Pre-Market Brief: Stocks Plunge On Mounting Recession Risks

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.68% this morning after the Dow Jones Industrial Average and S&P 500 index continued to fall deeper into bear-market territory as investors digested a wave of remarks from Federal Reserve members indicating further rate increases that could throw the U.S. economy into a recession. The Dow Jones Industrial Average and S&P 500 indexes were weighted down primarily by losses in the Utilities, Financials, and Consumer Goods sectors, while the NASDAQ Composite index ended in the green mainly due to gains in the Oil & Gas, Basic Materials, and Technology sectors.

Federal Reserve Bank of St. Louis President James Bullard indicated on Tuesday that the Fed would need to keep interest rates high enough for “some time to make sure we’ve got the inflation problem under control.” Federal Reserve Bank of Minneapolis President Neel Kashkari said that the current speed of rate increases was "appropriate" and repeated the Fed's commitment to reduce inflation. Meanwhile, U.S. rate futures have priced in a 44.9% chance of a 50 basis point rate increase and a 55.1% chance of a 75 basis point hike at November's monetary policy meeting.

"It's disappointing, but it's not a surprise. People are concerned about the Federal Reserve, the direction of interest rates, the health of the economy," said Robert Pavlik, a senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. 

Today, market participants will be paying close attention to speeches from FOMC members Bostic, Bullard, Powell, and Bowman.

Also, investors are likely to focus on the U.S. Crude Oil Inventories data, which was at +1.142M last week. Economists, on average, forecast the new figure to be +0.443M.

U.S. August Pending Home Sales data will be reported today as well. Economists foresee this figure to come in at -1.4% m/m, compared to the previous value of -1.0% m/m.

In the bond markets, United States 10-Year rates are at 3.990%, up +0.69%.

The Euro Stoxx 50 is down -0.85% this morning amid renewed fears about the energy crisis and the worsening growth outlook. European stocks have received a negative handover from Wall Street and Asia after the major indices closed lower. Moreover, the European Central Bank is expected to keep hiking interest rates to bring down inflation. Goldman Sachs expects the ECB to raise interest rates by 75 basis points at its October and December meetings. Adding to the region's woes was the intensification of geopolitical tensions after Europe initiated an investigation of large leaks into the Baltic Sea from two Nord Stream pipelines.

The German GfK Consumer Climate Index, French Consumer Confidence, and Italian Consumer Confidence data were released today. 

Germany's October GfK Consumer Climate Index has been reported at -42.5, weaker than an economic forecast of -39.0.

The French September Consumer Confidence came in at 79, weaker than expectations of 80.

Italy's September Consumer Confidence stood at 94.8, weaker than expectations of 95.1.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.58%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.50%.

China’s Shanghai Composite today closed down as comments from Federal Reserve officials intensified more concerns over heightened interest rates, pushing investors out of risk-driven assets into the arms of the safe-haven dollar. Chinese stocks closed near 5-month lows, slightly outperforming their Asian peers on stimulus measures by the government.

"It is now clear that central banks in advanced economies will make the current tightening cycle the most aggressive in three decades," said Jennifer McKeown, a head of global economics at Capital Economics.

At the same time, Japan’s Nikkei Stock Index closed lower today, weighed down by losses n the Transportation Equipment, Chemical, Petroleum & Plastic, and Construction sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.59% to 24.48.

Pre-Market U.S. Stock Movers

Biogen Inc (BIIB) spiked over +50% in pre-market trading after the company announced positive topline results from Eisai's large global Phase 3 confirmatory Clarity AD clinical trial of lecanemab for the treatment of mild cognitive impairment due to Alzheimer's disease. In addition, BMO Capital upgraded the stock to outperform from market perform.

Rumble Inc (RUM) climbed over +5% in pre-market trading after Russell Brand announced its intentions to move exclusively to Rumble from Youtube.

Mind Medicine Inc (MNMD) plunged over -30% in pre-market trading after the company announced a common stock offering.

Sandstorm Gold Ltd N (SAND) dropped about -8% in pre-market trading after the company announced $60M financing.

Ibio Inc (IBIO) plunged about -30% in pre-market trading after the company announced lower-than-expected FY 2022 results.

Today’s U.S. Earnings Spotlight: Wednesday - September 28th

Paychex (PAYX), Cintas (CTAS), Vail Resorts (MTN), Jefferies Financial (JEF), Concentrix (CNXC), Thor Industries (THO), Sprott Physical Gold and Silver Trust (CEF), Eaton Vance TaxManaged Global Diver (EXG), Micro Focus ADR (MFGP), Eaton Vance Tax Managed Diversified (ETY), Duckhorn Portfolio (NAPA), MillerKnoll (MLKN), Enerpac Tool Group (EPAC), Lilium NV (LILM), Pathfinder Acquisition (PFDR), QIWI (QIWI), Skillsoft Corp Class A (SKIL), Cognyte Software (CGNT), Mesabi Trust (MSB), Niocorp Developments (NIOBF), Genfit (GNFT), NextSource Materials (NSRCF), Vizsla (VZLA), Bridgford (BRID), Park City Group (PCYG), Glimpse Group (VRAR), PharmaCyte Biotech (PMCB), Renalytix AI Nas (RNLX), IsoRay (ISR), Wolford ADR (WLFDY), Centogene (CNTG), S&W Seed (SANW), US Gold (USAU), Nutriband (NTRB), China Botanic Pharmaceutical (CBPI), Troika Media Group (TRKA), Applied Genetic (AGTC), Coffee Holding (JVA), Heart Test Laboratories Unt (HSCS), Sears (SHLDQ), REGI US (RGUS), Christopher Banks (CBKCQ), Bon-Ton Stores (BONTQ), EnSync (ESNC), Petro River Oil Corp (PTRC).

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