Stocks Extend Thursday’s Gains as Inflation Concerns Ease

Morning Markets

September S&P 500 futures (ESU22) this morning are up +0.88% at a 1-1/2 week high. Stock indexes this morning are extending Thursday’s gains as signs of slowing price pressures push T-note yields lower.  The 10-year T-note yield is down -6.6 bp today at 3.251% as the 10-year breakeven inflation expectations rate dropped to a 6-week low today of 2.401%.

U.S. stocks have carry-over support from a +0.82% rally in China’s Shanghai Composite to a 2-week high. Chinese stocks rallied today on signs of easing price pressures after economic reports showed China's August consumer and producer prices rose less than expected.   Also, Chinese stocks rose after today’s news showed China Aug aggregate financing, the broadest measure of credit growth, rose more than expected.

Bank of America said data from EPFR Global shows U.S. stock funds had outflows of $10.9 billion in the week to September 7, the biggest exodus in 11 weeks.

The Euro Stoxx 50 today is up +1.62% at a 1-week high.  Mining stocks are climbing today as metals prices firmed on optimism that Chinese demand for metals will strengthen after China’s government took steps to revive its troubled property sector.  Also, carry-over support from a rally in U.S. stock index futures that extended Thursday’s gains is giving European stocks a boost.  In addition, energy crisis concerns eased with European nat-gas prices down more than -4% as EU energy ministers meet today in Brussels to discuss measures to deal with soaring energy costs.

ECB Governing Council member Knot said Thursday's +75 bp rate hike by the ECB was a "powerful and big signal, but more steps should follow."

ECB Governing Council member Kazimir said the ECB needs to continue "resolute" hikes to tackle "unacceptably high" price gains.

ECB Governing Council member Muller warned that delaying interest rate hikes too much risks needing a "much sharper brake on the economy" later to bring prices under control.

France's July manufacturing production fell -1.6% m/m, weaker than expectations of -0.5% m/m and the steepest pace of decline in 17 months.

Asian markets today closed higher.  China’s Shanghai Composite Index closed up +0.82%, and Japan’s Nikkei Stock Index closed up +0.53%.

China’s Shanghai Composite today climbed to a 2-week high and closed moderately higher.  Signs of easing price pressure in China bolstered expectations for additional government stimulus and lifted stocks after China's August consumer and producer prices rose less than expected.  Also, Chinese real estate stocks jumped after a report from Chinese state media said at least 24 Chinese cities have allowed parents to fund their children's home purchases in an effort to expand housing demand.  In addition, stronger-than-expected Chinese credit growth is supportive for stocks after today’s news showed China Aug aggregate financing rose more than expected.

China Aug CPI rose +2.5% y/y, weaker than expectations of +2.8% y/y.  China Aug PPI rose +2.3% y/y, weaker than expectations of +3.2% y/y and the weakest report in 1-1/2 years.

China Aug aggregate financing, the broadest measure of credit growth, rose 2.43 trillion yuan, stronger than expectations of 2.075 trillion yuan.

Japan’s Nikkei Stock Index today rallied to a 2-week high on carry-over support from Thursday’s rally in U.S. equities.  Also, expectations of additional government stimulus lifted Japanese stocks after Prime Minister Kishida ordered the putting together of a fresh stimulus package in October to help revive Japan’s economy. A previous package announced in April had 6.2 trillion yen ($43.2 billion) in measures to help households and businesses deal with inflation.

The yen rallied more than +1% against the dollar today after BOJ Governor Kuroda held a meeting with Japanese Prime Minister Kishida and said, "sudden moves in foreign exchange rates increase uncertainty for firms and are undesirable."  The yen has been in freefall recently and sank to a 24-year low against the dollar on Wednesday.

Pre-Market U.S. Stock Movers

Zscaler (ZS) jumped +13% in pre-market trading after reporting Q4 revenue of $318.1 million, above the consensus of $305.7 million, and forecast 2023 calculated billings of $1.92 billion-$1.94 billion, stronger than the consensus of $1.88 billion.

DocuSign (DOCU) surged +17% in pre-market trading after reporting Q2 revenue of $622.2 million, higher than the consensus of $584.4 million, and raised its forecast for 2023 billings to $2.55 billion-$2.57 billion from $2.52 billion-$2.54 billion, stronger than the consensus of $2.53 billion. 

T-Mobile U.S. (TMUS) rose more than +1% in pre-market trading after the company’s board authorized a repurchase program for up to $14 billion of commons sock through September 30, 2023. 

Cryptocurrency-exposed stocks are moving higher in pre-market trading, with the price of Bitcoin up more than +8% at a 2-week high.   Marathon Digital (MARA) is up more than +9%.  Also, Hut 8 Mining (HUT) is up more than +8%, and Riot Blockchain (RIOT) is up more than +7%.  In addition, Coinbase Global (COIN) is up more than +5%, and MicroStrategy (MSTR) is up more than +4%.

Honeywell International (HON) rose +1% in pre-market trading after maintaining its full-year sales forecast of $25.5 billion-$36.1 billion, the midpoint above the consensus of $35.74 billion.

Swvl Holdings (SWVL) surged more than +25% in pre-market trading after Baird initiated coverage of the stock with an outperform rating and a price target of $8.

Zumiez (ZUMZ) tumbled more than -14% in pre-market trading after B Riley Securities downgraded the stock to neutral from buy.

Smith & Wesson Brands (SWBI) dropped about -5% in pre-market trading after reporting Q1 net sales from continuing operations of $84.4 million, well below the consensus of $129.9 million.

Enphase Energy (ENPH) slid more than -1% in pre-market trading after Guggenheim Securities downgraded the stock to neutral from buy. 

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

ABM Industries Inc (ABM), Bowlero Corp (BOWL), DENTSPLY SIRONA Inc (XRAY), Hyzon Motors Inc (HYZN), Kroger Co/The (KR), National Beverage Corp (FIZZ), Radiant Logistics Inc (RLGT).

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