U.S. Stock Market Outlook | Three Major Index Futures Rise, Micron Tech Plummets After Earnings

Pre-Market Market Trends

1. As of December 19th (Thursday) pre-market, all three major U.S. stock index futures are up. As of the time of writing, Dow futures are up 0.36%, S&P 500 futures are up 0.39%, and Nasdaq futures are up 0.37%.

1. As of the time of writing, the German DAX index is down 1.21%, the UK FTSE 100 index is down 1.41%, the French CAC 40 index is down 1.45%, and the Euro Stoxx 50 index is down 1.52%.

1. As of the time of writing, WTI crude oil is down 0.98%, priced at $69.89 per barrel. Brent crude oil is down 0.16%, priced at $73.27 per barrel.

Market News

Powell emphasizes inflation as the number one enemy! The Federal Reserve's pace of interest rate cuts may slow down. Federal Reserve Chair Jerome Powell candidly pointed out that the central bank's inflation forecast for the end of the year has not met expectations. Officials now expect that achieving the 2% inflation target will take longer, a target that has not been met for nearly four years. Therefore, they have lowered their expectations for interest rate cuts next year and emphasized that any future adjustments will depend on whether inflation can cool further. This increased focus on inflation marks a strategic shift for the Federal Reserve, which viewed a weak labor market as a greater risk in September. However, recent data and incoming President Trump's policy suggestions have reignited concerns about inflation exceeding the central bank's target. Powell emphasized at a press conference: "When we consider further rate cuts, we will focus on progress in inflation. The 12-month inflation rate has been fluctuating." Among the 19 Federal Reserve officials, 15 believe the risk of inflation exceeding expectations is higher, a significant shift compared to the three officials who held the same view in September. Fourteen officials indicated that they believe there is greater uncertainty in inflation forecasts. Many economists state that Trump's tax cuts, mass evictions, and new tariff plans pose risks of exacerbating inflation. Officials currently expect the inflation rate to reach 2.5% by the end of next year, up from the median of 2.1% in September, and they expect price growth to stabilize by the end of this year. The latest forecasts indicate that policymakers currently expect to achieve the 2% target by 2027.

Is the stock market trend about to change? UBS advises selling cyclical stocks and shifting to growth defensive stocks. UBS Chief Global Equity Strategist Andrew Garthwaite stated in a report: "The pricing of cyclical stocks reflects very high global PMI benchmark expectations, and both the price-to-earnings and price-to-book ratios relative to defensive stocks are close to historical highs." "The UBS team led by Gassway stated that the significant positive news at the cyclical level—such as the Federal Reserve's interest rate cut cycle, the European Central Bank and the Bank of England's interest rate cut cycles, and the expectations of the Chinese government's fiscal policy—has already been reflected in the stock market pricing. They shared the UBS strategy team's concerns about the current market preference for high-risk cyclical stocks over defensive stocks. 'Firstly, the cyclical profit margins in many industries are at historical highs. Moreover, market pricing suggests that the profit margins of cyclical industries relative to defensive industries will remain at an 'abnormally high' level, which is not good news for cyclical stocks.' Additionally, the 'performance growth-oriented defensive stocks' favored by UBS—those that have long-term sustainable growth expectations and 'defensive characteristics' in bear markets—are typically companies with strong economic resilience, growth potential, robust financial conditions, and relatively low volatility, concentrated in pharmaceutical companies, medical device companies, essential consumer goods companies, retail giants, utility companies (mainly electricity and water), and cloud computing giants (such as Microsoft, Amazon, and SAP).

Federal Reserve's 'Expectation Management' Hits Rate Cut Expectations, U.S. Treasury Yields and Dollar Enter 'Surge Mode'? The latest dot plot shows that Federal Reserve officials generally expect only two rate cuts in 2025, down from the basic expectation of four cuts indicated in September, with the long-term median federal funds rate raised to 3%. Following a hawkish policy statement and Powell's hawkish remarks, the 10-year U.S. Treasury yield broke through 4.5%, and the dollar index surged to its highest point since 2022. As of the time of writing, the 10-year U.S. Treasury yield rose slightly to 4.537%; the dollar index was just below 108. After the dot plot was released and Powell's press conference, swap contract pricing significantly reduced expectations for rate cuts next year, even starting to price in no rate cuts next year. A recent report from Deutsche Bank indicated that the bank expects the Federal Reserve to pause rate cuts throughout next year, anticipating that the Fed's easing cycle will essentially stagnate. T. Rowe Price, a top U.S. asset management company, believes that as the U.S. fiscal predicament worsens and Trump's policies lead to rising inflation, the 10-year U.S. Treasury yield could rise to 6% for the first time in over 20 years.

$100,000 is not the end! Will Bitcoin surge to $200,000 next year? Bitcoin has experienced a historic year, rising 135.7% since the beginning of 2024 and successfully breaking through the $100,000 mark. However, analysts believe this is not the end, expecting the cryptocurrency to maintain this momentum into 2025. Traders are now optimistic about next year, with analysts predicting that institutional capital flows will continue to drive the development of digital currencies. For example, Standard Chartered's head of cryptocurrency research, Geoff Kendrick, stated in a report that by the end of next year, institutional funds flowing into Bitcoin could push its price to $200,000. Nick Ruck, head of LVRG Research, stated: 'The new U.S. government has indicated that it will protect and attempt to promote the development of the cryptocurrency industry. Although Bitcoin has reached $100,000 and entered unknown territory, many analysts and traders believe that $200,000 to $250,000 is the next key level for Bitcoin to reach "In addition, the largest cryptocurrency fund management company in the United States predicts that establishing a national reserve of Bitcoin could drive the price of this cryptocurrency up to as high as $500,000.

Individual Stock News

AI demand struggles against the sluggish smartphone and PC markets, Micron Technology (MU.US) Q2 earnings guidance falls short of expectations. For the first fiscal quarter ending November 28, the company's sales grew 84% to $8.71 billion, in line with analyst expectations; the adjusted earnings per share were $1.79, slightly above the analyst expectation of $1.76. Micron stated that revenue related to data centers increased by 400% year-on-year this quarter—this segment currently accounts for more than half of the company's total sales. However, the company noted that this surge was not enough to offset the weakness in orders from consumer device manufacturers. Micron expects sales for the second fiscal quarter ending in February to reach approximately $7.9 billion, below the average analyst expectation of $8.99 billion; it anticipates adjusted earnings per share will not exceed $1.53, far below the average analyst expectation of $1.92. Despite seeing strong orders for components used in artificial intelligence computing, the company still faces weak demand from smartphone and PC manufacturers—these two markets account for the majority of its chip production. As of the time of writing, Micron Technology's stock fell over 15% in pre-market trading on Thursday.

Apple (AAPL.US) reportedly cancels iPhone hardware subscription service, adjusts financial strategy to address regulatory challenges. According to insiders, Apple has decided to terminate its iPhone hardware subscription service project, marking a retreat from its attempt to change the way consumers purchase its flagship products. Originally, Apple planned to launch a service that would allow consumers to obtain a new iPhone each year by paying a monthly fee, similar to app subscriptions. However, due to software issues and regulatory challenges, this plan has been delayed since it was first reported in 2022 and has now been officially canceled, with relevant team members reassigned to other projects. This decision is part of a broader shift in Apple's payment service strategy. The subscription plan, overseen by the Apple Pay department, previously also shut down its "buy now, pay later" service, redirecting consumers to similar services offered by third parties. This shift reflects the company's cautious attitude in the financial services sector, especially in the face of a stricter regulatory environment.

Nippon Steel modifies its acquisition proposal for U.S. Steel (X.US), but still has not received approval from U.S. regulators. A letter shows that despite Nippon Steel holding a series of meetings and phone calls with U.S. officials and proposing three modifications aimed at alleviating national security concerns, the company has not yet received approval from the review committee for its $14.9 billion acquisition offer for U.S. Steel. U.S. Steel stated in a statement that Nippon Steel has provided "the brightest future yet" for U.S. Steel and added that no other party could achieve the billions of dollars in investments that Nippon Steel has promised. The company added, "U.S. Steel cannot—and does not have the resources—to do this alone." Hidden risks in loan business and continuous customer loss, BNPL service provider Sezzle (SEZL.US) suddenly targeted by short seller Hindenburg. The American short-selling firm Hindenburg Research disclosed its short position against the "Buy Now Pay Later (BNPL)" service company Sezzle, citing risks in the company's loan business and a decline in both customers and merchants. The short-seller stated, "Documents show that Sezzle lends to high-risk consumers with extremely poor credit at an interest rate of 12.65%, who cannot use traditional credit cards." It also added that Sezzle is rapidly losing customers and merchants. However, the company denied these allegations, calling them "misleading and taken out of context," and stated that they remain "confident in the outlook provided alongside third-quarter performance." Sezzle plummeted over 23% on Wednesday. As of the time of publication, Sezzle rose over 2% in pre-market trading on Thursday.

Important Economic Data and Event Forecast

Beijing time 21:30 U.S. Q3 real GDP annualized quarter-on-quarter final value

Beijing time 21:30 U.S. initial jobless claims for the week ending December 14

Beijing time 21:30 U.S. December Philadelphia Fed Manufacturing Index

Beijing time 23:00 U.S. November existing home sales annualized total

Earnings Forecast

Friday morning: Nike (NKE.US), FedEx (FDX.US)

Friday pre-market: Carnival Corporation (CCL.US)