A “data-dependent” Fed on future hikes could send markets higher, Cramer says
The market is already bracing for a 75 basis point hike from the Federal Reserve, but could rally if Chairman Jerome Powell signals that future hikes will be based on economic data, CNBC’s Jim Cramer said Wednesday.
“Three-quarters and depending on the data, I think we’re home-free, but three-quarters and more watchful, then I think we have a sell,” Cramer said on “Squawk Box.”
While there is no data to support the theory that the economy is cooling, Cramer expects the central bank to take a wait-and-see approach.
“Tech has been bad, but non-technology has been good,” Cramer said. “I’d hate to see non-tech join tech in decline.”
– Michelle Fox
Rogers shares fall as DuPont deal collapses
Shares of Rogers Corp, the engineering materials maker, fell on Wednesday after a planned $5.2 billion sale of the company to DuPont De Nemours fell through.
“Rogers is currently evaluating all options to determine the best course of action in response to DuPont’s notice,” the company said in a statement.
DuPont said after the close on Tuesday that the companies were unable to obtain all required regulatory approval in a timely manner. The deal was first announced on November 1 last year.
Rogers shares rose more than 43%, while DuPont shares rose about 6%.
Stocks open lower as market prepares for Fed decision
Stocks opened lower as Wall Street awaited the Fed’s latest policy decision.
The Dow Jones Industrial Average fell 95 points, or about 0.3%. S&P 500 and Nasdaq Composite futures were down 0.3% and 0.2%, respectively.
— Samantha Subin
As Fed meets, traders bet it will stop raising rates above 5% next year
Investors in the fed funds futures market are betting that the Federal Reserve will take its fed funds rate above 5% before halting rate hikes next year.
The Federal Reserve met on Wednesday and is expected to raise its fed funds rate by 75 basis points when it issues a policy statement at 2 pm ET.
The May contract was priced at 5.02% on Wednesday morning. The Fed is currently targeting fed funds in a range of 3% to 3.25%.
“Over the last two weeks, it’s been bouncing around 5%,” said Ben Jeffery, rates strategist at BMO. He said the futures market is also pricing in a rate hike of 75 basis points by Wednesday afternoon and is giving more than 50/50 odds to a 50 basis point hike in December. One basis point is equal to 0.01 of a percentage point.
“The base case is 75 today, 50 in December and 25 in February,” Jeffery said.
Market professionals expect the Fed to also signal on Wednesday that it could start raising rates at a slower pace, starting in December.
That signal could come from Fed Chairman Jerome Powell when he speaks to the media at 2:30 pm ET.
“Until we hear from Powell at 2:30, I think this is just noise,” Wells Fargo’s Michael Schumacher said.
—Patti Domm
US-traded Chinese stocks rise on reopening speculation
Shares of US-listed Chinese companies rose again in pre-market trading on Wednesday amid rumors that China may change its strict zero-Covid policy.
The KraneShares CSI China Internet ETF gained more than 2%, building on Tuesday’s 5.5% advance. The iShares China Large-Cap ETF rose about 1%.
Individual stocks including Alibaba and Pinduoduo each added 1%.
— Samantha Subin
KeyBanc expects a tougher holiday season for the toy industry
This holiday season, the toy industry won’t see the double-digit growth it’s had over the past two years, according to KeyBanc Capital Markets.
Toy sales in 2020 and 2021 were driven by stimulus, increased savings and stay-at-home activity.
“We believe current macroeconomic uncertainty, inflationary pressures and tight financial conditions create a more challenging environment,” analyst Bradley Thomas wrote in a note on Tuesday.
He noted that consumers have already pulled back from discretionary shopping at Target and Walmart this year. Mattel and Hasbro have also recently said they are gearing up for more promotions compared to last year.
Thomas believes Ollie’s Bargain Outlet Holdings is best positioned this season thanks to its high-quality, robust inventory and clearance offerings.
—Michelle Fox
Paramount Global, Estee Lauder and Caesars Entertainment among the stocks making the biggest pre-market moves
Companies that reported earnings results were among the biggest movers in premarket trading on Wednesday.
Paramount Global: The media company’s shares fell 8% in premarket after missing both top and bottom expectations last quarter.
Caesars Entertainment: Shares of Caesars rose 7.7% in premarket trading after the station operator beat analysts’ estimates on both the top and bottom lines. Caesars also said its digital betting business turned profitable on an adjusted basis for the quarter, 12 months ahead of the company’s target.
Estee Lauder: The cosmetics maker’s shares sank 9.5% in premarket trading after issuing a weaker-than-expected outlook. Estee Lauder cited higher costs, a stronger US dollar and Covid lockdowns in China among the reasons for the disappointing forecast.
— Peter Schacknow, Samantha Subin
ADP private payrolls, wages rose in October
The October ADP Employment report showed that the private labor market remains strong even as interest rates rise and the Federal Reserve seeks to cool high inflation.
Private sector employment rose by 239,000 in October, Wednesday’s report showed. The services sector added the bulk of jobs during the month, with big gains in leisure and hospitality hiring and transportation, commerce and utilities.
In addition, annual wages rose 7.7% on the year, but the momentum in wage gains is slowing, the report said. People who changed jobs were able to get a 15.2% pay rise in October, down from a 15.7% increase in September.
The ADP report comes just days before the Bureau of Labor Statistics releases nonfarm payrolls for October.
—Carmen Reinicke, Jeff Cox
Advanced Micro Devices rises 6% despite earnings miss
Shares of Advanced Micro Devices rose 6% in premarket trade after posting results after the bell on Tuesday that missed on both the top and bottom lines.
While the chip maker missed Wall Street expectations for its fiscal third quarter, revenue from all four business segments came in ahead of what the company projected in its October warning.
AMD reported adjusted earnings of 67 cents per share on revenue of $5.57 billion. Analysts polled by Refinitiv had expected earnings of 68 cents per share on revenue of $5.62 billion.
Year-on-year, revenues grew by 29%.
— Samantha Subin, Jordan Novet
Wheat futures fall as Russia agrees to resume grain exports
Wheat futures fell sharply on Wednesday morning after Russia announced it would resume grain exports to the Black Sea.
Russia pulled out of an export deal over the weekend, but said on Wednesday it had received assurances from Ukrainian officials that the shipping lanes would not be used for military purposes. Ukraine is a major world exporter of wheat, and Russia’s invasion has disrupted supplies.
Wheat futures in Chicago fell 6% on Wednesday, although they are still higher for the week. Corn futures fell 2%.
– Jesse Pound, Holly Elliott
Mortgage demand is flat even as rates fall
Mortgage demand was flat last week, with application volume falling 0.5% from the previous week, even as rates fell, according to the Association’s seasonally adjusted index of mortgage bankers.
Meanwhile, rates fell slightly but were near a 22-year high.
Refinancing applications rose 0.2% for the week, but are still down 85% year-over-year. Mortgage applications to buy a home fell by 1%. This represents a 41% decrease compared to the same week last year.
— Diana Olick, Samantha Subin
Twilio fell 4% after double Bank of America downgrades
Shares of Twilio, the maker of programmable tools that allow businesses to send and receive calls and text messages, were down nearly 4% in premarket trading.
The drop followed a double downgrade by Bank of America and a cut to the stock’s price target. While the bank still expects the stock to rise 13% next year, that’s down from the 133% previously forecast.
Bank of America’s downgrade comes on the heels of a survey showing that slightly more than half of respondents plan to spend the same or less on the company’s platform in 2023 compared to this year.
CNBC Pro subscribers can get the full story here.
CVS shares out on pace with earnings
Shares of CVS Health rose 5% after the pharmacy operator reported third-quarter earnings and revenue that beat expectations.
CVS earned $2.09 per share on revenue of $81.16 billion. Analysts were expecting earnings per share of $1.99 on revenue of $76.75 million, according to Refinitiv.
The company also raised its full-year outlook.
—Jack Stebbins
Salesforce is going the ‘Microsoft way’, says Macquarie
Salesforce outperformed Macquarie, with analyst Sarah Hindlian-Bowler noting that the company’s recent C-suite moves likely saved it 10 years of underperformance and put it “in the way of Microsoft “.
Additionally, the analyst believes Salesforce is less likely to be affected by global macro headwinds as it enters a period of “graceful maturation.”
CNBC Pro subscribers can read the full story here.
—Alex Harring
World’s largest container shipping company Maersk, a barometer for global trade, warns of ‘dark clouds on the horizon’
Maersk, the world’s biggest container shipping company, posted a record third-quarter profit on Wednesday due to high shipping rates, but noted a slowdown in demand.
The Danish giant, widely regarded as a barometer of global trade, reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $10.9 billion in the quarter, above consensus analyst projections of $9.8 billion and an increase of about 60% over the same period a year ago.
CEO Søren Skou said this year’s “outstanding results” were…