Pre-Market Brief: Stocks Retreat as Global Growth Concerns Persist

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.86% this morning after three major US benchmark indices finished the regular session lower, with the Nasdaq posting its lowest close since July 2020, driven by a chip-fueled decline in tech stocks after the White House unveiled new export restrictions aimed at hobbling China's semiconductor industry and investors' worries about the impact of higher interest rates. Three major U.S. stock indexes were weighted down primarily by losses in the Oil & Gas, Technology, and Healthcare sectors.

Federal Reserve Vice Chair Lael Brainard said Monday that a “second-half rebound will be limited, and real GDP growth will be essentially flat this year." "Monetary policy will be restrictive for some time to ensure that inflation moves back to the central bank’s 2% target," Brainard added. Chicago Fed President Charles Evans also said on Monday that U.S. Fed officials were in a strong consensus on the need to hike the target policy rate to about 4.5% by March next year.

"We continue to expect that the Fed will hike by 75bp in November, 50bp in December, and 25bp in February to reach a terminal forecast of 4.5-4.75%," Goldman Sachs said in a note.

Meanwhile, U.S. rate futures have priced in a 23.5% chance of a 50 basis point rate increase and a 76.5% chance of a 75 basis point hike at November's monetary policy meeting.

At the same time, estimates for third-quarter earnings have deteriorated in recent weeks. Analysts now expect y/y earnings for S&P 500 companies to increase 4.1% in the quarter, compared with a rise of 11.1% expected at the beginning of July.

Today, investors are likely to focus on the U.S. IBD/TIPP Economic Optimism data, which was at 44.7 in September. Economists foresee the October figure to come in at 40.5.

In the bond markets, United States 10-Year rates are at 3.941%, up +1.44%.

The Euro Stoxx 50 futures are down -1.13% this morning, with the basic resources sector leading losses, as concerns remained over the global economic outlook and the expectations of more monetary policy tightening from central banks. In addition, European equities were pressured by a rise in government bond yields across the globe. Another negative factor for European equities is the more than -6% drop in Givaudan (GIVN.Z.IX) after the Swiss fragrance and flavor maker said it was on track to implement price increases to offset higher input costs. 

U.K. Average Earnings Index +Bonus, U.K. Claimant Count Change, U.K. Employment Change 3M/3M, U.K. Unemployment Rate, and Italy Industrial Production data were released today. 

U.K. August Average Earnings Index +Bonus has been reported at 6.0%, stronger than expectations of 5.9%.

U.K. September Claimant Count Change stood at 25.5K, weaker than expectations of 4.2K.

U.K. August Employment Change 3M/3M was -109K m/m, stronger than expectations of -155K.

U.K. August Unemployment Rate stood at 3.5%, stronger than expectations of 3.6%.

The Italian Industrial Production came in at +2.3% m/m and +2.9% y/y in August, stronger than expectations of +0.2% m/m and -0.4% y/y.

Asian stock markets today settled mixed as technology majors remained under pressure from new U.S. export curbs and an aggressive Federal Reserve. China’s Shanghai Composite Index (SHCOMP) closed up +0.19%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.64%.

China’s Shanghai Composite today closed up amid the improvement in sentiment ahead of the third-quarter earnings season due to a strong outlook from COSCO Shipping Holdings Co Ltd and battery maker Contemporary Amperex Technology Co Ltd.

At the same time, Japan’s Nikkei Stock Index closed lower today in catch-up trade after a holiday on Monday, fueled by losses in the Precision Instruments, Gas & Water, and Non-Metal Minerals sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.97% to 23.33.

Japan's Adjusted Current Account came in at -0.53T, weaker than expectations of -0.47T.

Pre-Market U.S. Stock Movers

Grab Holdings Ltd (GRAB) fell more than -1% in pre-market trading after Barclays initiated coverage of the stock with an equal weight rating and a $3 price target.

Leggett & Platt (LEG) plunged over -8% in pre-market trading after the company cut FY EPS and revenue guidance.

Microsoft Corporation (MSFT) fell about -1% in pre-market trading after Jefferies lowered its price target on the stock to $275 from $320.

Virgin Galactic Holdings Inc (SPCE) dropped about -2% in pre-market trading after Wolfe Research initiated coverage of the stock with an underperform rating with a $4 price target.

Rigel Pharmaceuticals Inc (RIGL) slid over -6% in pre-market trading after the company received guidance from the FDA's review of the company's re-analysis of data from the FORWARD Phase 3 trial of fostamatinib.

Zscaler Inc (ZS) sank about -3% in pre-market trading after the company announced that Amit Sinha has accepted a CEO position at a privately-held technology company and will resign from Zscaler on October 21st, 2022.

Today’s U.S. Earnings Spotlight: Tuesday - October 11th

Louis Vuitton ADR (LVMUY), ASX ADR (ASXFY), AZZ (AZZ), Indus Realty Trust (INDT), VOXX (VOXX), TSR (TSRI), CLS Holdings USA (CLSH).

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