Stock futures gain as markets track China Covid changes; President Biden urges Congress to intervene in rail strike; Disney shares gain after first town hall since Bob Iger’s return; Cyber Monday sales hit record as shoppers seek bargains and UnitedHealth dips on muted 2023 profit forecast.
Five things you need to know before the market opens on Tuesday November 29:
1. — Stock Futures Gain As Markets Track China Covid Changes
U.S. equity futures nudged higher Tuesday, while the dollar drifted lower against its global peers and Treasury yields stabilized, as investors looked for a change in China’s strict Covid health policies following rare weekend protests in the world’s second-largest economy.
Security remains tight in major Chinese cities, however, and comments from high-ranking officials in Beijing, including from the National Disease Control and Prevention Administration, suggest a greater chance of fine-tuning than a complete overhaul of rules related to quarantine, vaccination and domestic travel.
Still, stocks in China were traded firmly higher in the overnight session, helping the region-wide MSCI ex-Japan index rise 2.38% heading into the close of trading as overall sentiment improved. The moves helped push the U.S. dollar index lower against a basket of its global peers and held benchmark 10-year U.S. Treasury note yields in place at 3.677%.
In Europe, the Stoxx 600 was up 0.11% in early Frankfurt trading while Britain’s FTSE 100 gained 0.64% in London.
A series of comments from Federal Reserve officials yesterday, however, are likely to blunt any follow-through from the Asia session, with each indicating that interest rates are likely to remain elevated for nearly all of next year as the central bank remains focused on its efforts to tame the fastest inflation in four decades.
“I’m very supportive of the path that is slower, probably longer and potentially higher,” Richmond Fed President Thomas Barkin told Bloomberg TV late yesterday.
The CME Group’s FedWatch is still pricing in a 70% chance of a 50 basis point rate hike next month in Washington, with the bulk of betting focused on a Fed Funds rate that will peak between 5% and 5.25% in the spring of 2023.
Elsewhere, hopes of easing Covid restrictions in China, coupled with more speculation of a production cut from OPEC members when they meet next week in Vienna, boosted global oil prices, with Brent contracts for January delivery rising $1.97 to $85.16 per barrel and WTI futures for the same month jumping $1.48 to $78.72 per barrel.
On Wall Street, futures linked to the S&P 500 are priced for a modest 10 point opening bell gain ahead of November consumer confidence data and September house price index figures later in the session. Futures linked to the Dow Jones Industrial Average are indicating a 37 point bump while the tech-heavy Nasdaq is priced for a 50 point gain.
2. — President Biden Urges Congress to Intervene in Rail Strike
President Joe Biden asked lawmakers to intervene and prevent a potentially “crippling national rail shutdown” by adopting a tentative agreement brokered by the White House in September.
Biden asked Congress to approve the deal, which includes pay increases, improved working conditions and ‘peace of mind’ with respect to healthcare benefits, amid a standoff between railway unions and freight operating companies that has dragged on for months and threatens to upend the fragile U.S. economy.
Nancy Pelosi, in what could be one of her final acts as House Speaker, said lawmakers would begin the process in the coming days in order to “prevent a catastrophic nationwide rail strike, which would grind our economy to a halt.”
The strike itself, which could go into effect as early las December 9, could cost the economy around $2 billion a day, shut down around 30% of the country’s freight traffic, disrupt passenger rail networks and add to inflationary pressures by delaying the delivery of key energy, food and consumer goods.
“A rail shutdown would devastate our economy,” the President said. “Without freight rail, many U.S. industries would shut down. Communities could lose access to chemicals necessary to ensure clean drinking water. Farms and ranches across the country could be unable to feed their livestock.”
3. — Disney Shares Gain After First Town Hall Since Bob Iger’s Return
Walt Disney (DIS) – Get Free Report shares edged higher in pre-market trading following comments from returning CEO Bob Iger late yesterday that suggested no major changes in strategy for the media and entertainment giant.
Iger, tapped to replaced the ousted Bob Chapek earlier this month amid one of the biggest year-to-date declines for Disney stock on record, told a town hall meeting in Burbank, California that the group will focus on “chasing profitability … instead of chasing subscribers” with aggressive marketing and content spending. “In order to achieve that, we have to take a very, very hard look at our cost structure across our businesses,” he said.
His comments largely echo those of Chapek, who was fired by the board earlier this month following a disappointing fourth-quarter earnings last month that carried a warning that cost cuts and corporate austerity would define the group’s ambitions “to be focused largely on profitability” as it rides out losses in its direct-to-consumer division.
Disney shares were marked 0.43% higher in pre-market trading to indicate an opening bell price of $96.10 each.
4. — Cyber Monday Sales Hit Record As Shoppers Seek Bargains
U.S. consumers spent a record $11.6 billion during yesterday’s ‘Cyber Monday’ sales, Adobe Analytics indicated, as value-focused buyers delayed the bulk of their shopping to the final day of the traditional holiday period.
Adobe said the overall sales tally, an 8.5% increase from last year, would likely precede spending of around $35.7 billion for the whole of this week as consumer continue to hunt for online bargains amid decades-high inflation.
Online and mobile sales formed a big part of the weekend’s shopping surge, Adobe noted, with a record 48% of Black Friday sales coming from smartphone orders. Shoppers spent a record $5.3 billion on Thursday, adding a further $9 billion in online sales over the weekend, the group estimated.
5. — UnitedHealth Dips On Muted 2023 Profit Forecast
UnitedHealth said adjusted profits for the coming year, which begins in January, will likely range between $24.40 to $24.90 per share, just shy of Refinitiv forecasts of $24.94 per share, with overall revenues in the region of $357 billion to $360 billion.
“Obviously, for the last couple of years, there is been a lot of focus on the effect of COVID as you think about impacts on medical cost trend,” CEO Andrew Witty told investors in October. “There is now a blend of possibly a little bit of COVID effect in the system, but cost of living effects, things like inflation, things like capacity constraints as the labor market tightness has affected different parts of the system at different moments.”
“So, I think this whole issue has become actually more complicated in some ways because there is more influences on what you need to think through going forward,” he added.
UnitedHealth shares, a Dow component, were marked 0.02% lower in pre-market trading to indicate an opening bell price of $532.16 each.