Markets Today: Stocks Climb as Bond Yields Fall

Morning Markets

December S&P 500 futures (ESZ22) this morning are up by +1.41%.  A sharp decline in T-note yields is supporting a rally in stocks today, with the 10-year T-note yield down -10.5 bp to 3.819%, falling back from Monday’s 12-year high of 3.929%.  Today's positive comments from Chicago Fed President Evans supported stocks when he said Fed forecasts are not showing "recession-like numbers."  Stock indexes extended their gains after this morning’s economic news showed U.S. Aug capital goods new orders nondefense ex-aircraft & parts rose more than expected.

Chicago Fed President Evans said Fed forecasts are not showing "recession-like numbers," and by spring 2023, we can sit and wait on interest rates.

U.S. Aug capital goods new orders nondefense ex-aircraft & parts rose +1.3% m/m, stronger than expectations of +0.2% m/m and the biggest increase in 7 months.

The Euro Stoxx 50 today is up by +0.95%.  European stocks are moderately higher today as they rebound from Monday’s 1-3/4 year low. A decline in bond yields today is supporting a rally in stocks.  The 10-year German bund fell back from a more than 10-year high today at 2.159% and is down -2.8 bp at 2.087%.   European stocks fell back from their best levels on hawkish ECB comments and after European nat-gas prices jumped more than +8% after the Nord Stream gas pipeline was damaged in the Baltic Sea from apparent sabotage.

Comments today from ECB Governing Council member Centeno were hawkish for ECB policy and bearish for stocks when he said, "for as long as we prolong the inflation peaks, we won't be able to give monetary policy the predictability that maybe we would wish, and the cycle of interest rate increases will continue."

Eurozone Aug M3 money supply rose +6.1% y/y, stronger than expectations of +5.4% y/y.

Asian markets today closed higher.  China’s Shanghai Composite Index closed up +1.40%, and Japan’s Nikkei Stock Index closed up +0.53%. 

China’s Shanghai Composite Index today recovered from a 4-1/4 month low and closed moderately higher.  Chinese stocks received a boost today from a Bloomberg report that said Chinese regulators asked several big mutual fund houses and brokers from large sales of stocks before the party congress in October.  Chinese exporters also rose today after the yuan fell to a 2-1/4 year low against the dollar.  Chinese casino stocks also rose for a second day on positive carry-over from Monday when Macau said the city would soon resume tour groups from mainland China.

Japan’s Nikkei Stock Index closed moderately higher.  A weaker yen Monday sparked a rally in Japanese exporter stocks today.  Also, signs of slowing price pressures were positive for Japanese stocks after Japan Aug PPI service prices rose at a slower pace than expected.  In addition, stocks garnered support today after the BOJ unexpectedly announced an unscheduled purchase of 150 billion yen of 5-to-10 year bonds and 100 billion yen of 10-to-25 year bonds.  The BOJ ramped up QE today in an attempt to lower bond yields after the 10-year JGB bond yield rose above 0.25%, the top limit of the central bank’s targeted yield range.

Japan Aug PPI services prices eased to +1.9% y/y, weaker than expectations of +2.1% y/y.

Pre-Market U.S. Stock Movers

Mega cap technology companies are climbing in pre-market trading on dip buying after the sharp sell-off over the past week.  Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), and Microsoft (MSFT) are all up more than +1%. 

U.S.-listed casino stocks with operations in Macau are moving higher in pre-market trading on positive carry-over from Monday, when the Macau government said tour groups from mainland China could resume as early as November.  Wynn Resorts (WYNN), Las Vegas Sands (LVS), and MGM Resorts International (MGM) are up more than +1%.

Cryptocurrency-exposed stocks are rising in pre-market trading, with the price of Bitcoin up more than +5% at a 1-1/2 week high.  Marathon Digital (MARA), MicroStrategy (MSTR), Coinbase Global (COIN), and Riot Blockchain (RIOT) are up more than +5%.

Tesla (TSLA) rose more than +2% in pre-market trading after Electrek reported that Tesla management, in an email to employees, said the company would be delivering a “very high volume of vehicles to customers during the final days” of the third quarter. 

Hyatt Hotels (H) jumped more than +3% in pre-market trading after Evercore ISI upgraded the stock to outperform from in-line.

Lucid Group (LCID) climbed more than +3% in pre-market trading after Cantor Fitzgerald initiated coverage on the stock with an overweight rating and a price target of $23.

Cogent Communications (CCOI) is up more than +3% in pre-market trading after KeyBanc Capital Markets upgraded the stock to overweight from sector weight.

Keurig Dr. Pepper (KDP) is down more than -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral. 

Today’s U.S. Earnings Reports (9/27/2022)

Cal-Maine Foods Inc (CALM), Cracker Barrel Old Country Sto (CBRL), Jabil Inc (JBL), Neogen Corp (NEOG), Progress Software Corp (PRGS), TD SYNNEX Corp (SNX), United Natural Foods Inc (UNFI).

• Pre-Market Brief: Stocks Rebound After Steep Losses
• Bear Call Spread Screener Results For September 27th
• Stocks Sink on Continued Rise in Global Bond Yields
• Hess Midstream is Appealing to Value Buyers with Its 9.0% Yield and Buybacks