U.S. Stock Outlook | Three Major Index Futures All Decline, Inflation Data Favored by the Federal Reserve to Be Revealed Tonight

Pre-Market News

1. As of December 20 (Friday) pre-market, U.S. stock index futures are all down. As of the time of writing, Dow futures are down 0.36%, S&P 500 futures are down 0.74%, and Nasdaq futures are down 1.23%.

1. As of the time of writing, the German DAX index is down 1.30%, the UK FTSE 100 index is down 0.98%, the French CAC 40 index is down 1.04%, and the Euro Stoxx 50 index is down 1.25%.

1. As of the time of writing, WTI crude oil is down 2.86%, priced at $68.56 per barrel. Brent crude oil is down 1.08%, priced at $72.09 per barrel.

Market News

The Federal Reserve favors inflation data to be revealed tonight. The U.S. November PCE price index data will be released tonight. The market currently expects the U.S. November PCE price index to grow by 2.5% year-on-year and 0.2% month-on-month; it is expected that the November core PCE price index will grow by 2.9% year-on-year and 0.2% month-on-month. It is worth mentioning that Federal Reserve Chairman Jerome Powell emphasized on Thursday that inflation is the "number one enemy." Officials now expect that achieving the 2% inflation target will take longer, a target that has not been met for nearly four years. Therefore, they have lowered expectations for interest rate cuts next year and emphasized that any future adjustments will depend on whether inflation can further cool down. This increased focus on inflation marks a strategic shift from the Federal Reserve's view in September, when it considered a weak labor market to be a greater risk. The latest forecasts show that policymakers currently expect to achieve the 2% inflation target by 2027.

Trump-backed bill fails to pass, increasing government shutdown risk. On Friday, a spending bill supported by President-elect Donald Trump was rejected in the U.S. House of Representatives, further heightening concerns about a government shutdown. Jim Reid of Deutsche Bank stated, "The biggest question now is whether the U.S. government is about to shut down." The latest bill proposed to suspend the debt ceiling and extend government funding. The bill was rejected by a vote of 235 to 174. This funding is set to expire on Friday night.

The largest "Triple Witching Day" in history is coming! Options worth $6.6 trillion are about to expire. Friday marks "Triple Witching Day," which is expected to be the largest options expiration day in history. According to statistics, options linked to stocks, exchange-traded funds (ETFs), and indices totaling over $6 trillion are set to expire According to data provided by Asym 500, the specific figure is $6.6 trillion, while some institutions even estimate the nominal value to be higher, reaching $7.7 trillion. Typically, the market experiences the most active trading wave at the opening. At that time, most options linked to the S&P 500 index will be exercised or expire. Quarterly options expiration is usually closely watched by traders, and this time is particularly important due to the significant sell-off triggered by the Federal Reserve's policy earlier this Wednesday. For investors, Friday will be a key time point that requires close attention. With the dynamic adjustments in the options market and the release of PCE data, the future direction of the market may become clearer.

Federal Reserve's hawkish actions trigger major changes in U.S. Treasuries! The yield curve reaches its steepest since 2022. Longer-term U.S. Treasuries weakened on Thursday, pushing the yield curve significantly steeper, returning to levels seen about 30 months ago. This change is primarily influenced by the Federal Reserve's tough rate policy, which is expected to reduce the number of rate cuts next year. Specifically, the yield on the two-year Treasury fell by 4 basis points to 4.31%, while the yield on the ten-year Treasury rose by about 8 basis points to an intraday high of 4.59%, close to the highest level since the end of May, with the yield difference between the two reaching 0.27 percentage points, the first time since June 2022. Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, pointed out that the weakness at the longer end of the yield curve is related to the Federal Reserve's hawkish stance, ongoing supply concerns, and investors' cautious attitude before decisive price actions. He expects the trend of a steeper curve to continue until the end of 2024.

Hawkish camp expands, making rate cuts by the Federal Reserve in 2025 increasingly difficult. In 2025, a group of somewhat hawkish Federal Reserve regional bank presidents will become voting members of the Federal Reserve's rate-setting committee, increasing the likelihood of more dissent over further rate cuts next year, similar to this week's dissent from the Cleveland Fed president against a rate cut. Oscar Munoz, an analyst at TD Securities, said, "This opens the door for more dissenting votes next year, as the incoming voting group is more hawkish compared to the outgoing group." Cleveland Fed President Loretta Mester, who voted against a rate cut in the December rate decision, will rotate out of the voting group next year, while the dovish Chicago Fed President Austan Goolsbee will take her place. However, the other two new voting members—St. Louis Fed President Alberto Musalem and Kansas City Fed President Jeffrey Schmid—will make the 2025 rate-setting committee more hawkish. They will replace the perceived centrist Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly.

If a "perfect storm" hits, oil prices may fall below $50 next year. Given the weak demand outlook, oil prices seem likely to decline by the end of this year, but 2025 may be even more pessimistic. If the market encounters "perfect storm" factors, including a sharp downturn in the European economy, oil prices could potentially fall below $50 per barrel. Tom Kloza, head of global energy analysis at OPIS, stated, "The risk of a sharp drop in oil prices next year is much greater than the risk of a surge." Proposed U.S. tariffs "may temporarily push oil prices higher, but as Canada and Mexico are forced to shift exports more aggressively, companies will gradually adapt to the tariff impacts, and oil prices may turn to decline At the same time, the idle capacity of OPEC member countries can be seen as a "spring that will eventually rebound." Kloza pointed out that a supply surplus is "almost certain," although it will be "volatile, with the riskiest period being from September to December next year."

Individual Stock News

Novo Nordisk (NVO.US) plummets pre-market as next-generation weight loss drug trial results fall short of expectations. Novo Nordisk stated on Friday that its experimental next-generation obesity drug Cagrisema helped overweight patients lose 22.7% of their weight in a late-stage trial, below its expected 25%. As of the time of writing, Novo Nordisk's stock fell over 22% in pre-market trading, while its competitor Eli Lilly (LLY.US) rose over 10% pre-market.

Promotional activities drag down Nike (NKE.US) Q2 revenue and profit, CEO admits new strategy may impact short-term performance. The financial report showed that for the second fiscal quarter ending November 30, Nike's sales fell 8% year-on-year to $12.35 billion, exceeding market expectations of $12.13 billion; earnings per share were $0.78, above market expectations of $0.63, but below last year's $1.03. The company's CEO Elliott Hill and CFO Matt Friend stated that the sneaker giant has been relying on promotions to drive sales and plans to restore its online business to a full-price model, but first needs to actively clear old inventory through "lower-margin channels." Hill stated, "What I see is that Nike's direct, digital, and physical traffic has all declined because we lack freshness... and we haven't provided inspiring stories. The result is that our promotional efforts have been too aggressive... Going into this year, our digital platform will split half of the full-price sales with promotional sales. The discounting not only affected our brand but also disrupted the profitability of the entire market and our partners." "I acknowledge that some of these actions will negatively impact our near-term performance, but our vision is long-term." Nike expects gross margins for the holiday quarter to decline by 3 to 3.5 percentage points; the company also anticipates a low double-digit decline in sales, worse than analysts' average expectations. As of the time of writing, Nike's stock fell over 3% in pre-market trading on Friday.

Continued weakness in courier services, the spin-off of the freight business is the biggest surprise for FedEx (FDX.US) Q2. The financial report showed that FedEx's revenue for the second fiscal quarter was $22 billion, a year-on-year increase of 0.9%, below market expectations of $22.1 billion. Under non-GAAP, net profit was $990 million, compared to $1.01 billion in the same period last year; adjusted earnings per share were $4.05, compared to $3.99 in the same period last year, with market expectations of $3.94. FedEx announced plans to spin off its freight division into an independent publicly traded company, a move that will drive the company's streamlining efforts. Meanwhile, FedEx lowered its full-year profit forecast, citing continued weakness in demand for its U.S. express division. The company stated that adjusted earnings for fiscal year 2025 will be $19 to $20 per share, down from the previous forecast of $20 to $21 per share. A more pessimistic outlook indicates that FedEx will continue to struggle with declining package demand issues As of the time of publication, FedEx rose over 8% in pre-market trading on Friday.

Trump transfers all shares of Trump Media & Technology Group (DJT.US) to a trust, with his son as the sole trustee. Documents from the U.S. Securities and Exchange Commission (SEC) show that former President Trump transferred all 114.75 million shares of Trump Media & Technology Group to a revocable trust, the Donald J. Trump Revocable Trust, on Tuesday, with no monetary transaction involved, and Trump is the sole beneficiary of the trust. Based on the closing price of Trump Media & Technology Group on Thursday at $35.41 per share, the transfer involves a total stock value of over $4 billion. The SEC documents indicate that since Trump is the beneficiary of the trust, he now "indirectly" owns the shares of Trump Media & Technology Group that he transferred. It is reported that Trump has been the largest individual shareholder of Trump Media & Technology Group, holding nearly 57% of the shares. Additionally, Trump's son, Donald Trump Jr., is the sole trustee of the trust and has exclusive voting and investment rights over all securities held by the trust. As of the time of publication, Trump Media & Technology Group fell over 5% in pre-market trading on Friday.

Steel prices and demand remain sluggish, U.S. Steel (X.US) lowers Q4 earnings guidance. The company expects an adjusted loss per share in the fourth quarter to be between $0.29 and $0.25, while analysts' average expectation is a profit of $0.16 per share; it expects adjusted core profits of about $150 million, down from the previously forecasted $225 million to $275 million, far below the average expectation of $261.7 million from six Wall Street analysts. The company's CEO, David Burritt, stated that low steel prices and costs associated with the expansion of the Big River 2 (BR2) plant are putting pressure on this quarter, while the team is working to increase production at the new plant. As of the time of publication, U.S. Steel fell over 5% in pre-market trading on Friday.

Ionis Pharmaceuticals (IONS.US) receives FDA approval for rare disease drug Olezarsen. Olezarsen has been approved for the treatment of familial chylomicronemia syndrome (FCS). FCS is a severe and extremely rare genetic disorder often caused by various single-gene mutations. Currently, there are very limited treatment options available for FCS, with strict low-fat diets being the first-line approach to treating this disease. Olezarsen has been approved as an adjunct treatment to lower triglyceride (TG) levels in adult patients. Trial results released in April this year showed that Olezarsen significantly reduced triglycerides, apolipoprotein B, and non-HDL cholesterol levels in patients with moderate hypertriglyceridemia at high cardiovascular risk, with no significant safety issues reported. As of the time of publication, Ionis Pharmaceuticals rose nearly 8% in pre-market trading on Friday.

Important Economic Data and Event Forecast

Beijing time 21:30 US November PCE Price Index data

Beijing time 21:30 US November Personal Spending MoM

Beijing time 23:00 US December University of Michigan Consumer Sentiment Index Final