Stocks See Downward Pressure after Sharp ECB Rate Hike

Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.16%.  Stock indexes are modestly lower as they await a speech from Fed Chair Powell later today for clues as to the future of Fed policy. U.S. stock indexes are also seeing downward pressure from weakness in European stocks after the ECB raised interest rates and its inflation estimates today.  In addition, stock indexes maintained slight losses after today’s economic news showed U.S. weekly jobless claims unexpectedly fell to a 3-month low, which is hawkish for Fed policy.

U.S. weekly initial unemployment claims unexpectedly fell -6,000 to a 3-month low of 222,000, showing a stronger labor market than expectations of an increase to 235,000.

The Euro Stoxx 50 today is down -0.16% after the ECB raised interest rates and its inflation forecasts.  The ECB, as expected, raised its main refinancing rate by 75 bp to 1.25% and raised its Eurozone 2022 inflation forecast to 8.1% from a previous forecast of 6.8%.  The ECB also expects to raise rates further at the next several meetings.

The ECB today raised its main refinancing rate by 75 bp to 1.25%, its deposit facility rate by 75 bp to 0.75%, and said it "expects to raise rates further because inflation remains far too high and is likely to stay above target for an extended period."

The ECB today raised its Eurozone 2022 GDP forecast to 4.1% from a prior estimate of 2.8% and raised its Eurozone 2022 inflation forecast to 8.1% from a previous forecast of 6.8%.  The ECB cut its Eurozone 2023 GDP forecast to 0.9% from a prior forecast of 2.1% and raised its 2023 inflation forecast to 5.5% from a prior view of 3.5%.

Asian markets today settled mixed.  China’s Shanghai Composite Index closed down -0.33%, and Japan’s Nikkei Stock Index closed up +2.31%.

China’s Shanghai Composite today closed moderately lower on concern that extended pandemic lockdowns will undercut China’s economy.  The city of Chengdu, with a population of 21 million people, said it will extend its pandemic lockdown for another week.  Strength in Chinese automakers limited losses in the overall market after the China Passenger Car Association reported that China Aug passenger car sales jumped +28.4% y/y to 1.9 million. 

Japan’s Nikkei Stock Index today rallied to a 1-week high after Japan Q2 GDP was revised upward.  Also, the shares of Apple suppliers in Asia, such as Japan’s Alps Alpine, rallied today after Apple unveiled new lineups for its iPhones and other products.  In addition, a slump in crude prices to a 7-3/4 month low Wednesday fueled a rally in airline stocks.  The yen rose moderately from Wednesday’s 24-year low after Japan’s top currency official warned today that he wouldn’t rule out any options if needed should recent moves in the currency markets continue. 

Japan Q2 GDP was revised upward to +3.5% (q/q annualized) from 2.2%, stronger than expectations of +2.9%.

The Japan Aug eco watchers outlook survey rose +6.6 to 49.4, stronger than expectations of 44.9.

Pre-Market U.S. Stock Movers

Moderna (MRNA) climbed more than +2% in pre-market trading after Deutsche Bank upgraded the stock to buy from hold, citing “solid” Q2 earnings beat and the “welcome” late-July news of additional fall 2022 orders from the U.S.

Asana (ASAN) surged +18% in pre-market trading after reporting Q2 revenue of $134.9 million, above the consensus of $127.5 million, and raised its 2023 revenue forecast to $544 million-$547 million from $536 million-$540 million, stronger than the consensus of $536.5 million. 

First Solar (FSLR) rose more than +3% in pre-market trading after Goldman Sachs upgraded the stock to buy from sell.

Roku (ROKU) gained nearly +2% in pre-market trading after Pivotal Research Group LLC raised its recommendation on the stock to hold from sell.

American Eagle Outfitters (AEO) slumped more than -13% in pre-market trading after the company reported Q2 adjusted EPS of 4 cents, weaker than the consensus of 14 cents, and then paused its quarterly dividend. 

Wayfair (W) tumbled more than -8% in pre-market trading after offering $600 million of convertible senior notes due 2027 in a private offering.

Williams Cos (WMB) fell more than -2% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral. 

Fidelity National Information Services (FIS) slid -2% in pre-market trading after Wells Fargo Securities downgraded the stock to underweight from equal weight.

Today’s U.S. Earnings Reports (9/8/2022)

5E Advanced Materials Inc (FEAM), Cantaloupe Inc (CTLP), CIRCOR International Inc (CIR), Concrete Pumping Holdings Inc (BBCP), DocuSign Inc (DOCU), eGain Corp (EGAN), FuelCell Energy Inc (FCEL), Lovesac Co/The (LOVE), MasterCraft Boat Holdings Inc (MCFT), Mission Produce Inc (AVO), RH (RH), Smith & Wesson Brands Inc (SWBI), Urstadt Biddle Properties Inc (UBA), Zscaler Inc (ZS), Zumiez Inc (ZUMZ).

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