Stock Market Update

The S&P 500 futures are up 20 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 63 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 150 points and are trading 0.4% above fair value.

Stock futures indicate a higher open, but there's not a lot of enthusiasm driving early action. Focus will be on the FOMC decision today at 2:00 ET followed by Fed Chair Powell's press conference at 2:30 ET.

Market participants largely expect the Fed to cut the target range for the fed funds rate by 25 basis points to 4.25-4.50%. The big unknown is how the Summary of Economic Projections (SEP) will look, which features projections for the Fed's policy path.

This would mark the third rate cut this year by the FOMC, which is in-line with estimates for rate cuts in 2024 from the December 2023 SEP. The last SEP released in September showed an estimate for a full percentage point reduction in rates in 2025. 

The 10-yr yield is up three basis points ahead of the decision at 4.41%. The 2-yr yield is at 4.26%, up two basis points from yesterday. 

In corporate news:

• General Mills (GIS 62.00, -3.93, -6.0%): beats by $0.18, beats on revs; Lowers FY25 adjusted EPS growth guidance
• HEICO (HEI 243.92, -15.88, -6.1%): beats by $0.01, misses on revs; anticipates net sales growth in FY25
• Boeing (BA 174.08, +1.05, +0.6%): resumed aircraft production in Seattle, according to Bloomberg
• Post (POST 118.50, +2.87, +2.5%): agrees to acquire Potato Products of Idaho, L.L.C; terms of transaction not disclosed

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region were mixed. Japan's Nikkei: -0.7%, Hong Kong's Hang Seng: +0.8%, China's, Shanghai Composite: +0.6%, India's Sensex: -0.6%, South Korea's Kospi: +1.1%, Australia's ASX All Ordinaries: flat.
  • In economic data:
    • Japan's November Exports +3.8% yr/yr (+2.8% expected; last +3.1%) and Imports -3.8% yr/yr (+1.0% expected; last +0.4%)
    • Australia's November MI Leading Index +0.1% (last +0.2%)
  • In news:
    • There is growing attention to central bank policy meetings that include today's FOMC decision, the Bank of Japan decision on Thursday, and the PBOC decision on Friday.
    • Separately, Bank Indonesia held its benchmark rate steady at 6.00% and Bank of Thailand did, too, keeping its policy rate at 2.25%.
    • Japan reported November trade data that included better-than-expected exports but weaker-than-expected imports, contributing to the prevailing expectation that the BOJ will hold off on raising rates this week.
    • According to Nikkei, Honda and Nissan will soon start merger talks as they aim to compete more effectively against Tesla.
    • Elsewhere, the PBOC held a meeting with financial firms to discuss their aggressive trading and to emphasize the need to be aware of relevant risks, according to Bloomberg.
    • Bank of Korea Governor Rhee sees downside risk to South Korea hitting the 2024 GDP growth forecast of 2.2%.
• Major European indices are mostly higher as markets await the FOMC decision and Summary of Economic Projections that will include estimates for the policy rate path. STOXX Europe 600: +0.2%, Germany's DAX: +0.2%, U.K.'s FTSE 100: +0.2%, France's CAC 40: +0.3%, Italy's FTSE MIB: +0.3%, Spain's IBEX 35: +0.4%.
  • In economic data:
    • Eurozone's November CPI -0.3% (expected -0.3%; last 0.3%) and 2.2% yr/yr (expected 2.3%; last 2.0%); Core CPI -0.6% m/m (expected -0.6%; last 0.2%) and 2.7% yr/yr (expected 2.7%; last 2.7%)
    • UK's November CPI 0.1% m/m (0.1% expected; last 0.6%) and 2.6% yr/yr (expected 2.6%; last 2.3%); Core CPI 0.0% m/m (last 0.4%) and 3.5% yr/yr (expected 3.6%; last 3.3%); November RPI 0.1% m/m (last 0.5%) and 3.6% yr/yr (expected 3.7%; last 3.4%); December CBI Industrial Trends Orders -40 (expected -22; last -19)
  • In news:
    • The Bank of England will hold its policy meeting tomorrow and today's CPI report for November solidified expectations that the BOE will remain on hold, as CPI increased to 2.6% yr/yr versus 2.3% in October.
    • The final November CPI reports for the eurozone were roughly as expected.
    • Total CPI was revised down to 2.2% yr/yr from prior 2.3% but core CPI remained unchanged at 2.7%.
    • ECB Chief Economist Lane said the ECB needs to "maintain agility" given the elevated uncertainty in the current environment, according to Bloomberg.