MARKET WRAPS

Watch For:

PPI for November; Wholesale Inventories for October; University of Michigan Preliminary Consumer Survey for December; World Agricultural Supply and Demand Estimates; Canada Industrial Utilization Rate for 3Q

Opening Call:

Today's Headlines/Must Reads

- Inflation Slowed in China as Lockdowns Spread

- Banks Should Be Wary of Crypto, Top U.S. Regulator Says

- Workers at GM-LG Battery Plant in Ohio Vote to Unionize

- Former Apple Executive Says Company Blundered by Firing Him After TikTok Video

Follow WSJ markets coverage here .

Stock futures were slightly firmer on Friday ahead of another important inflation update.

The producer prices index for November is expected by economists to fall from 8% in October to 7.2%, year-over-year.

A slower pace of factory gate price rises should help reduce consumer goods inflation and allow the Federal Reserve to be less aggressive in raising interest rates.

There has already been better news on Friday from China, where a report showed manufacturers trimming prices by 1.3% for the year to November.

Some analysts think traders are underestimating the potential for a benign set of inflation reports in coming days to spark another bounce in stocks.

"In the next 4 trading sessions are crucial incoming economic reports and Fed decisions that arguably will determine the path of markets for the next 6 months," Fundstrat said.

Referring to a CBOE equity put-call ratio at 1.46, Fundstrat said it was back to 2022 highs and was among the highest levels in the past 30 years.

"Takeaway? If PPI and CPI come in soft, we expect a fierce positive market reaction."

Stocks to Watch

Bath & Body Works shares gained 6.3% in after-hours trading after Daniel Loeb's Third Point hedge fund disclosed a 6% stake in the company. Loeb questioned governance practices, executive compensation, financial discipline, investor communications and board composition.

Broadcom said revenue grew 21% amid strong demand. Its shares added 3.2% off hours.

CooperCompanies reported a worse-than-expected drop in fourth-quarter profit. The stock fell 9% after hours.

Costco Wholesale edged down off hours after its sales growth slowed slightly as some shoppers bought fewer big-ticket discretionary items.

Chewy reported a swing to a profit, citing improved margins from supply-chain and pricing initiatives. Its shares lost 2.3% off hours.

DocuSign reported higher revenue and a loss narrower than analysts' estimates. Its shares rose 11% off hours.

Lululemon Athletica posted strong sales and earnings gains, but its inventory levels swelled. Its shares fell 7.5% off hours.

Vail Resorts CEO said booking trends are consistent with prepandemic levels. Its shares added 1.7% off hours.

Forex:

Economic data scheduled for later could further pressure the dollar, UniCredit Research said.

The PPI data may show a further easing in price pressures in November, which could fuel expectations for the Federal Reserve to slow the pace of interest rate rises on Dec. 14 and prompt "another EUR/USD assault above this month's high of 1.0594 and then on June highs above 1.06," UniCredit said.

"A relatively flat University of Michigan sentiment reading is not expected to inspire the USD either."

With the dollar battling seasonal weakness, the euro has managed to edge higher, although its gains are likely to be limited, ING said.

"Our base case is still that EUR/USD will struggle to trade sustainably above 1.0600, and is mostly facing downside risks into year-end as the dollar could regain some ground on global risk uncertainty and rebounding energy prices," ING said, noting the dollar's safe haven status.

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Sterling faces a hit from the Bank of England's latest inflation attitude survey on Friday as it could show inflation expectations remain high and confirm the public's dissatisfaction with the central bank's passive approach to raising interest rates, Commerzbank said.

Inflation expectations remain well above the BOE's 2% target over a two-year horizon, which makes it difficult for the central bank in taming inflation and GBPunderlines the risk of increased volatility in sterling," Commerzbank said.

The "depressed" economic outlook, cautious monetary policy and continued high inflation continue to "principally put pressure on sterling."

Rates Market

The recent rally in rates markets looks exaggerated for Societe Generale, which sees no fundamental factors driving it.

"Inflation remains sticky, labor markets and growth are resilient, and central banks still have a ways to go before they end their tightening cycle."

It expected both the Fed and the European Central Bank to raise interest rates by 50 basis points next week, adding that more rate rises will be needed.

Energy:

Oil futures wavered in European trading, with prices having suffered sharp falls this week, as higher inventories pressured demand.

"The demand side remains broadly bearish, amid a global economic slowdown, heightened recession risks in the EU and the U.S. and lingering concerns over growth in China," Fitch said.

It has forecast Brent to average $95 a barrel in 2023, "spurred by strong, albeit slowing, consumption growth and constraints on the supply side," but said the "balance of risk to the forecast is now skewed squarely to the downside."

Metals:

Base metals made solid gains in early London trade, while gold edged higher, with positive sentiment around China providing support.

"Metals have broadly edged higher since November with optimism toward mainland Chinese growth and the likely peaking of the dollar," Fitch said.

Further optimism has come from investment within China's property sector and also an easing of Covid-19 measures, Fitch added. However, it said the slowdown in construction activity in mainland China, weakening housing markets across developed markets and worsening financial conditions has kept prices in check.

More Metals Insight

Morgan Stanley has highlighted aluminum, iron ore and metallurgical coal as their top commodities picks in the China reopening trade, and said it remained positive on gold, too.

It cited tight supply, hydropower shortage and a demand pickup in China as reasons to bet on aluminum. For iron ore, it expected seasonally tight first-half supply and a backlog of infrastructure projects.

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Lithium spot-market availability is very tight, and even some contracted volumes are failing to be delivered, Benchmark Mineral Intelligence said.

"Looking ahead, a lot of the supply set to [come to] market has already been signed off under offtake agreement, so it looks like spot-market availability will remain quite limited. However, high prices will incentivize producers to keep some material back to sell on a spot basis...so this could allow for some more spot-market liquidity when any new projects come to market."

TODAY'S TOP HEADLINES

Workers at GM-LG Battery Plant in Ohio Vote to Unionize

Workers at an Ohio battery plant co-owned by General Motors Co. voted overwhelmingly to be represented by the United Auto Workers, bolstering the union as it seeks to solidify its membership amid the auto industry's push toward electric vehicles.

Employees at the plant voted 710-to-16 in favor of joining the UAW. The Ultium Cells LLC plant, a joint venture between GM and South Korea's LG Energy Solution Ltd., began operations in late August and employs about 900 people.

Former Apple Executive Says Company Blundered by Firing Him After TikTok Video

Tony Blevins woke up to a 1:30 a.m. phone call.

Apple Inc., his employer for 22 years, demanded that he get a video on TikTok taken down, according to Mr. Blevins.

Google Ad Software Disrupted for Publishers Large and Small

Google's widely used advertising software for publishers suffered an outage of more than 2 1/2 hours Thursday evening that affected numerous publications large and small.

During the outage, publishers who use Google Ad Manager couldn't make their ad inventory available in exchanges for automated buying, according to publishers who use the technology. They also weren't able to load any ads that the publication had sold directly, the publishers said.

Costco Sales Growth Cools as Consumers Shift Discretionary Spending

Costco Wholesale Corp. sales growth slowed slightly in the most recent quarter compared with recent years as some shoppers bought fewer big-ticket discretionary items.

Comparable sales, those from stores of digital channels operating for at least 12 months, rose 7.1% in the quarter ended Nov. 20. That quarterly figure, which excludes currency fluctuations and gasoline sales, hasn't fallen below 9% over the past two years. Online sales fell 3.7% from the prior year, Costco said.

Chinese Property Developers Rise as Sunac Advances Plan for Debt Restructuring

Shares of Chinese real-estate companies led the Hong Kong market's upturn Friday, as Sunac China Holdings Ltd. unveiled progress in restructuring its debt that could bode well for other highly leveraged private developers.

Among blue chips, China Resources Land Ltd., Longfor Group Holdings Ltd., China Overseas Land & Investment Ltd. and Country Garden Holdings Co. were some of the top gainers, adding between 7.3% and 10% by the midday trading break. The Hang Seng Mainland Properties index gained 7.3%, outshining the benchmark Hang Seng Index's 1.6% increase.

Inflation Slowed in China as Lockdowns Spread

SINGAPORE-Inflation in China slowed sharply in November as widespread Covid-19 lockdowns battered spending, emphasizing the economic cost of a stringent Covid strategy that the government has now begun to relax.

Economists expect China's move away from using lockdowns and mass testing to snuff out even tiny outbreaks will be a gradual and possibly bumpy process, likely meaning growth and inflation will remain subdued well into 2023.

Banks Should Be Wary of Crypto, Top U.S. Regulator Says

Banks should take a cautious approach to digital asset markets, including discussing any new plans with regulators, a top U.S. banking authority said, pointing to ongoing turmoil among crypto firms.

Crypto industry risk management lacks maturity, and some industry practices mean trouble in one firm could spill over to others, the Office of the Comptroller of the Currency said Thursday.

5 things to watch when the Fed makes its interest-rate decision

During the Federal Reserve's last battle with high inflation in the 1970s and 1980s, Fed officials didn't talk much at all publicly. When pressed for information on Capitol Hill about the outlook for the economy and interest rates, former Fed Chairman Paul Volcker would disappear behind a thickening cloud of cigar smoke. (Smoking was allowed at hearings in those days.)

Forty years later, there will be no ashtrays in sight when Fed Chairman Jerome Powell holds a post-meeting news conference. And investors and economists are going to get a slew of information, not just smoke, from the central bank.

U.S. to Levy Human-Rights Sanctions on Russia, China

WASHINGTON-The U.S. is set to levy fresh sanctions against Russia and China on Friday, actions that include targeting Russia's deployment of Iranian drones in Ukraine, alleged human-rights abuse by both nations and Beijing's support of alleged illegal fishing in the Pacific, according to officials familiar with the matter.

The bulk of the expected sanctions are to be imposed under the Global Magnitsky Act, named after a whistleblower who died in a Moscow jail after accusing officials of corruption. The U.S., by using those powers to sanction high-profile government, military and business officials accused of human-rights abuses and corruption, says it aims to hold them accountable and deter others.

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

Laurentian Bank of Canada 4Q

Economic Indicators (ET):

0830 3Q Industrial capacity utilization rate

Expected Major Events for Friday

07:00/GER: 3Q Labour cost index

09:30/UK: Nov Bank of England/Ipsos Inflation Attitudes Survey

13:30/CAN: 3Q Industrial capacity utilization rates

13:30/US: Nov PPI

15:00/US: Nov Online Help Wanted Index

15:00/US: Oct Monthly Wholesale Trade

15:00/US: Dec University of Michigan Survey of Consumers - preliminary

17:00/US: World Agricultural Supply & Demand Estimates (WASDE)

All times in GMT. Powered by Onclusive and Dow Jones.

Expected Earnings for Friday

Centene Corp (CNC) is expected to report for Full year.

Ferrellgas Partners LP (FGPR) is expected to report for 1Q.

Johnson Outdoors (JOUT) is expected to report $0.37 for 4Q.

Laurentian Bank of Canada (LB.T,LRCDF) is expected to report $1.21 for 4Q.

SIFCO Industries (SIF) is expected to report for 4Q.

Sigmatron International Inc (SGMA) is expected to report for 2Q.

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ANALYST RATINGS ACTIONS

American Homes 4 Rent Raised to Buy From Neutral by Goldman Sachs

Apartment Income REIT Raised to Buy From Sell by Goldman Sachs

Applovin Cut to Neutral From Buy by BTIG

AT&T Raised to Buy From Hold by Argus Research

AvalonBay Cut to Neutral From Buy by Goldman Sachs

AVROBIO Raised to Buy From Neutral by BTIG

Casey's General Stores Cut to Neutral From Buy by Northcoast Research

DTE Energy Raised to Outperform From Peer Perform by Wolfe Research

Fulgent Genetics Cut to Neutral From Overweight by Piper Sandler

Hershey Raised to Buy From Neutral by UBS

Invitation Homes Cut to Neutral From Buy by Goldman Sachs

KVH Industries Cut to Market Perform From Strong Buy by Raymond James

Lumos Pharma Cut to Hold From Buy by Jefferies

Mid-America Apartment Raised to Buy From Neutral by Goldman Sachs

Mirati Therapeutics Cut to Market Perform From Outperform by BMO Capital

Mirati Therapeutics Cut to Neutral From Overweight by JP Morgan

Mondelez Cut to Neutral From Buy by UBS

Ollie's Bargain Outlet Cut to Accumulate From Buy by Gordon Haskett

Omeros Cut to Neutral From Buy by UBS

Polaris Cut to Market Perform From Outperform by BMO Capital

Principal Financial Cut to Underperform From Neutral by Credit Suisse

Prometheus Biosciences Shares Continue to Rally as Analysts Cheer

Relmada Therapeutics Shares Plumb New Depths After Lead Program Setback

Salesforce Cut to Neutral From Outperform by Baird

Sinclair Broadcast Cut to Underweight From Neutral by JP Morgan

Sovos Brands Cut to Neutral From Buy by UBS

Unity Software Cut to Neutral From Buy by BTIG

Vivint Smart Home Cut to Neutral From Overweight by JP Morgan

Vulcan Materials Raised to Overweight From Neutral by JP Morgan

Wolverine World Wide Cut to Hold From Buy by Williams Trading

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

December 09, 2022 06:06 ET (11:06 GMT)

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