Pre-Market Brief: Stocks Mixed Ahead of Key U.S. PPI Data

Morning Markets

December S&P 500 futures (ESZ22) are trending higher +0.56% this morning after the Nasdaq and S&P 500 indexes declined for the fifth successive session, with investors remaining cautious ahead of crucial producer price data as well as minutes from the Federal Reserve’s latest meeting. However, the Dow ended higher, supported by a +5.7% rise in Amgen Inc shares after Morgan Stanley upgraded the drugmaker's stock to overweight from equal weight. The S&P 500 and NASDAQ Composite indexes were weighted down primarily by losses in the Technology, Telecoms, and Financials sectors, while the Dow Jones Industrial Average index ended in the green mainly due to gains in the Healthcare, Consumer Goods, and Utility sectors.

All three major US benchmark indices edged lower in afternoon trading after Bank of England Governor Andrew Bailey told pension fund managers to complete rebalancing their positions by Friday when the BoE is due to finish its emergency support program for the U.K. bond market.

"What caused the latest downturn was an announcement the Bank of England was going to stop supporting the gilt (UK bonds) market in three days," said Randy Frederick, a managing director of trading and derivatives at Charles Schwab in Austin.

Federal Reserve Bank of Cleveland President Loretta Mester emphasized in her remarks the need for monetary policy to become "more restrictive" to "put inflation on a sustainable downward path to 2%." "I do not anticipate any cuts in the fed funds target range next year," she added. Meanwhile, U.S. rate futures have priced in a 19.2% chance of a 50 basis point rate increase and an 80.8% chance of a 75 basis point hike at November's monetary policy meeting.

Also, the International Monetary Fund predicted a moderate 1.6% growth in the U.S. economy this year.

Today, all eyes are focused on the U.S. Producer Price Index (PPI) data in a couple of hours. Economists, on average, forecast that September PPI will come in at +0.2% m/m, compared to the previous figure of -0.1% m/m.

Also, investors are likely to focus on minutes from the Federal Reserve’s September meeting for clues into future rate increases.

U.S. September Core PPI data will be reported today as well. Economists foresee this figure to come in at +0.3% m/m, compared to the previous value of +0.4% m/m.

In the bond markets, United States 10-Year rates are at 3.923%, down -0.41%.

The Euro Stoxx 50 futures are up +0.45% this morning as investors look ahead to U.S. PPI data. However, those gains are likely to be unstable, with global growth concerns dominating sentiment. In addition, mixed earnings reports fueled concerns about the impact of tighter monetary policies and rising inflation on corporate profits.

The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2023 from July's estimate of 2.9% to 2.7%. It said Europe has a high risk of a recession amid rising energy prices caused by Russia's invasion of Ukraine.

U.K. GDP, U.K. Industrial Production, U.K. Manufacturing Production, U.K. Monthly GDP 3M/3M Change, U.K.Trade Balance, and Eurozone Industrial Production data were released today. 

U.K. GDP has been reported at -0.3% m/m and +2.0% y/y, weaker than expectations of 0.0% m/m and +2.4% y/y.

U.K. August Industrial Production stood at -1.8% m/m, weaker than expectations of -0.2% m/m.

U.K. August Manufacturing Production came in at -1.6% m/m, weaker than expectations of +0.2% m/m.

U.K. Monthly GDP 3M/3M Change was -0.3%, weaker than expectations of -0.2%.

U.K. August Trade Balance stood at -19.26B, stronger than expectations of -20.40B.

Eurozone August Industrial Production was +1.5% m/m, stronger than expectations of +0.6% m/m.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.53%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.02%.

China’s Shanghai Composite today recovered in the final hours of trade and closed in the green ahead of the key economic data from the U.S. due later this week. The index earlier lost more than -1.5%. Also, chipmaker SK Hynix Inc and tech conglomerate Samsung Electronics Co Ltd will be allowed to import U.S.-made chips to their factories in China. 

At the same time, Japan’s Nikkei Stock Index closed lower today, weighed down by losses in the Electrical/Machinery, Precision Instruments, and Machinery sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 11.32% to 25.97.

Pre-Market U.S. Stock Movers

El Pollo Loco Holdings Inc (LOCO) climbed over +11% in pre-market trading after the company declared a special dividend of $1.50 per share. In addition, its Board of Directors approved a new share repurchase program of up to $20M. 

Roblox Corp (RBLX) rose about +1% in pre-market trading after Barclays initiated coverage of the stock with an underweight rating and a $20 price target.

Cameco Corp (CCJ) plunged over -10% in pre-market trading after the company announced a strategic partnership with Brookfield Renewable Partners and other institutional partners to acquire Westinghouse Electric Company.

Dice Molecules Holdings LLC (DICE) increased about +1% in pre-market trading, extending yesterday's gains after the company reported results from its Phase 1 clinical trial of DC-806.

Allstate Corp (ALL) rose more than +1% in pre-market trading after Keefe Bruyette upgraded the stock to outperform from market perform with a price target of $158, up from $136.

Today’s U.S. Earnings Spotlight: Wednesday - October 12th

PepsiCo (PEP), Wipro ADR (WIT), Chr Hansen ADR (CHYHY), Duck Creek (DCT), ASOS plc PK (ASOMY), Sono-Tek Corp (SOTK), J W Mays (MAYS), Hepion Pharmaceuticals (HEPA), Esports Entertainment (GMBL), CLST Holdings (CLHI), Canyon (CYBA), Safeplus International Holdings (ACAI).

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