Powell’s speech, Salesforce, French political woes – what’s moving markets

Investing.com — Wall Street awaits a speech by Fed chair Jerome Powell later in Wednesday’s session, although the overall tone seems supportive. Salesforce has impressed with its third-quarter result, while, in Europe, the troubled French government faces a vote of no-confidence. 

1. Powell speech looms large

Jerome Powell takes to the stage in Washington later Wednesday, and investors are keenly awaiting the comments from the Fed chief as they seek more cues on the central bank’s plans for interest rates. 

His address comes just weeks before the US central bank’s final meeting for 2024, where policymakers are widely expected to agree to cut interest rates again, by 25 basis points.

That said, the October consumer price index, released last month showed an increase in the headline annual figure to 2.6% after climbing 2.4% in September. While the so-called core CPI, excluding food and energy, gained 3.3% in the 12 months through October, both above the Fed’s 2.0% target.

Additionally, the prospect of protectionist trade policies under President-elect Donald Trump, potentially resulting in tariffs on a number of imports, has also sparked concerns over the impact on inflation in the long term.

Beyond Powell’s address, investors will also carefully study Friday’s nonfarm payrolls data for November, amid signs of positioning for a potentially strong reading with the labor market remaining resilient. 

2. Futures higher ahead of ADP private payrolls

US stock futures rose Wednesday, adding to recent gains with key employment data on the economic slate. 

By 03:55 ET (08:55 GMT), the Dow futures contract was up 150 points, or 0.3%, S&P 500 futures climbed 12 points, or 0.2%, and Nasdaq 100 futures rose by 100 points, or 0.5%.

The main benchmarks traded in tight ranges Tuesday, continuing December’s tepid start in comparison to the strong advances at the start of the previous month as Donald Trump cemented his return to the White House.

That said, both the S&P 500 and the Nasdaq Composite closed at record levels, with the Dow Jones Industrial Average slipping back slightly.

All eyes will be on the ADP private payrolls report for November later in the session, particularly with the widely watched monthly jobs report due for release on Friday.

There are more quarterly earnings to digest Wednesday, from the likes of Foot Locker (NYSE:FL), Dollar Tree (NASDAQ:DLTR) and Chewy (NYSE:CHWY), while Salesforce (NYSE:CRM) is seen surging after strong third-quarter numbers [see below].

3. Salesforce soars after Q3 beat

Salesforce stock soared over 10% in premarket trading Wednesday, from Tuesday’s $331.43 close, after the cloud-based software company beat third-quarter revenue expectations and raised the lower end of its annual revenue forecast, helped by robust spending on its enterprise cloud portfolio.

The company’s revenue for the third quarter rose 8% to $9.44 billion, beating the average analyst estimate of $9.35 billion, according to data compiled by LSEG.

Salesforce now expects fiscal year 2025 revenue between $37.8 billion and $38 billion, compared with its prior forecast range of $37.7 billion to $38 billion.

The company’s stock has risen over 25% year-to-date, and even after this rally, Jefferies believes the stock remains undervalued, trading at a discount to its competitors.

The brokerage remains confident in Salesforce’s ability to grow its revenue and profit margins, and has lifted its price target to $425 from $400, while maintaining a ‘buy’ rating.

That said, Jefferies did also flag concerns about slowing improvements in profit margins and weaker growth in recently acquired businesses.

4. French government faces collapse

The fragile French coalition government under Prime Minister Michel Barnier looks set to collapse later Wednesday as French lawmakers gear up to vote on no-confidence motions over a dispute over his belt-tightening budget aimed at curbing a hefty budget deficit.

French politics has been in crisis since President Emmanuel Macron called snap elections in early June, with France’s CAC 40 index dropping nearly 10% and the single currency down nearly 4% during the period.

A government collapse would likely reduce the chances of any push to tackle France’s pressing fiscal problems, with the country’s Treasury estimating the budget deficit could reach 7% of economic output next year rather than the 5% targeted without Barnier’s measures.

The French monetary difficulties are also unlikely to receive the boost of strong economic growth anytime soon, with the composite PMI data release for November coming in at 45.9, down from 48.1 the prior month, and further into contraction territory.

There is also political turmoil in South Korea, after president Yoon Suk Yeol declared martial law earlier Wednesday only to reverse the move hours later, triggering the biggest political crisis in decades in Asia’s fourth-largest economy.

A coalition of lawmakers from opposition parties said they planned to propose a bill to impeach Yoon, which should be voted on within 72 hours.

5. Crude edges higher; OPEC+ meets on Thursday

Crude prices edged higher Wednesday, boosted by heightened geopolitical tensions as well as the prospect of OPEC+ extending supply cuts against weaker demand.

By 03:55 ET, the US crude futures (WTI) climbed 0.1% to $69.98 a barrel, while the Brent contract rose 0.1% to $73.66 a barrel.

Concerns over the brittle state of the ceasefire between Israel and Lebanon’s Hezbollah, South Korea’s curtailed declaration of martial law as well as prolonged fighting in Syria and Ukraine have all lent support to oil prices.

Both contracts surged over 2% on Tuesday.

Some momentum was stalled during the previous session by industry data showing an unexpected increase in US oil inventories, but eyes are turning to a meeting of major producers on Thursday.

The Organization of Petroleum Exporting Countries, and their allies, a group known as OPEC+, postponed Sunday’s meeting to discuss production levels until Thursday, providing more time for delegates to agree to a further delay in plans to increase production.

OPEC+ has been looking to gradually phase out supply cuts through next year, but the group has become concerned that weak demand and an increase in supply in 2025 will see prices slump sharply.