Markets Today: Stocks Post Modest Losses on Inflation Concerns

Morning Markets

December S&P 500 futures (ESZ22) this morning are down by -0.05%.  Stock indexes are under modest pressure today on concern the decision by OPEC+ Wednesday to cut its crude output by -2.0 million bpd will boost crude oil prices and keep inflation elevated for longer, which will keep aggressive Fed rate hikes in play.

Stock indexes recovered most of their overnight losses after T-note yields declined when this morning’s economic news showed U.S. weekly initial unemployment claims rose more than expected to a 5-week high.  The 10-year T-note yield this morning is down -1.2 bp to 3.741%.

U.S weekly initial unemployment claims rose +29,000 to a 5-week high of 219,000, showing a weaker labor market than expectations of 204,000.

The Euro Stoxx 50 today is down by -0.34%.  Losses in energy stocks today are weighing on the overall market, led by a more than -4% slump in Shell Plc after the company said Q3 performance might be weaker due to a drop in the company’s refining and chemical businesses.  Also, today’s economic news weighed on stocks after Eurozone Aug retail sales and German Aug factory orders declined.

According to the September ECB meeting minutes, some policymakers saw a 50 bp rate hike as sufficient given recession risks. 

Eurozone Aug retail sales fell -0.3% m/m, right on expectations, and the third straight month sales declined.

German Aug factory orders fell -2.4% m/m, weaker than expectations of -0.7% m/m and the biggest decline in 5 months.

The German Sep S&P Global construction PMI fell -0.8 to 41.8, the steepest pace of contraction in 1-1/2 years.

Asian markets today settled mixed.  Chinese markets are closed this week for the Golden Week holidays.  Hong Kong’s Hang Seng Index closed down -0.42%, and Japan’s Nikkei Stock Index closed up +0.70%. 

Hong Kong’s Hang Seng Index posted moderate losses today as the index gave back some of Wednesday’s +5% surge.  Trading volume remained light as mainland China remains closed for the Golden Week holiday.  Losses in Hong Kong stocks were limited after Morgan Stanley Wednesday upgraded emerging-market and Asia ex-Japan stocks to overweight from equal-weight.

Japan’s Nikkei Stock Index today posted moderate gains. Japanese chipmakers extended Wednesday’s gains after Morgan Stanley projected a return to growth for the semiconductor industry for the second half of 2023.  Also, Japanese stocks rose on optimism that the BOJ’s loose monetary policies could provide further support to equities.

Pre-Market U.S. Stock Movers

Tesla (TSLA) is down -1% in pre-market trading after Mizuho Securities cut its price target on the stock to $370 from $391.

Okta (OKTA) slid more than -2% in pre-market trading after Evercore ISI initiated coverage of the stock with a recommendation of underperform. 

ArcelorMittal (MT) dropped more than -3% in pre-market trading after UBS downgraded the stock to neutral from buy. 

Twitter (TWTR) fell more than -2% in pre-market trading as the company awaits further news on the revived $44 billion deal for Elon Musk to buy the company.

Peloton Interactive (PTON) dropped -4% in pre-market trading after CEO McCarthy told staff that the company is laying off a significant amount of employees.

Eli Lilly (LLY) gained +1% in pre-market trading after the FDA granted the company’s tirzepatide drug Fast Track designation for the treatment of obesity in overweight adults.

Richardson Electronics (RELL) jumped more than +8% in pre-market trading after reporting Q1 gross margin of 34.1%, up from 30.3% in the year-ago period. 

Pinterest (PINS) climbed more than +5% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral.

Steel Dynamics (STLD) gained nearly +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $88.

Take-Two Interactive Avantor (TTWO) rose more than +1.0% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $165.

Today’s U.S. Earnings Reports (10/6/2022)

Accolade Inc (ACCD), AngioDynamics Inc (ANGO), Conagra Brands Inc (CAG), Constellation Brands Inc (STZ), IDT Corp (IDT), Landec Corp (LNDC), McCormick & Co Inc/MD (MKC), Park Aerospace Corp (PKE).

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