© Reuters.
Investing.com – U.S. stock futures pointed to a decline on Wednesday after a mostly negative start to 2024 in the previous session. Markets are now awaiting the release of minutes from the Federal Reserve's December policy meeting for possible clues about the central bank's interest rate path in the coming months. Elsewhere, sales of Tesla's (NASDAQ:) Chinese-made cars surged in December, but Elon Musk's electric vehicle giant is still battling tough competition in the country.
1. Futures inches lower
U.S. stock futures fell slightly on Wednesday as investors awaited the release of minutes from the Federal Reserve's latest policy meeting.
As of 5:09 a.m. ET (10:09 GMT), the contract was down 56 points, or 0.2%, down 11 points, or 0.2%, and down 76 points, or 0.4%.
Both the benchmark and the tech-heavy stock lost ground on the first trading day of 2024, weighed in part by fading hopes that the Fed will implement interest rate cuts early this year. Meanwhile, 30 shares gained almost 0.1%.
In individual stocks, shares of Apple (NASDAQ:) fell about 4% after analysts at Barclays downgraded their rating on the iPhone maker, citing weak hardware demand and concerns about sales at its services division. Nvidia (NASDAQ:), Google parent Alphabet (NASDAQ:) and Microsoft (NASDAQ:) – which, along with Apple, are part of the so-called Magnificent Seven group of technology companies that helped drive stocks to a banner 2023 – – also rejected.
“The impressive rally to start the year[-]The end has weakened a bit despite the seasonal tailwinds, but we expect the short to lose[-]“Near-term momentum is likely to be modest,” analysts at Fairlead Strategies said in a note to clients.
2. US Treasury yields are rising
Another drop in stocks on Tuesday was a rise in U.S. Treasury yields, a possible sign that markets' excitement over the prospect of Fed rate cuts earlier this year may be waning.
The yield on the benchmark 10-year bond – a key indicator for long-term estimates of borrowing costs – briefly hit a more than two-week high, while the yield-linked 2-year bond also rose. Prices typically fall when yields rise.
At the end of 2023, the figure was below 3.9%, after a strong recovery at the end of the year, driven by expectations of imminent interest rate cuts from the Fed and a so-called “soft landing” for the US economy. In this scenario, the Fed's aggressive rate hike campaign successfully cools inflation without triggering a collapse in the overall economy.
Aided by the rise in Treasury yields, the U.S. dollar, which tracks the greenback against a basket of its currency pairs, posted its best daily performance since March 2023.
3. Fed minutes ahead
Traders are now turning their attention to the minutes of the Fed's December meeting, due to be released on Wednesday at 19:00 GMT.
How officials view borrowing costs moving in the coming months could have an impact on whether recent bets hold that the Federal Reserve will soon begin cutting interest rates from more than two-decade highs.
In December, the Fed left interest rates unchanged in a range of 5.25% to 5.50% but signaled that its unprecedented tightening cycle to contain elevated inflation may have reached its peak. New forecasts from policymakers also suggest they could cut interest rates by 75 basis points this year, an outlook that is more dovish than previous forecasts.
Speculation about possible interest rate cuts sparked a surge in stock prices late in the year, although many officials have since tried to curb that enthusiasm. The minutes could provide even more insight into the Fed's thinking.
4. Sales of Tesla's Chinese-made electric vehicles surge in December
Sales of Tesla's Chinese-made electric vehicles (EVs) rose 68.7% year-on-year last month, new data from the China Passenger Car Association showed on Wednesday, although the US carmaker still faces stiff competition in the country.
The December total, which includes exports, brought Tesla's annual sales in China to 947,742 – just over half of the company's global shipments.
Tesla's Shanghai factory is its largest production center, supplying China and other countries such as New Zealand and Australia. The group has outlined plans to expand its EV capacity at the factory, but the move still needs regulatory approval from Beijing.
The latest CPCA figures come after China's BYD (SZ:) overtook Tesla as the world's largest electric vehicle maker earlier this week. BYD, which offers both pure battery and hybrid options, delivered 341,043 cars in December, up 45% from a year ago.
5. Oil slips
Oil prices fell on Wednesday ahead of the release of key weekly inventory data from the United States, the world's largest consumer.
At 5:09 a.m. ET, futures were trading 0.6% lower at $69.94 a barrel, while the contract fell 0.5% to $75.53 a barrel.
U.S. crude oil inventories from industry group American Petroleum Institute are due later on Wednesday, a day later than usual due to the Lunar New Year holiday on Monday. Official data will then be published on Thursday.
Crude oil benchmarks had risen sharply earlier in the week after attacks by Houthi rebels on ships in the Red Sea raised concerns about possible supply disruptions in that key region.
Comments are closed.