Stock futures steady as inflation focus resumes; Taiwan Semiconductor set to triple U.S. chipmaking investment; Microsoft moves to placate Sony amid Activision takeover; PepsiCo edges higher on reports of planned job cuts and Fox shares jump as Murdoch mutes News Corp combination.
Five things you need to know before the market opens on Tuesday December 6:
1. — Stock Futures Steady As Inflation Focus Resumes
U.S. equity futures nudged lower Tuesday, while the dollar held onto yesterday’s rally and Treasury yields stabilized, as investors continue to worry that inflation risks remain imbedded in the domestic economy.
Monday’s stronger-than-expected reading of the ISM non-manufacturing index for November, a benchmark of activity in the biggest and most important driver of growth in the U.S. economy, surprised markets and triggered the biggest rally in the dollar in more than two weeks as traders bet the data may induce a longer, and more hawkish stance on rate hikes from the Federal Reserve.
The CME Group’s FedWatch still suggests a 78.2% chance of a 50 basis point rate hike from the Fed next week, but bets on follow-on moves of similar size are starting to take shape, testing the market’s theory that the terminal Fed Funds rate will be pegged at around 5% to 5.25% in the early spring.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.02% higher in overnight trading at 105.136, following on from yesterday’s sharp rally triggered by the ISM data. Gains were tempered, however, by another overnight rate hike by the Reserve Bank of Australia — its eighth of the year — which lifted its benchmark cash rate to 3.1%.
Benchmark 10-year Treasury note yields were holding at 3.581% in overnight trading, consolidating yesterday’s gains, while 2-year notes were pegged at 4.369%.
Further Covid easing in China, including moves to eliminate negative testing requirements to travel on public transport in the capital city of Beijing, failed to support stocks in the Asia session as markets reacted to last night’s slump on Wall Street.
The region-wide MSCI ex-Japan index was marked 1.32% lower heading into the close of trading, its biggest decline in two weeks, while Europe’s Stoxx 600 fell 0.2% in early trading in Frankfurt.
On Wall Street, futures contracts tied to the S&P 500 are priced for a 1 point opening bell decline while those linked to the Dow Jones Industrial Average are indicating a 5 point dip. Futures tied to the tech-heavy Nasdaq are priced for a 10 point gain.
2. — Taiwan Semiconductor Set to Triple U.S. Chipmaking Investment
Taiwan Semiconductor, the world’s biggest contract chipmaker, is set to unveil plans for a second manufacturing site in Arizona Tuesday, taking its overall U.S. investment to more than $40 billion.
TSMC, as it is often known, will host President Joe Biden at its plant in Phoenix later today as moves towards making the $12 billion facility fully operational by 2024.
The company is also set to unveil plans for a second plant, which will begin producing higher-end chips in 2026, at today’s event. Nvidia (NVDA) – Get Free Report CEO Jensen Huang, who will attend the event along with Apple’s (AAPL) – Get Free Report Tim Cook and Micron’s (MU) – Get Free Report Sanjay Mehrotra, called TSMC’s investment a “game-changing development for the industry”.
Nvidia shares were marked 0.16% higher in pre-market trading at $166.36 each while Micron nudged 0.39% higher to $54.25 each.
3. — Microsoft Moves To Placate Sony Amid Activision Takeover
Activision Blizzard (ATVI) – Get Free Report shares edged higher in pre-market trading following a move by Microsoft (MSFT) – Get Free Report to offer Sony a ten-year contract that guarantees the simultaneous release of ‘Call of Duty’ games on both the XBox and Playstation consoles.
Microsoft, which is seeking ways to convince regulators to approve its proposed $69 billion takeover of ‘Call of Duty’ maker Activision, said keeping the popular game only on XBox — the console made by Microsoft — would be “economically irrational”.
The comments, made by Microsoft President Brad Smith in a Wall Street editorial late Tuesday, could provide a path through the thicket of regulators seeking to probe the deal, first unveiled in January, over concerns that it will raise prices and limit customer choice. Microsoft also said it would boost the price of new ‘Call of Duty’ releases by 16.7%, to $70 each, starting next year.
Activision shares were marked 0.5% higher in pre-market trading to indicate an opening bell price of $76.71 each. Microsoft, meanwhile, was little-changed at $250.20 each.
4. — PepsiCo Edges Higher On Reports of Planned Job Cuts
PepsiCo (PEP) – Get Free Report shares moved higher in pre-market trading following a Wall Street Journal report that suggested the drinks and snacks giant is preparing to lay off hundreds of workers in its north American division.
PepsiCo, which lifted its full-year profit forecasts in October following a strronger-than-expected third quarter earnings report powered by its Frito-Lay snacks operations, is looking to “simplify the organization so we can operate more efficiently”, according to a company memo viewed by the Journal.
The job cuts are likely to affect the group’s headquarters in Purchase, New York, as well as offices in Chicago, Illinois and Plano, Texas.
PepsiCo forecast organic revenue growth of around 12%, topping its previous forecast of 10%, while boosting its forecast for core earnings for the year to $6.67 per share, a four cent improvement on its previous estimate, in early October.
PepsiCo shares were marked 0.11% higher in pre-market trading to indicate an opening bell price of $183.32 each.
5. — Fox Shares Jump As Murdoch Mutes News Corp Combination
Fox Corp. (FOXA) – Get Free Report shares jumped higher in pre-market trading after billionaire media owner Rupert Murdoch said he would not support a re-combination with News Corp. (NWS) – Get Free Report unless it was approved by investors.
Murdoch, 91, who along with his son Lachlan has effective control over Fox, said in October that the two media groups have formed ‘special committees’ to “thoroughly evaluate a potential combination”. The all-stock deal would require a majority vote of the minority shareholders of both News Corp and Fox, with the Murdoch family controlling around 39% of the former and 42% of the latter.
The committee said in a statement late Monday that it is ‘thoroughly reviewing’ the proposed deal, but no determination has been made. The Murdoch Family Trust, meanwhile, has said it would only support the tie-up if it’s approved by a “majority vote of the shares held by non-affiliated stockholders entitled to vote.”
Fox shares were marked 1.22% higher in pre-market trading to indicate an opening bell price of $32.40 each. News Corp. shares were unchanged at $18.96 each.
