Stocks Stabilize on a Mixed U.S. PPI Report

Morning Markets

September S&P 500 futures (ESU22) this morning are up by +0.16% and are stabilizing after Tuesday’s rout.  This morning's mixed U.S. PPI report sparked some short covering in stock index futures. However, gains in stock index futures are limited as the 10-year T-note yield rose to a 2-3/4 month high today of 3.472% after the Aug PPI report.  Stocks plunged Tuesday after a stronger-than-expected U.S. Aug consumer price report bolstered expectations for the Fed to raise interest rates by 75 bp at next week’s FOMC meeting.

Today’s U.S. producer price data was mixed.  On the positive side, the Aug final-demand PPI fell -0.1% m/m, matching estimates, and Aug PPI final demand rose +8.7% y/y, slightly weaker than expectations of +8.8% y/y.  However, Aug core PPI rose +0.4% m/m and +7.3% y/y, stronger than expectations of +0.3% m/m and +7.0% y/y.

The Euro Stoxx 50 today is down -0.91%.  European stocks today extended Tuesday’s losses after yesterday’s strong U.S. CPI report sparked a rout in U.S. equity markets that carried over into Europe.  European utility and energy stocks retreated today as the European Commission considers plans to contain the energy crisis, which may include revenue caps and windfall taxes on utility and energy company profits. Economic growth concerns in the Eurozone also weighed on stocks after Eurozone July industrial production fell more than expected and after France today cut its 2023 GDP forecast to 1.0% from 1.4% forecast in July, citing a “tense” backdrop.

ECB Governing Council member Simkus said, "inflation trends in the Eurozone are strong.  Therefore, at least a 50 bp increase in interest rates is needed" at next month’s ECB meeting. 

Eurozone July industrial production fell -2.3% m/m, weaker than expectations of -1.1% m/m and the biggest decline in 11 months.

Asian markets today closed lower.  China’s Shanghai Composite Index closed down -0.80%, and Japan’s Nikkei Stock Index closed down -2.78%. 

China’s Shanghai Composite Index fell to a 1-week low today. Weakness in Chinese technology stocks led the overall market lower as they tracked Tuesday’s sharp losses in U.S. technology stocks.  Also, Chinese metals producers and miners fell on concern that the global economy and industrial metals demand will slow as high inflation in the U.S. prompts the Fed to keep aggressively raising interest rates. 

Japan’s Nikkei Stock Index today fell sharply following a broad selloff in U.S. stocks after stronger-than-expected U.S August consumer prices fueled expectations for tighter Fed policy.  The yen recovered from near a 24-year low against the dollar today on jawboning from Japan’s top currency official and after the BOJ conducted a rate check in currency markets, a possible precursor for currency intervention. 

Today’s Japanese economic news was mixed.  On the negative side, Japan July industrial production was revised downward to +0.8% m/m from the originally reported +1.0% m/m.  Conversely, Japan July core machine orders rose +5.3% m/m and +12.8% y/y, stronger than expectations of -0.6% m/m and +6.6% y/y.

Pre-Market U.S. Stock Movers

Starbucks (SBUX) is up more than +2% in pre-market trading after the company raised its three-year outlook for profit and sales at an annual presentation to investors.

Mega-cap technology stocks are moving higher in pre-market trading after Tuesday’s rout. Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Netflix (NFLX), Nvidia (NVDA), Microsoft (MSFT), and Meta Platforms (META) are all up +1%.

PayPal Holdings (PYPL) rose more than +1% in pre-market trading after Raymond James upgraded the stock to outperform from market perform.

Nikola (NKLA) climbed more than +2% in pre-market trading after BTIG upgraded the stock to buy from neutral. 

SoFi Technologies (SOFI) gained more than +3% in pre-market trading after Bank of America upgraded the stock to buy from neutral.

Nucor (NUE) tumbled more than -5% in pre-market trading after forecasting Q3 EPS of $6.30-$6.40, well below the consensus of $7.74.  

Block (SQ) dropped -4% in pre-market trading after Evercore ISI downgraded the stock to underperform from outperform.

CoStar (CSGP) slid more than -2% in pre-market trading after offering $750 million of stock via Goldman Sachs and JPMorgan Chase.  

Syneos Health (SYNH) fell more than -2% in pre-market trading after Guggenheim Securities downgraded the stock to neutral from buy.

Today’s U.S. Earnings Reports (9/14/2022)

IronNet Inc (IRNT), Li-Cycle Holdings Corp (LICY).

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