Stock futures extend heavy selling on recession fears; Twitter suspends reporter accounts amid ‘doxxing’ allegations; Adobe shares leap on solid Q4 earnings, upbeat outlook; Meta jumps on JPMorgan upgrade, price target boost and U.S. Steel gives upbeat Q4 guidance as demand, prices improve.
Five things you need to know before the market opens on Friday December 16:
1. — Stock Futures Extend Heavy Selling On Recession Fears
U.S. equity futures extended heavy declines Friday as investors worry that weakening economic growth prospects set against hawkish central bank rate signals will continue to pressure stock markets around the world.
Economic activity remained muted in Europe this month, with PMI data from S&P Global Markit Intelligence indicating a sixth consecutive month of declines that suggest an increased chance of recession in the world’s biggest economic bloc.
The data following a stern warning from European Central Bank President Christine Lagarde Thursday that interest rates will need to rise “substantially” in order to tame an inflation wave that looks set to accelerate again next year, thanks in part to elevated energy prices and a weakened euro.
In the U.S., the Federal Reserve has also warned that its benchmark Fed Funds rate will need to rise to around 5.1% next year, and remained elevated until early 2024, as inflation pressures continue to work their way up from the labor market.
The prospects of central bank tightening into a recessionary environment has investors scrambling to re-set price assumptions for both major stock indices and individual companies, as pressure on corporate earnings forecasts mounts following a weaker-than-expected reading for November retail sales on Thursday and data indicating weakness across several manufacturing sectors.
Treasury bond yields continue to flash recession warnings, as well, with 2-year note yields edging to 4.262% in overnight trading, a level that’s around 77 basis points north of 10-year notes, which traded at 3.491% heading into the start of the New York session.
Stocks on Wall Street will also be focused on today’s scheduled options and futures expiry, known as the quadruple witching hour, which typically triggers late-session volatility.
The CBOE’s Vix index, a key market volatility gauge, was marked 12% higher in overnight trading at 22.6 points, a level that suggests daily swings of around 57 points for the S&P 500.
Heading into the start of the trading day, futures tied to the S&P 500, which closed below the key technical support level of 3,900 points, are priced for a 57 point opening bell decline. Futures linked to the Dow Jones Industrial Average are priced for a 445 point slump while the tech-focused Nasdaq is looking at a 130 point pullback.
Global stocks were also weaker, with Japan’s Nikkei 225 falling 1.87% to close at a three-month low 27,527.12 points while the region-wide MSCI ex-Japan index fell 0.6%.
In Europe the Stoxx 600 was marked 1.1% lower and on pace for a negative week, while the FTSE 100 was down 1.14% in London.
2. — Twitter Suspends Reporter Accounts Amid ‘Doxxing’ Allegations
Elon Musk suspended the accounts of several high-profile tech journalists late Thursday amid a dispute over coverage of the billionaire’s private jet details.
Reporters from the Washington Post, the New York Times and CNN were banned for reporting Musk’s real-time location, based on movements of his private jet, in violation of new rules but it place against so-called ‘doxxing’ just days before.
Musk said the suspensions would likely last for a week, but also polled his 121.6 million followers for their opinion on the length of the ban and whether it should be lifted.
Musk has expressed concern for the reporting of his location following an incident on December 13 in which he claimed a stalker followed a private car carrying his son — thinking it was the billionaire himself — based on data Musk said came from an account known as @elonjet run by Jack Sweeney, a student who has tracked Musk’s personal jet for the past few years.
“Any account doxxing real-time location info of anyone will be suspended, as it is a physical safety violation. This includes posting links to sites with real-time location info. Posting locations someone traveled to on a slightly delayed basis isn’t a safety problem, so is ok,” Musk said.
3. — Adobe Shares Leap On Solid Q4 Earnings, Upbeat Outlook
Adobe (ADBE) – Get Free Report shares moved firmly higher in pre-market trading after the world’s third-largest cloud software group posted stronger-than-expected fourth quarter earnings as it moves to close its $20 billion purchase of privately-held design startup Figma.
Adobe posted record revenues of $4.53 billion for the three months ending on December 2, its fiscal fourth quarter, a 10% increase from last year, with an adjusted non-GAAP bottom line of $3.60 per share, topping Street forecasts by a dime.
Looking into the current quarter, Adobe said it sees revenues of around $4.625 billion, with earnings rising to between $3.65 tp $3.70 per share, firmly ahead of analysts’ estimates.
Adobe shares were marked 4.2% higher in pre-market trading to indicate an opening bell price of $342.50 each.
4. — Meta Jumps On JPMorgan Upgrade, Price Target Boost
JPMorgan analysts lifted their rating on the group to ‘overweight’, from ‘neutral’, while boosting their price target by $35 to $115 per share, citing better cost discipline at the social media and augmented reality group following last month’s move to lay off around 11,000 people, or 12.5% of its global workforce, in the first major round of job cuts under CEO Mark Zuckerberg.
Meta said earlier this fall that it will “meaningfully” ramp-up investments in Reality Labs, the division that will house the company’s metaverse plans and has absorbed more than $9.4 billion in losses over the first nine months of the year, as the social media group continues to transition from its Facebook roots.
The choice to double-down on the expensive enterprise, which will add at least another $4 billion to next year’s capital spending plans – now pegged at between $30 billion to $34 billion for the coming year.
Meta shares were marked 1.9% higher in pre-market trading to indicate an opening bell price of $118.29 each.
5. — U.S. Steel Gives Upbeat Q4 Guidance As Demand, Prices Improve
U.S. Steel said adjusted net earnings for the three months ending in December were forecast in the region of 58 to 63 cents per share, or $375 million, firmly ahead of the Refinitiv forecast of around 43 cents per share.
We remain on-track to deliver our second-best financial year with continued execution of our strategy and $150 million of direct returns to stockholders expected in the quarter,” said CEO David Burritt. “December commercial demand in the U.S. is better and scrap prices have begun to increase .. flat-rolled customer inquiries are accelerating and spot steel selling prices are improving.”
US Steel shares were marked 0.05% higher in pre-market trading to indicate an opening bell price of $23.65 each.