Markets Today: Stocks Slip on Weakness in Chipmakers and Automakers

Morning Markets

December S&P 500 futures (ESZ22) this morning are up +0.32% even though we are seeing a slide in chip stocks in pre-market trading after the U.S. Commerce Department Friday imposed fresh curbs on China's access to American technology.  Also, automakers are under pressure in pre-market trading after UBS downgraded Ford and General Motors.  Overall trading activity may be muted today, with the cash government bond market closed for Columbus Day.   

Global semiconductor stocks are falling today after the U.S. Commerce Department Friday imposed fresh curbs on China's access to American technology.  The restrictions include the export of U.S. chips used in artificial intelligence and supercomputing and tighter rules on the sale of semiconductor equipment to any Chinese company.

The Euro Stoxx 50 today is down by -0.11%.  Losses in chipmakers today are weighing on the overall market after the U.S. imposed fresh restrictions on China’s access to U.S. technology.  Weak economic news today is also weighing on stocks after the Eurozone Oct Sentix investor confidence fell -6.5 to a 2-1/4 year low of -38.3.  Higher interest rates today are also weighing on stocks as the 10-year German bund yield climbed to a 1-week high of 2.230%.  However, strength in bank stocks today limits losses in the overall market as Credit Suisse Group AG rose for the third day today after Bloomberg News reported that its securitized products group unit had drawn interest from bidders, including Pimco and Centerbridge. 

ECB Governing Council member Knot said he sees "at least two significant rate hikes" at the next two ECB policy meetings before the ECB can begin shrinking its balance sheet.

Eurozone Oct Sentix investor confidence fell -6.5 to a 2-1/4 year low of -38.3, weaker than expectations of -34.7.

Asian markets today closed lower.  China’s Shanghai Composite closed down -1.66%, and Hong Kong’s Hang Seng Index closed down -2.95%.  Japan is closed today for the Health Sports Day holiday. 

China’s Shanghai Composite tumbled to a 5-month low today after reopening from the week-long Golden Week holidays.  Shares of Chinese chip and electronics makers tumbled today to lead the overall market lower following last Friday’s announcement from the U.S. of new restrictions on China’s access to U.S. semiconductor technology. Chinese stocks also fell today on weak holiday spending as tourism revenue declined -26% to 287 billion yuan ($40.3 billion) over the Golden Week holiday from a year ago.  In addition, a jump in new Covid cases has led to pandemic lockdowns that undercut economic activity after Covid infections in China on Sunday rose to 1,878, the most in 7-weeks, as the week-long National Day holiday saw new cases flare among returning holiday travelers.

China’s economic news today was bearish for stocks after the China Sep Caixin services PMI fell -5.7 to 49.3, weaker than expectations of 54.4 and the steepest pace of contraction in 4 months.

Pre-Market U.S. Stock Movers

Chip stocks are sliding in pre-market trading after the U.S. Commerce Department Friday imposed fresh curbs on China's access to American technology.  Advanced Micro Devices (AMD), Nvidia (NVDA), Applied Materials (AMAT), Micron (MU), and Texas Instruments (TXN) are down more than -1%.

Ford Motor (F) tumbled nearly -4% in pre-market trading after UBS downgraded it to sell from neutral, citing weak profit margins, and General Motors (GM) is down -3% after UBS downgraded the stock to neutral from buy, saying it sees “demand destruction” for GM’s electric vehicle segment. 

Rivian Automotive (RIVN) dropped more than -7% in pre-market trading after it said it would recall 13,000 vehicles it delivered to customers after discovering a minor structural defect.   

U.S.-listed Chinese stocks declined in pre-market trading, with sentiment hurt by weak holiday spending data during the Golden Week holiday and new Covid flareups that sparked fresh pandemic restrictions.  Bilibili (BILI) is down more than -5%.  Also, Pinduoduo (PDD) is down more than -2%.  In addition, Alibaba Group Holding (BABA), Baidu (BIDU), and JD.com (JD) are down more than -1%. 

U.S.-listed Macau casino operators fell in pre-market trading after Citigroup cut its estimate from Macau’s gross gaming revenue in October to 5.5 billion patacas from 7 billion patacas, citing disappointing revenue during the first nine days of this month.  Las Vegas Sands (LVS) is down more than -3%.  Also, Wynn Resorts (WYNN) is down more than -2%, and MGM Resorts International (MGM) is down more than -1%. 

Proctor & Gamble (PG) fell -1% in pre-market trading after Goldman Sachs downgraded it to neutral from buy.

Lowe’s (LOW) slid nearly -1% in pre-market trading after R5 Capital downgraded the stock to hold from buy, saying there are too many risks for the company due to rising mortgage rates and their impact on the overall housing market.

Kraft Heinz Foods (KHC) gained more than +1% in pre-market trading after Goldman Sachs upgraded it to buy from neutral. 

Toast (TOST) climbed more than +3% in pre-market trading after Mizuho Securities upgraded the stock to buy from neutral. 

Fortinet (FTNT) rose more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight. 

Merck & Co (MRK) gained more than +1% in pre-market trading after saying a phase 3 trial of its sotatercept for treating pulmonary arterial hypertension met primary efficacy outcome measures. 

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

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