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US futures

Dow futures -0.36% at 37584

S&P futures -0.4% at 4724

Nasdaq futures -0.58% at 16449

In Europe

FTSE -0.59% at 7667

Dax -1% at 16590

• Investors rein in Fed cut bets ahead of data
• ISM manufacturing, job openings & FOMC minutes are due
• Apple falls further on iPhone worries
• Oil rises from a 3-week low 
   

Investors rein in Fed cut bets ahead of data

US futures are pointing to further losses on Wednesday, the second trading day of 2024. The losses come as treasury yields rise ahead of data, which could offer additional clues over the Federal Reserve's plans for easing monetary policy.

Tech stocks fell sharply yesterday, and the Nasdaq 100 is set to underperform again today as the 10-year treasury yield climbed for a fourth straight session to 3.972%.

While optimism about aggressive rate cuts from the Federal Reserve sent stocks charging higher at the end of 2024, investors are reassessing the likelihood of deep and significant rate cuts this year. Investors are rotating out of rate-sensitive stocks, such as big tech and growth stocks, resulting in a steep selloff in the Nasdaq100.

Attention will now be on US ISM manufacturing PMI data, which is expected to show the sector contracted at a slower pace in December, 47.1, up from 47.6.

JOLTS job openings are also expected to rise slightly to 8.75 million from 8.733 million. The data comes ahead of Friday's nonfarm payroll report. Stronger than forecast data could see investors rein in rate-cut bets further.

The Federal Reserve December meeting minutes, where policymakers opened the door to potential rate cuts this year, are due to be released later.

However, following the meeting, several Fed members have looked to calm rate-cut bets, so the minutes may not provide the dovish clues the market hopes for. Let's not forget that the Fed has pointed to around three cut rate cuts this year while the equity market is currently pricing for six.

Should the minutes be more hawkish than the market has been pricing, stocks could drop further.
 

Corporate news

Apple is set to extend losses on the open after falling 3.5% in the previous session. The tech giant fell after data from a Counterpoint research group showed that its iPhone market share of worldwide smartphones fell in November.

Tesla is set to fall 1.7% on the open after the EV maker saw sales in China rise by 68.7% annually, according to Chinese data, as it faces intense competition in the world's largest automobile market.

Coinbase is on track to fall a further 6.6% on the open after dropping 9.8% in the previous session as the cryptocurrency exchange suffers amid a sharp fall in Bitcoin.
 

Nasdaq 100 forecast – technical analysis

The Nasdaq 100’s 9-week rally appears to have run out of steam. The index continues to fall from its all-time high of 16978, breaking below the rising trendline support. The Nasdaq 100 is testing yesterday’s low at 16450, with a break below here opening the door to 16170, the November high. Should the 16450 support hold, buyers could look to push the price back up towards 16865, the mid-December high, before bringing the all-time high back into focus.

(Click on image to enlarge)

FX markets – USD rises EUR/USD falls

The USD rises as investors reassess expectations of significant rate cuts across 2024. Attention will be on US ISM manufacturing PMI data, JOLTS job openings, and the FOMC minutes later.

EUR/USD Is drifting lower after German employment change fell to 5K from 22K. Unemployment remained unchanged at 5.9%. Investors have priced in six rate cuts from the ECB across 2024 as inflation in the region has fallen close to 2% and as the economy shows signs of slowing.

GBP/USD has given up earlier gains and is extending a slide towards 1.2625 as risk appetite evaporates.  The pound had outperformed in recent months on expectations that the Fed would start cutting interest rates earlier than the Bank of England; however, the UK's deteriorating economic outlook and deepening business pessimism could force BoE policymakers to cut rates sooner.

EUR/USD -0.23% at 1.0917

GBP/USD +0.04% at 1.2625
 

Oil rises from a 3-week low.

Oil prices rise after steep losses in the previous session as investors fretted about the US economy and supply disruptions from ongoing tension in the Red Sea.

Previous optimism that the Federal Reserve could cut interest rates aggressively across 2024 was waning, pulling oil prices lower.

Meanwhile, expectations of abundant oil supply in the first six months of this year are limiting the upside ahead of the potential OPEC+ meeting in early February. This would be earlier than the June date initially planned.

The decision to hold the meeting earlier highlights uneasiness in the oil cartel over the current weak oil market conditions, despite voluntary cuts in the region of 2.2 million barrels per day in Q1.

Looking ahead, today’s US crude oil inventory report is expected to show that crude stockpiles fell last week.

WTI crude trades +0.85% at $71.05

Brent trades +0.85% at $76.59

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