Stocks Set to Rebound to Begin the Day

U.S. stocks are rising in pre-market trading, looking to rebound from yesterday's drop. Action remains subdued in the final days of the year with volumes appearing to remain muted. The equity front continues to offer little headlines, though Cal-Maine Foods missed earnings estimates. The economic calendar is also relatively quiet, but jobless claims were released, showing a slight uptick in first-time unemployment filings. Treasury yields are mixed, while the U.S. dollar is dropping. Crude oil prices are lower, and gold is trading higher. Asia finished mostly lower after yesterday's downturn in the U.S., and Europe is mostly higher, though conviction appears constrained by uncertainty regarding the ultimate global impact of aggressive monetary policy tightening across the world.

As of 8:56 a.m. ET, the March S&P 500 Index future is 30 points above fair value, the Nasdaq Index future is 126 points north of fair value, and the DJIA future is 176 points ahead of fair value. WTI crude oil is decreasing $0.71 to $78.25 per barrel, and Brent crude oil is declining $0.70 to $83.29 per barrel. The gold spot price is up $2.10 to $1,817.90 per ounce. Elsewhere, the Dollar Index is falling 0.5% to 104.02.

Cal-Maine Foods Inc. (CALM $62) reported fiscal Q2 earnings-per-share (EPS) of $4.07, below the $4.24 FactSet estimate, as revenues surged 110% year-over-year (y/y) to $802 million, above the Street's forecast of $798 million. The company said its results reflect the current market environment characterized by record average selling prices for conventional eggs, primarily due to reduced supply related to the outbreak in the U.S. of highly pathogenic avian influenza, and good customer demand. CALM said both conventional egg and specialty egg prices jumped y/y, with the former more than doubling. However, the company noted higher costs across various inputs including feed, labor, packaging, and distribution, due to weather-related shortfalls, the ongoing disruptions related to COVID-19, and the impact of the war in Ukraine and its impact on the export markets.

Equity news remains light in the final days of 2022, which has the S&P 500 tracking for a decline of nearly 20% for the year. Although the index is down for the month of December, it is still solidly higher for the quarter, which would be the first quarterly advance since Q4 2021. However, the Nasdaq is heading toward a Q4 drop. The markets continue to wrestle with the ultimate impact of aggressive Fed actions to try to combat inflation after earlier this month downshifting from a string of four-straight 75-basis point (bp) rate hikes to a 50-bp increase. The deceleration remained unusually aggressive, and the Fed signaled that restrictive policy will likely have to remain in place for longer and at a potentially higher "terminal rate" than expected.

Schwab's Chief Investment Strategist Liz Ann Sonders discusses in our latest, Schwab Market Perspective: When Will the Fed Brake?, how inflation trends are moving in a favorable direction, but the change is likely too slow for the Fed to take its foot off the brake anytime soon.