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Our top stories today: Turmoil hits Capitol Hill (0:20), Trump threatens tariffs (3:55), and EU approves Nvidia’s acquisition (5:00).
Stock index futures tumbled on Friday, after a spending bill backed by President-elect Donald Trump was voted down in the U.S. House of Representatives, further fueling concerns of a government shutdown.
Investors also eagerly awaited the release of the Federal Reserve’s most preferred inflation measure, November’s personal consumption expenditures (PCE) price index report, scheduled for release later today.
S&P 500 futures (SPX) -1.1%, Nasdaq 100 futures (US100:IND) -1.5% and Dow futures (INDU) -1%.
The 10-year Treasury yield (US10Y) fell 2 basis points to 4.55%. The 2-year yield (US2Y) fell 3 basis points to 4.29%.
“The big question now is whether a U.S. government shutdown is about to happen,” Deutsche Bank’s Jim Reid said.
The latest bill proposed to suspend the debt ceiling and also extend government funding. It was voted down by 235 votes to 174.
The funding is set to expire on Friday night.
“A short-lived shutdown affects government workers, but has limited economic impact. The longer a shutdown lasts, the more disruptive it is to the U.S. economy. Economic data may not get published in a shutdown,” UBS’ Paul Donovan said.
Wall Street’s bounce back on Thursday following its worst session in over three months ran out of steam in the final hour of trading.
“For those wanting a quiet run up to Xmas, the good news is that there hasn’t been any real follow-through to the Fed-induced slump on Wednesday. The bad news is that an initial recovery in markets struggled to gain traction yesterday,” Reid added.
Traders will also keep an eye on the November PCE price index data. Core PCE is expected to come in at 0.2% M/M and 2.9% Y/Y.
PCE is forecasted to come in at 2.5% Y/Y and 0.2% M/M.
“U.S. personal income and consumption data should continue to signal rising real incomes. The fact that household incomes are so strong, allowing consumption without use of savings or credit card debt, gives a solid foundation for US economic growth in 2025,” Donovan added.
A Santa rally may be out of the cards this year as troubling headlines out of Washington continue to pile up. The first was from the Federal Reserve, which disrupted the market party on Wall Street via a disappointing policy outlook for 2025.
Next, was the likelihood of a government shutdown starting late Friday night. Last, was how everything went down, with turmoil hitting Capitol Hill and talk of scrapping legislative mechanisms like the debt ceiling.
While Congressional leaders had reached a bipartisan deal to fund the government through March, support for the spending package disintegrated after opposition from President-elect Donald Trump and Elon Musk, who will head up the new Department of Government Efficiency. A slimmed-down bill (that included a provision to extend the debt ceiling until 2027) was quickly drawn up, but the measure failed a vote in the House on Thursday evening due to opposition from Democrats and Republican detractors. It’s not yet clear what will happen next, but a similar fight is likely to take place early next year, and Trump would rather “have this debate now” to “start [the shutdown] with a Democratic president” and cement his control over the GOP.
Abolishing the debt ceiling is the “smartest thing [Congress] could do. I would support that entirely,” Trump told NBC News. “The Democrats have said they want to get rid of it. If they want to get rid of it, I would lead the charge. It doesn’t mean anything, except psychologically.”
President-elect Donald Trump has threatened tariffs on the European Union unless the bloc commits to buying more U.S. oil and gas, over a month after the EU’s leader indicated that the group may purchase more gas from the U.S.
“I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas,” Trump posted on his social media platform Truth Social. “Otherwise, it is TARIFFS all the way!!!”
According to data from the Census Bureau, the U.S. had a trade deficit of nearly $208.69B with the EU in 2023. Up to October this year, the trade deficit stood at $193.46B.
Trump’s tariff threat comes more than a month after European Commission president Ursula von der Leyen said the EU would consider replacing Russian liquefied natural gas imports with those from the U.S.
“We still get a lot of LNG from Russia and why not replace it by American LNG, which is cheaper for us and brings down our energy prices,” von der Leyen said.
Trump had previously threatened 10%-20% tariffs on all imports to the U.S. “If there are some new frictions for the trade, the EU will be ready to react to that,” Jovita Neliupšienė, the EU’s ambassador to the U.S., had said in response.
To note, Europe receives the most U.S. crude exports compared to other regions. Europe accounted for 66% of U.S. LNG exports last year.
The Bank of Japan reviewed the unconventional stimulus it implemented in 2013 under former governor Haruhiko Kuroda, and in a rare admission, said the move did not change consumers’ deflationary mindset as much as it’d hoped. The review’s findings are expected to bolster BOJ’s resolve to continue policy normalization.
The review was published on Thursday, when the BOJ maintained its key interest rate at 0.25% for the third time, but offered few clues on future rate hikes.
EU has unconditionally approved the Nvidia’s (NASDAQ:NVDA) proposed acquisition of Israeli startup Run:ai.
The European Commission stated that the deal will not raise competition concerns in the European Economic Area.
In October, the deal came under scrutiny in Europe amid competition concerns.
The commission further stated that Nvidia (NASDAQ:NVDA) will have neither the technical ability nor the incentive to affect the compatibility of its GPUs with competing GPU orchestration software due to the availability and widespread use of tools that ensure such compatibility, and that customers will continue to have access to sufficient credible alternatives to Run:ai.
Nvidia announced its deal to acquire Run:ai in April. Financial terms were not disclosed, but reports suggested the Jensen Huang-led company paid roughly $700M to acquire Run:ai, which AI chips more efficient by enabling multiple workloads to run in parallel, reducing the number of GPUs needed to complete tasks.
FedEx (NYSE:FDX) shares surged nearly 9% despite mixed FQ2 results, as the parcel giant announced plans for a tax-free separation of its FedEx Freight unit into an independent public entity to streamline operations.
Mission Produce (AVO) shares jumped over 11% after FQ4 results exceeded expectations, driven by a 37.4% rise in sales and a 160% increase in adjusted profits, fueled by higher avocado prices. For FQ1, the company expects stable industry avocado volumes but anticipates a 20% rise in pricing, signaling continued strong demand.
United States Steel (X) shares dropped over 4% after the company lowered its Q4 guidance, citing weak demand and pricing in Europe.
Nike (NKE) shares fell as much as 4% despite exceeding estimates in fiscal Q2, as the sportswear giant outlined its turnaround plan under new CEO Elliott Hill. The company is taking bold steps to revive the brand, including aggressively clearing aged inventory, strengthening its digital presence, and curbing promotional pricing.
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