© Reuters.
Investing.com – U.S. futures pointed lower on Wednesday as traders gauged the potential for Federal Reserve interest rate cuts this year after a senior central bank official made a hawkish statement. Elsewhere, Walt Disney (NYSE:) is rejecting a number of candidates for its board put forward by activist investors as headwinds loom against China's economy, even as the country posts annual growth that exceeds Beijing's target.
1. US Futures Slip
U.S. stock futures were lower on Wednesday, pointing to an extension of losses recorded in the previous session as investors weighed new comments on the Federal Reserve's possible interest rate path this year.
As of 5:10 a.m. ET (10:10 GMT), the contract had lost 139 points, or 0.4%, was down 21 points, or 0.4%, and was down 97 points, or 0.6%.
Key averages in New York fell on Tuesday, with traders reacting to hawkish comments in a high-profile speech by a senior Fed official (see below). A decline in bank stocks following mixed earnings from Wall Street giants Goldman Sachs and Morgan Stanley sent the benchmark down 0.4%.
Technology-heavy stocks also fell by 0.2%. Apple (NASDAQ:), one of the index's largest constituents, fell 1.2% after news that the company was offering discounts on its wildly popular iPhone device in China to combat strong domestic competition.
A highlight of the economic data calendar today will be the release of US retail sales for December. Analysts at ING say a strong month-on-month reading could challenge the current market assessment of a 62 percent chance of a Fed rate cut in March.
2. Waller from the Fed further dampens hopes of imminent interest rate cuts
Fed Governor Christopher Waller said there was no rush for the world's most influential central bank to begin cutting interest rates from more than two-decade highs this year.
In a speech at the Brookings Institution in Washington, DC, Waller noted that U.S. economic activity and labor markets are in “good shape” while inflation is “gradually” declining toward the Fed's stated 2% target.
Because of these trends, Waller argued, “You see[s] There is no reason to move as quickly or cut as quickly as we have in the past.”
The comments led to a rise in the rate-sensitive two-year Treasury yield and the benchmark 10-year Treasury yield on Tuesday. As of 5:10 a.m. ET on Wednesday, the 2-year yield was up 0.044 percentage points at 4.27% and the 10-year yield was down slightly by 0.015 percentage points at 4.05%. Yields tend to move in the opposite direction to prices.
3. Disney rejects nominations for activist board
Walt Disney has rejected nominees for its board proposed by activist investors, saying the entertainment giant's current leadership team has made “significant” progress in carrying out a major transformation of the company.
In a letter to shareholders, Disney CEO Bob Iger outlined the company's plan to make its streaming business profitable, transform its sports media brand ESPN into a “standout” digital platform, improve production at its film studios and “supercharge” its key. Theme Parks Department.
“[W]“We continue to move forward with urgency and clarity,” Iger said.
Activist stakeholders, angered by weak streaming returns and box office flops that have led to a decline in Disney's stock price, have sought to grab board seats to influence this revamp. One of the most outspoken figures in the fight was Trian Fund Management boss Nelson Peltz, who heavily criticized Iger as the “root cause” of Disney's problems.
Trian previously nominated both Peltz and former Disney CFO Jay Rasulo to the board, while fellow activist Blackwells Capital nominated three of its own candidates. In a securities filing rejecting these candidates, Disney particularly criticized Peltz, claiming he “did not present a single strategic idea.”
4. Chinese growth in 2023 exceeds official target, but headwinds remain
China's economy grew slightly less than expected in the fourth quarter due to continued pressure from weak spending and a decline in the property market, although growth for 2023 narrowly exceeded government targets.
Gross domestic product rose 5.2% year-on-year in the three months ended Dec. 31, data from the National Bureau of Statistics showed on Wednesday. The reading was weaker than expectations for 5.3% growth, but rebounded from 4.9% in the previous quarter.
This brought overall growth for 2023 to 5.2%, slightly above Beijing's 5% target. While activity accelerated from a dismal 3% in 2022, the higher figure was also due to a lower comparable base as the country still grappled with strict COVID-19 restrictions. Excluding the three years of closures during the pandemic, this was the lowest annual growth rate since 1990.
Slowing consumer spending, a collapse in the real estate market and deflationary pressures weighed on the Chinese economy last year. New data also showed the country's population decline accelerated in 2023, highlighting the demographic challenges facing the world's second-largest economy.
5. Weak Chinese data impacts crude oil prices
Oil prices fell on Wednesday after disappointing growth data from China, adding to fears that the country may be unable to boost global crude growth in 2024.
At 5:12 a.m. ET, futures were trading 2.2% lower at $70.91 a barrel, while the contract fell 2.0% to $76.72 a barrel.
Meanwhile, the US dollar was at a one-month high after comments from Fed Chairman Waller dampened expectations that interest rate cuts were imminent. The dollar's strength may hurt demand for dollar-denominated oil from buyers paying in other currencies.
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