Morning Call: A slump in energy stocks drags the overall market lower; Dec E-mini S&Ps down -0.50% at a 3-1/2 week low; Jan WTI crude down -4.28% at a 13-month low.
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 ESZ18 - S&P 500 E-Mini

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 -0.45%) this morning are down -0.50% at a 3-1/2 week low as energy stocks tumble with Jan WTI crude oil prices (CLF19 -4.52%) down sharply by -4.28% at a 13-month low on signs of oversupply. Saudi Energy Minister Khalid Al-Falih said Saudi Arabia is producing in excess of 10.7 million bpd, which would be a new record. Further losses in stocks may be contained on signs of a strong start to the holiday shopping season after Adobe Analytics said U.S. consumers spent about $1.75 billion online as of 5 pm Thursday, up almost 29% from a year ago. Also, researcher Consumer Growth estimated Black Friday sales my produce $24 billion in sales. European stocks are up +0.06% as Italian political risks eased after the yield on Italy's 10-year government bond dropped to a 2-week low of 3.352% when Italian Deputy Premier Di Maio said there are "margins" for a dialog with the EU. Also, Italian Prime Minister Conte said his government would ask the EU to delay any infringement procedure as it works to resolve its budget standoff with the EU. Gains in European stocks were limited on signs of a slowdown in the Eurozone economy after the Eurozone Nov Markit manufacturing PMI fell -0.5 to a 2-1/2 year low of 51.5. Asian stocks settled mostly lower: Japan and India closed for holiday, Hong Kong -0.35%, China -2.49%, Taiwan -0.49%, Australia +0.44%, Singapore +0.37%, South Korea -0.53%. China's Shanghai Composite fell to a 3-week low on a sell-off in Chinese technology stocks after the WSJ reported the U.S. was contacting allies in an attempt to persuade telecommunications companies in their countries to avoid using equipment from China's Huawei Technologies.

The dollar index (DXY00 +0.09%) is up +0.11%. EUR/USD (^EURUSD -0.41%) is down -0.40%. USD/JPY (^USDJPY -0.09%) is down -0.12%.

Dec 10-year T-note prices (ZNZ18 +0-020) are up +3 ticks.

The Eurozone Nov Markit manufacturing PMI fell -0.5 to 51.5, weaker than expectations of no change at 52.0 and the slowest pace of expansion in 2-1/2 years.

The Eurozone Nov Markit composite PMI fell -0.7 to 52.4, weaker than expectations of -0.1 to 52.0 and the slowest pace of expansion in 3-3/4 years.

Eurozone Nov consumer confidence fell -1.2 to a 1-1/2 year low of -3.9, weaker than expectations of -0.3 to -3.0.

The German Nov Markit/BME manufacturing PMI fell -0.6 to 51.6, weaker than expectations of no change at 52.0 and the slowest pace of expansion in 2-1/2 years.

U.S. Stock Preview

Key U.S. news today includes: (1) Nov Markit manufacturing PMI (expected unch at 55.7, Oct +0.1 to 55.7).

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: none.

Market Comments

Dec S&P 500 E-minis (ESZ18 -0.45%) this morning are down -13.25 points (-0.50%) at a 3-1/2 week low. Wednesday's closes: S&P 500 +0.30%, Dow Jones unch, Nasdaq 100 +0.75%. The S&P 500 on Wednesday closed higher on a rebound in technology stocks following three days of steep losses. Stocks also received a boost from the +1.4% increase in U.S. Oct existing home sales to 5.22 million, stronger than expectations of +1.0% to 5.20 million. Energy stocks were supported by the +2.25% rally in crude oil prices. Stocks were undercut by unexpected -0.8 point decline in University of Michigan U.S. Nov consumer sentiment to 97.5, weaker than expectations of unchanged at 98.3.

Dec 10-year T-notes (ZNZ18 +0-020) this morning are up +3 ticks. Wednesday's closes: TYZ8 -3.50, FVZ8 -2.75. Dec 10-year T-notes on Wednesday closed lower on negative carryover from a decline in German 10-year bunds as Italian political risks eased on a possible budget compromise in Italy. T-notes were also undercut by the rally in stocks that reduced the safe-haven demand for T-notes.

The dollar index (DXY00 +0.09%) this morning is up +0.108 (+0.11%), EUR/USD (^EURUSD -0.41%) is down -0.0046 (-0.40%), and USD/JPY (^USDJPY -0.09%) is down -0.14 (-0.12%). Wednesday's closes: Dollar Index -0.124 (-0.13%), EUR/USD +0.0014 (+0.12%), USD/JPY +0.29 (+0.26%). The dollar index on Wednesday closed lower on the weaker than expected U.S economic data on weekly jobless claims, Oct durable goods orders and University of Michigan Nov consumer sentiment, which were all dovish for Fed policy. EUR/USD received support from reduced Italian political risks after Italian Deputy Prime Minister Salvini said he was open to tweaking Italy's 2019 budget to get it closer to EU rules.

Metals prices this morning are weaker with Dec gold (GCZ18 -0.36%) -5.8 (-0.47%), Dec silver (SIZ18 -1.74%) -0.277 (-1.91%), Dec copper (HGZ18 -1.04%) -0.034 (-1.20%). Dec Comex gold (GCZ18) on Wednesday closed up +$6.80 an ounce (+0.56%) and Dec Comex silver (SIZ18) closed up +0.233 (+1.63%). Dec gold climbed to a 2-week high Wednesday and Dec silver posted a 1-1/2 week high after weaker-than-expected U.S. economic data pressured the dollar and bolstered speculation the Fed may slow its pace of interest rate hikes. Oct durable goods orders dropped -4.4%, weaker than expectations of -2.6%, and weekly jobless claims unexpectedly rose +3,000 to a 4-1/2 month high of 224,000, weaker than expectations of -1,000 to 215,000. Also, recent stock market volatility has boosted demand for gold as a store of wealth as long gold positions in ETFs rose to a 3-1/4 month high on Tuesday of 2,139 MT. On the negative side, a rebound in stock prices on Wednesday reduced the safe-haven appeal of precious metals.

Jan WTI crude oil prices (CLF19 -4.52%) this morning are down sharply by -$2.34 per barrel (-4.28%) at a 13-month low and Jan gasoline (RBF19 -4.70%) is down -6.74 cents per gallon (-4.51%) at a 17-month low. Jan WTI crude oil (CLF19) on Wednesday closed up +$1.20 per barrel (+2.25%) and Jan Brent crude (CBF19) closed up +$0.95 (+1.52%). Jan RBOB gasoline (RBF19) closed up +1.51 cents a gallon (+1.01%). A slide in the dollar lifted crude and gasoline prices on Wednesday. Gains accelerated after weekly EIA data showed an unexpected decline in EIA gasoline inventories by -1.295 million bbl to an 11-1/2 month low, weaker than expectations for a build of +100,000 bbl. Also, crude supplies at Cushing, OK, delivery point of WTI futures, fell by -116,000 bbl. Finally, a rally in stocks improved confidence in the economic outlook and in energy demand. Crude prices shrugged off the +4.85 million bbl increase in EIA crude inventories to an 11-1/2 month high, more than expectations of a +3.5 million bbl increase. Also, the crack spread fell to a 2-week low, which curbs the incentive for refiners to purchase crude oil to refine it into gasoline.

Overnight U.S. Stock Movers

Tocagen (TOCA +2.83%) may open lower initially this morning after it filed to sell $30 million of its common stock via Citigroup.

Rexnord (RXN +0.80%) was rated a new 'Neutral' at Credit Suisse with a price target of $31.

Fox Factory Holding (FOXF +0.66%) was downgraded to 'Neutral' from 'Buy' at Bank of America/Merrill Lynch.

Autodesk (ADSK +9.74%) was upgraded to 'Buy' from 'Hold' at Argus Research with a price target of $160.

Unifi Inc (UFI +1.35%) may open higher initially this morning after holder ValueAct Holdings LP increased its stake in the company to 6.10% from 5.81%.

LexinFintech Holdings Ltd (LX +1.15%) rose 2% in after-hours trading after it was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $14.10.