Morning Markets
December S&P 500 futures (ESZ22) this morning are down by -0.52%. U.S. stock indexes today are under pressure on concern that interest rate hikes by the world’s central banks to combat persistently high inflation will push the global economy into recession. Higher bond yields are also weighing on stocks today, with the 10-year T-note yield up +8.4 bp to 3.769%, just below last Friday’s 12-year high of 3.825%.
Energy stocks are weaker today as the price of WTI crude fell to an 8-1/2 month low. Mining stocks and metal producers are weaker after the price of gold fell to a more than 2-year low and copper tumbled to a 2-month low.
The Euro Stoxx 50 today is down by -0.13% and fell to a 1-3/4 year low. Weakness in European mining and energy stocks is leading the overall market lower today on declines in gold and copper prices. Also, a jump in bond yields is bearish for stocks after the 10-year UK gilt yield rose to a 12-year high of 4.195%, and the 10-year German bund yield climbed to a 10-year high of 2.130%. A slump in German business confidence also undercut European stocks after the German Sep IFO business climate index fell to a 2-1/4 year low.
Comments today from ECB Vice President Guindos weighed on European stocks when he said the Eurozone economy will slow significantly in the third and fourth quarters this year and "reducing inflation is the main contribution we can have to improve the economic situation."
Hawkish ECB comments today also weighed on stocks and helped push the 10-year German bund yield up to a 10-year high of 2.130%. ECB Governing Council member Simkus said "inflation trends are intensifying," and the ECB will raise interest rates by at least 50 bp at the October meeting.
The German Sep IFO business climate index fell -4.3 to a 2-1/4 year low of 84.3, weaker than expectations of 87.0.
Asian markets today closed lower. China’s Shanghai Composite Index closed down -1.20%, and Japan’s Nikkei Stock Index closed down -2.66%.
China’s Shanghai Composite Index today dropped to a 4-1/4 month low and closed moderately lower. Chinese exporters and shippers sold off today on concern a slowdown in the global economy will crimp demand for Chinese goods. Weak demand has knocked the price to ship a 40-foot container from Shanghai to Los Angeles down to a 2-year low of $3,779. Chinese exporters declined today even after the yuan fell to a 2-1/4 year low against the dollar. Chinese stocks recovered from their worst levels on a rally in tourism-related stocks after Macau said the city would soon resume tour groups from mainland China, and Hong Kong announced an end to hotel quarantines.
Japan’s Nikkei Stock Index fell to a 2-1/4 month low today and closed sharply lower. Japanese stocks retreated today following the selloff in U.S. equity markets on Friday. A fall of more than -3% in Toyota Motor today weighed on Japanese automakers after the company said it plans to produce about 800,000 vehicles globally in October, below the 900,000 units it predicted last month, as the semiconductor shortage continues to impact auto production. Weak economic news also weighed on Japanese stocks after the Japan Sep Jibun Bank manufacturing PMI fell to a 20-month low.
BOJ Governor Kuroda said uncertainties surrounding the Japanese economy are very high, and he believes BOJ monetary easing will continue in 2023 and 2024.
The Japan Sep Jibun Bank manufacturing PMI fell -0.5 to 51.0, the slowest pace of expansion in 20 months.
Pre-Market U.S. Stock Movers
Energy stocks and energy service providers are falling in pre-market trading as the price of WTI crude dropped to an 8-1/2 month low. Devon Energy (DVN), Diamondback Energy (FANG), Exxon Mobil (XOM), ConocoPhillips (COP), Halliburton (HAL), Occidental Petroleum (OXY), and Marathon Oil (MRO) are all down more than -1%.
Diana Shipping (DSX) dropped more than -5% in pre-market trading, and Safe Bulkers (SB) fell more than -2% after Jeffries downgraded both shippers to hold from buy, citing a decline in dry bulk charter rates.
Farfetch (FTCH) dropped more than -4% in pre-market trading after Citigroup began coverage of the stock with a sell rating, citing “weak” underlying profitability.
Freeport-McMoRan (FCX) fell nearly -2% in pre-market trading after the price of gold dropped to a 2-year low and the price of copper dropped to a 2-month low.
Sotera Health (SHC) slid nearly -2% in pre-market trading after KeyBanc Capital Markets downgraded the stock to sector weight from overweight.
U.S.-listed casino stocks with operations in Macau jumped in pre-market trading after the Macau government said tour groups from mainland China could resume as early as November. Wynn Resorts (WYNN) and Las Vegas Sands (LVS) are up more than +7%, and MGM Resorts International (MGM) is up more than +2%.
Planet Fitness (PLNT) rose +2% in pre-market trading after Raymond James upgraded the stock to strong buy from market perform with a price target of $70.
Atea Pharmaceuticals (AVIR) jumped more than +9% in pre-market trading after the FDA granted the company Fast Track Designation for its AT-752, an antiviral treatment for the dengue virus infection.
Today’s U.S. Earnings Reports (9/26/2022)
Broadcom Inc (AVGO), Campbell Soup Co (CPB), Ciena Corp (CIEN), Hormel Foods Corp (HRL), Lululemon Athletica Inc (LULU), nCino Inc (NCNO), Ollie's Bargain Outlet Holding (OLLI), Science Applications Internati (SAIC), Smartsheet Inc (SMAR), Toro Co/The (TTC).
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