Markets Today: Stocks Recover Overnight Losses as BOE Ramps Up QE

Morning Markets

December S&P 500 futures (ESZ22) this morning are up by +0.27%.  Dec S&Ps rebounded from a 1-3/4 year low in overnight trade as stock indexes erased their losses, and global bond yields plunged, when the Bank of England (BOE) unexpectedly ramped up QE.  The 10-year T-note yield fell from a 14-year high today of 4.015% and is down -7.3 bp at 3.872%.  The 10-year UK gilt yield fell back from a 14-year high of 4.591% and is down -38.3 bp at 4.122%.

Health care stocks jumped in pre-market trading to give a boost to the overall market as Biogen surged more than +45% when it said its Lecanemab drug developed with Eisai Co significantly slowed the progression of Alzheimer’s disease.

U.S. stock indexes initially fell in overnight trading on weakness in chip stocks as Apple fell more than -3% in overnight trading after a Bloomberg report said the company is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize. 

The BOE announced today that it would buy long-dated government bonds beginning Wednesday "to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome."  The BOE’s rescue-action action today sparked a rally in global government bond markets.

The U.S. Aug advance goods trade balance deficit of -$87.3 billion was narrower than expectations of -$89.0 billion and the smallest deficit in 10 months.

U.S. Aug wholesale inventories rose +1.3% m/m, more than expectations of +0.4% m/m.  Also, Aug retail inventories rose +1.4% m/m, more than expectations of +1.0% m/m.  The buildup of inventories is a negative factor for the economy since it suggests that production will need to slow to match demand.

The Euro Stoxx 50 today is down by -1.12% and fell to a 1-3/4 year low.  A slump in technology stocks led the market lower after a Bloomberg report said Apple was ditching plans to boost iPhone production due to demand concerns.   Also, weakness in European shipping stocks weighed on the overall market after Bloomberg reported that the European Union is said to be considering adding shipping restrictions on Russian oil as part of sanctions.  

Investors continue to flee European stocks after Citigroup said EPFR Global data show European equity funds on track for eight straight months of outflows totaling $98 billion, or 6% of assets under management, comparable to the 2011/12 Eurozone debt crisis.

ECB President Lagarde said we're not at the neutral rate yet, and we'll continue raising rates at the next several ECB meetings.

ECB Governing Council member Kazimir said, "inflation is too high for too long, and we will need to continue in normalization of monetary policy."  While ECB officials are data dependent, a 75 bp hike "is a good candidate to continue and keep tightening." 

The German Oct GfK consumer confidence index fell -5.7 to a record low of -42.5, weaker than expectations of -39.0.

Asian markets today closed lower.  China’s Shanghai Composite Index closed down -1.58%, and Japan’s Nikkei Stock Index closed down -1.50%. 

China’s Shanghai Composite Index today dropped to a new 4-1/4 month low and closed moderately lower.  Concern about slowing global growth weighed on Chinese stocks today after HSBC cut its year-end target for the Shanghai Composite to 3,300 from 3,750, citing tighter global liquidity, U.S. inflation, Covid flare-ups, and China’s Covid-Zero policy, and slumping mutual fund issuances. 

Japan’s Nikkei Stock Index today tumbled to a 2-3/4 month low and closed moderately lower.  Concern that the Fed’s aggressive tightening path will lead to slower global economic growth weighed on Japanese stocks.  Also, weaker than expected Japanese economic news undercut stocks today after the Japan July leading index CI was revised downward by -0.7 to a 20-month low of 98.9.

Pre-Market U.S. Stock Movers

Apple (AAPL) dropped more than -3% in pre-market trading after a Bloomberg report said the company is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize.  Suppliers to Apple also fell on the report, with Micron Technology (MU), Qualcomm (QCOM), and Skyworks Solutions (SWKS) all down more than -1%

Microchip stocks are falling in pre-market trading on demand concerns on the news that Apple is ditching plans to boost its iPhone production. Microchip Technology (MCHP), Nvidia (NVDA), NXP Semiconductors (NXPI), Intel (INTC), and Texas Instruments (TXN) are all down more than -1%. 

Lockheed Martin (LMT) fell more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to underweight.

UiPath (PATH) tumbled more than -4% in pre-market trading after it forecasted fiscal 2024 revenue at $1.185 billion, weaker than the consensus of $1.220 billion. 

Mind Medicine (MMED) plunged more than -30% in pre-market trading after an offering of shares priced at $4.25 a share, a 31% discount to Tuesday’s close.

Biogen (BIIB) surged by more than +45% in pre-market trading after the company reported the drug Lecanemab it is developing with Eisai Co. showed it reduced the pace of cognitive decline in people with early stages of Alzheimer’s disease by 27% over 18 months when compared with a placebo. 

Illumina (ILMN) rose nearly +2% in pre-market trading after Evercore ISI upgraded the stock to outperform from in-line.

ZoomInfo Technologies (ZI) gained more than +1% in pre-market trading after Daiwa Securities initiated coverage of the stock with a buy rating and a price target of $66.

Today’s U.S. Earnings Reports (9/28/2022)

Cintas Corp (CTAS), Concentrix Corp (CNXC), Jefferies Financial Group Inc (JEF), Paychex Inc (PAYX), 

Thor Industries Inc (THO), Vail Resorts Inc (MTN).

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