Morning in New York: foreign policy news is the market's focus

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research

Foreign policy news will determine sentiment in the upcoming session. The night before, President Trump announced a naval blockade of tankers carrying oil to and from Venezuela. Against this background, WTI quotes rose by almost 2%. According to analysts, under the influence of the embargo from the market will temporarily leave the market up to 900 thousand barrels of oil per day, but due to the global surplus of supply strong growth in prices for this raw material will not be. Nevertheless, the escalation of tension in the region remains an important risk factor.

Heads of the FRBs of New York and Atlanta John Williams and Raphael Bostic, as well as Christopher Waller, a member of the Board of Governors, will make comments. Their assessments of the current economic situation, inflation risks and labor market conditions are important for the formation of market expectations given the mixed release on employment for October-November.

In the technology sector, the news around OpenAI remains in the spotlight. According to The Information, the company is negotiating to raise at least $10 billion from Amazon (AMZN) and in parallel may agree to use its chips in its computing infrastructure. The potential deal, on the one hand, signals the continuing high demand for AI infrastructure. On the other hand, the "circular" nature of such agreements calls into question the transparency of project economics and the real return on invested capital, which raises concerns among the investment community.

Before the main session opens, General Mills (GIS), Jabil Circuit (JBL ) , ABM Industries (ABM) and Toro Co. (TTC) will report quarterly results. Micron (MU), Herman Miller (MLKN ), Actuant Corp (EPAC) and General Employment Enterprises (JOB ) will report at the postmarket. The Micron report will be the last major corporate release in the technology sector this year.

Futures on US indices demonstrate sideways dynamics. We assess the balance of risks for the upcoming trades as neutral with moderate volatility. We focus on the S&P 500 fluctuations in the range of 6750-6850 points (from -0.7% to +0.7% to the closing level of the previous session). Recall that on Thursday, December 18, will be published data on consumer inflation for November. Trading activity before this event, as well as before Micron release, may be lower than usual.

- Worthington Enterprises (WOR) reported last quarter revenue growth of 19% YoY to $327.5 mln, beating average expectations. At the same time, the issuer's adjusted earnings per share amounted to only $0.65 with a consensus of $0.7. Against this background, the company's quotations fell by 7%. Investors focused on profitability decline, ignoring strong sales growth in the construction products segment (+31.9% YoY) and the announcement of LSI Group acquisition for $205 mln.

- Shares of Tesla (TSLA) fell about 2% with a subsequent recovery amid news of a 30-day sales suspension in California. The reason was the regulator's assumptions about misleading statements about autopilot capabilities and self-driving features. The sanction reinforces the risks of promoting the company's respective decisions.

- A weak fourth-quarter report and a disappointing outlook for the next three months caused Lennar (LEN) shares to fall more than 4%. Earnings per share came in at $1.93 with a consensus of $2.22 due to weak demand and expensive housing. At the same time, the company's revenue reached $9.37 billion versus the expected $9.02 billion. The negative reaction of investors was caused by a decrease in the profitability forecast from 17% in the reporting quarter to 15-16% in the current quarter under the influence of discount programs.

The trades on December 16 on the American stock exchanges ended mostly in the negative. S&P 500, which remained in the negative for the third day in a row, fell by 0.24%, Dow Jones lost 0.62%, Russell 2000 fell by 0.45%, and NASDAQ 100 rose by 0.26%.

Shares of the Magnificent Seven showed mixed performance. Tesla (TSLA: +3.1%) updated its historic high on news of success in the development of robotaxis. The technology sector (XLK: +0.32%) led the growth, while the energy sector (XLE: -2.98%) was the outsider on the back of falling oil prices.

The main event of the day was the publication of the labor market report for November, the structure of which was distorted by the effects of the shutdown. The data turned out to be contradictory. On the one hand, the number of new jobs outside agriculture amounted to 64k, while the consensus was 50k. On the other hand, the unemployment rate unexpectedly rose to a four-year high of 4.6%, increasing the sense of uncertainty in the economy (consensus: 4.5%, September: 4.4%). In our view, the signal in favor of a hiring recovery was the recent rise in open job openings. Thus, the weak components of the report can be viewed as statistical "noise" rather than confirmation of a turnaround in the economic cycle. The rise in unemployment to 4.6% could also be attributed to the peculiarities of classifying government employees during the shutdown of a number of government agencies. We forecast unemployment to return to the 4.4-4.5% range in the coming months.

Retail sales for October showed zero dynamics to the September level (consensus: +0.1%), indicating stagnation in consumer spending. At the same time, the key component - sales of the control group of goods - increased by 0.8%, indicating the continued strength of demand.

Preliminary PMI data for December from S&P Global signaled a cooling of economic processes. The composite business activity index fell to 53 points, manufacturing fell from 52.2 to 51.8 points, and the service index was 52.9 points with a consensus of 54.

- PayPal (PYPL: +1%) has applied for a banking license in Utah to expand small business lending, offer insured accounts and promotions to customers.

- Humana 's insurance division (HUM: -6%) will be led by Amazon's Aaron Martin in 2026 following the departure of George Renodin.

- Pfizer (PFE: -3.4%) presented EPS guidance for 2026, which came in 5% below consensus due to falling revenue from COVID products and loss of exclusivity on a number of drugs.

- Hunterbrook Media investigators found that growth in RadNet 's AI unit (RDNT: -1.9%) was driven primarily by sales to its own centers.

This article was AI-translated and verified by a human editor