberg
• Biogen (BIIB 152.70, -0.22, -0.1%): downgraded to Neutral from Overweight at Piper Sandler

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region had a mixed start to the new year. Japan's Nikkei: closed for holiday, Hong Kong's Hang Seng: -2.2%, China's Shanghai Composite: -2.7%, India's Sensex: +1.8%, South Korea's Kospi: flat, Australia's All Ordinaries: +0.5%.
  • In economic data:
    • China's December Caixin Manufacturing PMI 50.5 (expected 51.6; last 51.5)
    • Hong Kong's November Retail Sales -7.3% yr/yr (last -2.9%)
    • South Korea's December S&P Global South Korea Manufacturing PMI 49.0 (last 50.6)
    • Australia's December Judo Bank Australia Manufacturing PMI 47.8 (expected 48.2; last 49.4)
    • India's December HSBC Manufacturing PMI 56.4 (expected 57.4; last 56.5)
    • Singapore's Q4 GDP 0.1% qtr/qtr (expected 2.0%; last 3.2%) and 4.3% yr/yr (expected 3.8%; last 5.4%)
  • In news:
    • Chinese markets fell badly in response to concerns about growth and the effectiveness of Chinese stimulus plans after the December Caixin Manufacturing PMI came in lower than expected and signaled a slowdown in the pace of expansion. The news contributed to Chinese bond yields falling to new record lows; however, press reports indicate analysts think the PBOC could delay an RRR cut on account of the continuing weakness in the yuan and falling bond yields.
    • Japan's Nikkei will be closed until Monday, January 6.
    • South Korea's finance ministry lowered its 2025 GDP growth forecast to 1.8% from 2.2% and press reports note Bank of Korea Governor Rhee, pointing to potential FX volatility and new growth challenges, opined that ongoing rate cuts may become a source of anxiety.
• Major European indices started their session on higher ground but soon ran into selling interest that dialed back the opening gains. STOXX Europe 600: -0.1%, Germany's DAX Index: flat, UK's FTSE 100: +0.2%, France's CAC 40: -0.8%, Italy's FTSE MIB: -0.4%, Spain's IBEX 35: -0.5%.
  • In economic data:
    • Eurozone's December HCOB Manufacturing PMI 45.1 (expected 45.2; last 45.2)
    • Germany's December HCOB Manufacturing PMI 42.5 (expected 42.5; last 43.0)
    • France's December HCOB Manufacturing PMI 41.9 (expected 41.9; last 43.1)
    • Spain's December HCOB Manufacturing PMI 53.3 (expected 53.6; last 53.1)
    • Italy's December HCOB Manufacturing PMI 46.2 (expected 44.9; last 44.5)
    • UK's December S&P Global/CIPS Manufacturing PMI 47.0 (expected 47.3; last 48.0); December Nationwide HPI 0.7% m/m (expected 0.1%; last 1.2%) and 4.7% yr/yr (expected 3.8%; last 3.7%)
  • In news:
    • Participants have digested a round of final December manufacturing PMIs that were little changed from flash estimates that showed an ongoing contraction in manufacturing activity in most countries, except Spain.
    • The news hit (as expected), that the natural gas pipeline from Russia to Europe was stopped after Ukraine refused to renew agreement, according to New York Times.
    • ECB President Lagarde called attention to progress made in bringing down inflation and that she hopes the 2% target will be hit in 2025.