S&P 500 Index Futures Slide as Investors Look Ahead to ISM Services PMI Data
The major U.S. stock index futures are edging lower during the pre-market session, shortly before the cash market opening. Today’s early two-sided trade is being influenced by general uncertainty ahead of a report on the U.S. services sector. The data from the report will be used by the Federal Reserve at its Dec. 13-14 monetary policy meeting.
At 11:57 GMT, the blue chip Dow Jones Industrial Average futures contract is trading 34347.00, down 112.00 or -0.33%. The benchmark S&P 500 Index is at 4062.25, down 13.25 or -0.33% and the tech-weighted NASDAQ Composite Index is trading 11989.25, down 21.00 or -0.17%.
Investors Hope to Regain Friday’s Lost Momentum
Although the indexes finished higher last week, Friday’s price action was disappointing with equities losing momentum and settling lower following the release of a hotter-than-expected U.S. payrolls report, which created headwinds for investors hoping for a less-aggressive Fed.
Ahead of Friday’s jobs data, the chances of a 50 basis point rate hike at the Fed’s Dec. 13-14 monetary policy meeting, was 91%. After the report, the odds dropped to about 82%.
Investors are hoping today’s report from the Institute of Supply Management (ISM) will help get the market back on track. The data due at 15:00 GMT is expected to show that the services sector grew at a slower pace in November compared with the prior month.
The services data will come on the heels of a survey last week that showed manufacturing activity contracted for the first time in 2-1/2 years last month as higher borrowing costs weighed on demand for goods.
Starbucks Downgraded, United Airlines Upgraded
CNBC is reporting that Deutsche Bank analyst Brian Mullan downgraded Starbucks to hold from buy, saying that further gains will be harder to come by for the coffee chain stock.
“We are not negative on SBUX; but rather we are simply moving to hold on what we deem to be a balanced Risk Reward scenario at present,” Mullan wrote in a Monday note.
Shares of United Airlines gained more than 1% in the Premark after Morgan Stanley upgraded the airline to overweight from equal weight, CNBC reported.
“After three years of uncertainty when the market was either too cold or too hot, 2023 could be the year when conditions are “just right”, potentially delivering earnings well above market expectations,” the bank said in a Monday note.
Today’s ISM Services PMI report is likely to set the early tone in the market. The report, due to be released at 15:00 GMT, is expected to show to come in at 53.5, down slightly from October’s 54.4 reading.
A lower than expected reading will be good for stocks because it will solidify the chances of a 50-basis point rate hike by the Fed next week.
A higher reading will make investors nervous about next week’s Fed interest rate decision. Coupled with Friday’s strong payrolls report, it could encourage Fed policymakers to stick with a 75 basis point rate hike instead of dropping to 50 basis points. A strong reading will also put pressure on stock prices.