Pre-Market Brief: Stocks Mixed as Risk-off Rout Continues

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.17% this morning after three major US benchmark indices ended the previous week at 3-month lows as fears grew that raising interest rates to combat inflation will push the global economy into recession. Three major U.S. stock indexes were weighted down primarily by losses in the Oil & Gas, Basic Materials, and Consumer Goods sectors. At the same time, the U.S. dollar soared to a two-decade high after the Federal Reserve signaled rates would be higher for longer. Stocks are also under pressure today from rising bond yields as the 10-year T-note yield jumped 2.27% to 3.781%, the highest level since February 2011.

"There's unease in the market about having confidence that we know how inflation will develop and that yields will indeed peak in the mid-high 4s. People have been reflecting on that uncertainty, and it might mean more tightening ahead, it might mean even more tightening of financial conditions that the markets have to go through," said Andrzej Skiba, a head of the BlueBay U.S. fixed income team at RBC Global Asset.

On the ground of this, Goldman Sachs cut its year-end target for the benchmark S&P 500 index by about 16% to 3,600 points. Also, U.S. rate futures have priced in a 24.2% chance of a 50 basis point rate increase and a 75.8% chance of a 75 basis point hike at November's monetary policy meeting.

Today, investors are likely to focus on a batch of speeches from Federal Reserve members, including Mester, Rosengren, and Bostic.

The Euro Stoxx 50 is volatile this morning, rising from -0.86% to +0.39%. However, those gains are likely to be fragile amid the deteriorating economic outlook and political uncertainty, including high inflation, aggressive monetary policy, a brewing energy crisis, and the Russia-Ukraine war. At the same time, Italy's shares advanced, driven by gains in financial stocks, after the electoral victory of a right-wing alliance led by Giorgia Meloni's Brothers of Italy party, which is expected to give the country the most right-wing government since World War Two.

Germany Business Expectations, Ifo Business Climate Index, and Current Assessment data were released today. 

The German September Business Expectations came in at 75.2, weaker than expectations of 79.0.

Germany's September Ifo Business Climate Index has been reported at 84.3, weaker than expectations of 87.0.

The German September Current Assessment stood at 94.5, weaker than expectations of 96.0.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.20%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.66%.

China’s Shanghai Composite today closed down as investors sold off risk-driven assets on fears that the current aggressive monetary policy tightening across the globe could trigger a global economic recession. In addition, the Chinese government increased the foreign exchange risk reserve requirements for financial institutions to decelerate a drop in the yuan.

“Momentum may follow from the further sell-off on Wall Street to end last week, with strength in the U.S. dollar weighing on Asian indices,” said Yeap Jun Rong, a market strategist at IG in Singapore.

At the same time, Japan’s Nikkei 225 Stock Index tumbled today as data revealed that Japanese business activity grew slightly in September, but the economic outlook remained under pressure amid high inflation and a weakening yen. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 4.25% to 21.61.

Pre-Market U.S. Stock Movers

Spero Therapeutics (SPRO) climbed about +6% in pre-market trading, extending its gains after Evercore ISI upgraded the stock to Outperform from In Line with a price target of $8, up from $2.  

Anheuser Busch Inbev NV ADR (BUD) dropped over -1% in pre-market trading after Jefferies downgraded the stock to hold from buy.

Reliance Global Group Inc (RELI) rose over +3% in pre-market trading after its Board of Directors authorized a share repurchase program of up to 3M shares.

Sonendo Inc (SONX) plunged more than -12% in pre-market trading after the company announced a $63M private placement of common stock and pre-funded warrants.

ASML Holding NV ADR (ASML) rose more than +1% in pre-market trading after Grupo Santander upgraded the stock to neutral from underperform.

Golden Ocean Group Ltd (GOGL) fell more than -4% in pre-market trading after Jefferies downgraded the stock to hold from buy.

Today’s U.S. Earnings Spotlight: Monday - September 26th

Aspen (AZPN), Sprott Physical Gold and Silver Trust (CEF), Cognyte Software (CGNT), Skillsoft Corp Class A (SKIL), Mesabi Trust (MSB), Niocorp Developments (NIOBF), Bridgford (BRID), Sangoma Technologies (SANG), The Intergroup (INTG), Bancroft (BCV), Fonar (FONR), AMREP (AXR), Kentucky First Federal (KFFB), PharmaCyte Biotech (PMCB), Renalytix AI Nas (RNLX), Wolford ADR (WLFDY), CanAlaska Uranium (CVVUF), US Gold (USAU), Applied Genetic (AGTC), Marine Petroleum (MARPS), Coffee Holding (JVA), Sears (SHLDQ), Kintara Therapeutics (KTRA), American Overseas (AOREF), Silver Bull (SVBL), Sunwin Stevia International Inc (SUWN), JLM Couture (JLMC), Jammin Java Corp (JAMN), Crowdgather Inc (CRWG), Champion Ind (CHMP), Christopher Banks (CBKCQ), Bon-Ton Stores (BONTQ), Destination Maternity (DESTQ), Global Gaming (BLKCF), PreVu (PRVU), Signature Eyewear (SEYE).

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