US open: Stocks mixed ahead of the Fed

US futures

Dow futures -0.08% at 35528

S&P futures -0.02% at 4637

Nasdaq futures +0.03% at 15934

In Europe

FTSE -0.31% at 7204

Dax +0.2% at 15513

Euro Stoxx +0.64% at 4171

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Retail sales slow

US stocks are pointing a mixed open after disappointing retail sales data and as investors look ahead to the Fed’s announcement later today.

Retail sales rose just 0.3% MoM in November noticeably lower than October’s 1.8%. Retail sales are notoriously volatile, and October was an exceptionally strong month. Whilst sales still grew in November, they did so at a slower pace than expected, possibly a sign that rising prices are starting to bite.

The moves in the futures today are fairly subdued ahead of the key Fed meeting. Coming to a backdrop of record high PPI and CPI at an almost 40 year high, the market is expecting the Fed to ramp up the pace at which it is tapering bond purchases. This would bring the programme to an end by March, which could mean that a rate hike from the Fed will be lined up for the middle of the year, leaving plenty of time for one, if not two more hikes across the second half of the year.

Whilst the Fed is unquestionably the key focus for the market’s today, Omicron concerns are also lingering. A statement from the World Health Organisation that COVID vaccines may be less effective against Omicron, was information that the market already had, but still it has added to the negative tone.

In corporate news:

Eli Lilly rose 5% pre-market after raising its full year 2021 profit and sales forecast, thanks in part to the US government’s contract for its COVID antibody treatment.

Where next for the Dow Jones?

The S&P closed off the lows in the previous session and is holding steady just above the 50 sma with the longer term bull trend still in tact. The RSI is neutral awaiting its next catalyst. Should the price break through the 50 sma at 4315, this opens the door to 4500 the December low. It would take a move below here for sellers to gain momentum. Meanwhile, buyers could look for a move over 4715.

FX – USD rises, GBP rises as CPI hits 5.1%

The USD is edging a few pips higher, building on gains from the previous session after strong PPI and ahead of the Fed meeting later today.

GBP/USD is rising as investors increase bets that the BoE will hike interest rates tomorrow after inflation surged to 5.1%. Decade high inflation, plus payrolls back at pre-pandemic levels could encourage the BoE to act, despite Omicron fears.

 

Oil extends losses for a third straight day

Oil prices are heading southwards for a third straight day as Omicron concerns continue to haunt the market. The World Health Organisation said that COVID vaccines may be less effective against Omicron. The International Energy Agency also warned that the spread of Omicron would dent global demand for oil, particularly in the US.

However, OPEC remain relatively upbeat on the look picture.

API data yesterday showed that crude stock piles fell by 815,000 compared to a 2.1 million barrel drop expected, which offered some support to the price.

EIA stock pile data is due shortly.

WTI crude trades -0.1% at $70.95

Brent trades -0.01% at $74.30

Learn more about trading oil here.

 

Looking ahead

15:30 EIA crude oil stocks