New York morning: the Fed's favorite inflation indicator in focus

The key event of the upcoming session will be the publication of personal income and expenditure statistics, as well as the consumer spending deflator (PCE) for September. These data will complement the picture formed by the recently released business activity indices and will be another test of the "soft landing" scenario for the US economy. Freedom Broker's forecast calls for a 0.3% m/m increase in consumer spending at the expense of a 0.5% m/m rise in the services sector. For the household income benchmark, we plot a 0.4% m/m increase, assuming that the PCE total and core deflators rise by 0.21% and 0.18% m/m, respectively. The realization of these close to consensus expectations will indicate a gradual easing of inflationary pressures.

Also of interest for participants of today's trades will be the data of consumer sentiment index from the University of Michigan for December (consensus: 52 points, November: 51 points). The main indicator for assessing the risk of a price hike will be the dynamics of inflation expectations. All statistics released this Friday will have an impact on the Fed's decision on the parameters of the MPC, which will be made on December 10. According to CME FedWatch, the probability of a 25bp rate cut is estimated at around 90%.

Victoria's Secret (VSCO) will present quarterly results before the main session opens.

Futures on US indices show weak positive dynamics. We assess the balance of risks for the upcoming trades as neutral with moderate volatility. We focus on S&P 500 fluctuations in the range of 6820-6900 points (from -0.5% to +0.6% of the previous session's closing level).

- Despite a strong quarterly report, reflecting revenue growth of 8% with strong operating margins and free cash flow, market reaction to DocuSign's (DOCU) report was negative, with its stock losing more than 5% in the premarket. Investors focused on the risks of metrics volatility due to the introduction of a subscription model, the effect of customer migration to cloud services, and the sensitivity of revenue to the timing of renewals.

- Rubrik (RBRK) reported double-digit growth in subscription revenue (ARR) and revenue, as well as record free cash flow for the quarter. Against this backdrop, the company's shares rose more than 15% in value before the start of main trading. Investors' focus on accelerating the development of cloud SaaS and AI products outweighed margin concerns.

- Hewlett Packard Enterprise (HPE) generated record margins in the latest reporting period and showed strong revenue growth from its networking and GreenLake businesses. At the same time, the server segment and hybrid cloud services business recorded a decline in revenues, and the timing of AI server shipments was pushed back. The market perceived this information cautiously. Together with concerns about the impact of rising memory chip prices and the difficulties of integrating the absorbed Juniper, this led to a drop in the company's shares by about 8%, despite the confident guidance of the management.

- Exclusive negotiations to sell Warner Bros. Discovery's (WBD) movie studios and streaming assets to Netflix (NFLX) for $28 per share with hefty compensation in the event of a regulatory lockup and a predominantly cash portion have increased speculation surrounding the deal. Amid these reports, WBD stock is adding about 4% on the premarket.

- Ulta Beauty (ULTA) reported strong revenue and comparable sales growth in the quarter with an expanding loyal customer base and strong digital services. Investors ignored the decline in margins due to higher costs. Quotes of the company before the opening of the main session are up within 5%.

- SentinelOne's (S) steady improvement in recurring revenue (ARR) and margin, as well as platform expansion with Observo AI, went unnoticed by investors due to cautious guidances on revenue and ARR, as well as management's warning of impending margin erosion. This caused the company's shares to fall by about 7% in the premarket.

Trading on December 4 on the U.S. stock exchanges ended mixed. S&P 500 rose by 0.11%, Nasdaq 100 corrected by 0.1%, Dow Jones lost an insignificant 0.07%, and Russell 2000 rose by 0.76%.

The communications sector (XLC: +0.57%) was the top performer, while the healthcare industry (XLV: -0.76%) was the outsider.

The representatives of the "Magnificent Seven" showed mixed dynamics. Meta (META: +3.43%) closed in a strong plus. Amazon (AMZN: -1.41%) was under the greatest pressure.

The market is still experiencing difficulties with formation of single direction. The main movement is observed in securities of small capitalization companies with high beta, and also in shares of beneficiaries of AI-trend on the background of tight schedule of industry conferences and separate corporate reports. Investors are waiting for important for AI-related events, as well as for the results of the Fed meeting. This explains the decline in trading turnovers after the rally in late November, driven by the hope for seasonally favorable statistics by the end of the month.

The number of initial applications for unemployment benefits for the previous week amounted to the lowest since September 2022, 191 thousand with a consensus of 220 thousand. The number of repeated applications decreased to 1.939 million with average forecasts at 1.963 million. At the same time, Challenger statistics recorded about 1.1 million layoffs since the beginning of the year, and this is the maximum since 2020. This information shows that the situation on the labor market remains contradictory.

- According to Bloomberg, Meta Platforms (META: +3.43%) intends to cut its meta universe development budget by 30% and tighten overall cost controls.

- Costco Wholesale (COST: -2.9%) reported a 6.4% increase in comparable sales for November, which was slightly below forecasts. The retailer's quotes went down due to signs of slowing growth and high starting valuation.

- Kroger (KR: -4.6%) came under pressure from its strategic business transformation and revised operational profile. At the same time, the company's earnings per share for the last reporting period exceeded expectations, and management confirmed its plans to bring the e-commerce business into profit in fiscal 2026.

- Dollar General (DG: +14%) reported revenue, earnings and comparable sales growth above expectations for the most recent quarter. In addition, its own guidance for revenue and earnings per share was revised upward.

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