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

Morning Markets

December S&P 500 futures (ESZ22) are trending up +0.35% this morning after three major US benchmark indices finished lower during the regular trading session as investors braced for a key U.S. inflation reading and corporate earnings results from major financial companies. Three major U.S. stock indexes were weighted down primarily by losses in the Utilities, Telecoms, and Industrials sectors.

The Labor Department's producer prices index data came in slightly higher than expected, leaving expectations for the Fed's November rate hike unchanged. Also, the September meeting minutes showed that many Fed officials "emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action."

“With no notable pushback [in the FOMC minutes] against the current pace of rate hikes, we see the FOMC on track for another 75bp hike in November,” Morgan Stanley said in a note. Meanwhile, U.S. rate futures have priced in an 18.7% chance of a 50 basis point rate increase and an 81.3% chance of a 75 basis point hike at November's monetary policy meeting.

"Maybe there is a bit of hope within the minutes that basically officials are weighing the risk of going too hard or going too high on hiking. That's not the number one concern right now. Number one concern continues to be inflation," said Juan Perez, a director of trading at Monex USA in Washington. 

Today, all eyes are focused on the Labor Department's fresh consumer price index (CPI) data in a couple of hours. Economists, on average, foresee that September CPI will stand at +0.2% m/m and +8.1% y/y compared to the previous value of +0.1% m/m and +8.3% y/y. 

Also, investors are likely to focus on the U.S. Initial Jobless Claims data, which was at 219K last week. Economists, on average, forecast the new figure to be 225K.

U.S. Core CPI data will be reported today. Economists foresee this figure to stand at +0.5% m/m, compared to the August number of +0.6% m/m.

U.S. Crude Oil Inventories data will be reported today as well. Economists forecast this figure to come in at +1.750M, compared to the last week's figure of -1.356M.

In the bond markets, United States 10-Year rates are at 3.919%, up +0.43%.

The Euro Stoxx 50 futures are up +0.30% this morning. However, those gains are likely to be fragile as market participants weigh the risks of global recession ahead of the release of crucial U.S. inflation data and the continued U.K. market turmoil. European stocks have received a negative handover from Wall Street and Asia after main indices edged lower as investors feared a potential shock from U.S. inflation data after the minutes from last month's Federal Reserve policy meeting.

Germany CPI, Germany HICP, and Switzerland PPI data were released today. 

The German September CPI has been reported at +1.9% m/m and +10.0% y/y, in line with expectations. Germany's hot inflation reading increased pressure on the European Central Bank to continue tightening monetary policy.

Germany's September HICP came in at +2.2% m/m and +10.9% y/y, in line with expectations.

Switzerland's September PPI was +0.2% m/m and +5.4% y/y, compared to the August value of -0.1% m/m and 5.5% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.30%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.60%.

China’s Shanghai Composite today closed lower as rising COVID-19 cases in the country drove concerns over renewed lockdown measures. Authorities have already closed schools and outdoor venues in Shanghai after infections in China’s financial capital hit a three-month high. Also, market participants will be closely monitoring any changes to Beijing’s strict COVID Zero policy at the 20th National Congress of the Chinese Communist Party on Sunday.

At the same time, Japan’s Nikkei 225 Stock Index dropped today, fueled by losses in the Power, Mining, and Paper & Pulp sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.58% to 26.12.

The Japanese September PPI has been reported at +0.7% m/m and +9.7% y/y, stronger than expectations of +0.2% m/m and +8.8% y/y.

Pre-Market U.S. Stock Movers

Duck Creek Technologies Inc (DCT) climbed more than +8% in pre-market trading after the company reported a better-than-anticipated Q4 earnings report and issued strong FY2023 guidance.

Digital World Acquisition Corp (DWAC) jumped over +11% in pre-market trading on CNBC's report that Truth Social was added to Google Play Store.

Applied Materials Inc (AMAT) dropped about -1% in pre-market trading after the company revisited its business outlook for the fourth quarter of fiscal 2022 amid the new export regulations for U.S. semiconductor companies.

LYFT Inc (LYFT) rose over +2% in pre-market trading after Gordon Haskett upgraded the stock to buy from hold with a $24 price target.

Farfetch Ltd Class A (FTCH) climbed over +3% in pre-market trading, extending its gains after Wells Fargo named the company a "Top Pick."

Rocket Lab USA, Inc. (RKLB) dropped about -1.5% in pre-market trading after Credit Suisse initiated coverage of the stock with an underperform rating and a $3 price target.

Today’s U.S. Earnings Spotlight: Thursday - October 13th

Taiwan Semiconductor (TSM), BlackRock (BLK), Infosys ADR (INFY), Progressive (PGR), Fast Retailing ADR (FRCOY), Fortescue Metals (FSUMF), Walgreens Boots (WBA), Fastenal (FAST), Delta Air Lines (DAL), Domino’s Pizza Inc (DPZ), Carrefour SA PK (CRRFY), Commercial Metals (CMC), Washington Federal (WAFD), Pimco Income Strategy II Closed (PFN), Theratechnologies (THTX), Oil-Dri Of America (ODC), American Bank (AMBK), Bank of South Carolina (BKSC), Cxj Group Co (ECXJ), LifeMD (LFMD), Emmis Comm (EMMS), Rocky Mountain Chocolate (RMCF), National American University (NAUH), Premier Exhibitions (PRXIQ).

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