Pre-Market Brief: Stocks Mixed After Indices Stage Sharp Reversal

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.20% this morning after three major US benchmark indices made a dramatic recovery, closing sharply higher after an earlier sell-off on Thursday as the highly anticipated CPI reading came in hotter than expected but continued to slow slightly from 40-year highs. The S&P 500 index demonstrated the biggest intraday increase since Jan. 24th. Three major U.S. stock indexes were fueled primarily by gains in the Oil & Gas, Financials, and Basic Materials sectors.

"People were perhaps net short going into the CPI report and saw the report being negative and started covering their shorts," said King Lip, a chief investment strategist at Baker Avenue Asset Management in San Francisco.

The market initially dropped after data revealed the consumer price index rose 8.2% y/y in September, stronger than an economic forecast of 8.1% y/y, adding fuel to recession fears. However, technical support around the 3,500 mark for the S&P 500 and investors' shorts covering caused a dramatic rebound in U.S. equities.

After Thursday's inflation data, U.S. rate futures have priced in a 98.2% chance of a 75 basis point rate increase and a 1.8% chance of a super-sized 100 basis point hike at November's monetary policy meeting. The fresh inflation data gives the Federal Reserve more reason to continue on its aggressive path of interest rate increases.

Today, all eyes are focused on the U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that September Retail Sales will come in at +0.2% m/m compared to the previous value of +0.3% m/m.

Also, investors are likely to focus on the U.S. Core Retail Sales data, which was at -0.3% m/m in August. Economists forecast the new number to be -0.1% m/m.

Canada's August Wholesale Sales data will be reported today. Economists foresee this figure to stand at +0.8% m/m, compared to the July value of -0.6% m/m.

Michigan Consumer Sentiment index will be reported today as well. Economists forecast this figure to stand at 59.5, compared to the previous number of 58.6.

In the bond markets, United States 10-Year rates are at 3.914%, down -1.02%.

The Euro Stoxx 50 futures are up +0.65% this morning, continuing the global rebound, with investors scooping up beaten-down names despite worries about economic growth and its impact on corporate earnings. At the same time, speculation mounts that the U.K. government can abandon its plans for massive unfunded tax cuts. On the ground of this, finance minister Kwasi Kwarteng cut short his trip to Washington and headed back to London late Thursday. Also, market participants are closely watching a coming deadline for the end of the Bank of England's emergency bond purchases program on Friday.

France CPI, France HICP, Spain CPI, and Spain HICP data were released today. 

The French September CPI has been reported at -0.6% m/m, weaker than expectations of -0.5% m/m.

The French September HICP stood at -0.5% m/m, in line with expectations.

The Spanish September CPI came in at -0.7% m/m and +8.9% y/y, weaker than expectations of -0.6% m/m and +9.0% y/y.

The Spanish September HICP was at -0.2% m/m and +9.0% y/y, weaker than expectations of +0.3% m/m and +9.3% y/y.

Asian stock markets today settled in the green, tracking an overnight rebound on Wall Street. China’s Shanghai Composite Index (SHCOMP) closed up +1.84%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +3.25%.

China’s Shanghai Composite today recovered but is set to end the week in the red, dragged by semiconductor-exposed stocks after the U.S. blocked their access to key technology. In addition, concerns over a COVID outbreak in Shanghai weighed on sentiment amid renewed fears about lockdown measures. However, the country's central bank governor promised prepotent support to the real economy as COVID lockdowns spread.

The Chinese September CPI came in at +2.8% y/y, in line with expectations.

China's September Producer Price Index stood at +0.9% y/y, weaker than expectations of +1.0% y/y, indicating continued weakness in the manufacturing sector.

At the same time, Japan’s Nikkei 225 Stock Index closed sharply higher today, fueled by gains in the Warehousing, Railway & Bus, and Retail sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.58% to 26.12.

Pre-Market U.S. Stock Movers

Imara Inc (IMRA) jumped over +12% in pre-market trading after the company announced that it entered into an all-stock merger agreement with Enliven Therapeutics, Inc.

Eargo Inc (EAR) spiked more than +20% in pre-market trading after the company announced that the record date for its proposed rights offering is October 24th, 2022.

Novo Integrated Sciences Inc (NVOS) plunged about -38% in pre-market trading after the company announced the pricing of its public offering of an aggregate of 4M units at a public offering price of $0.50 per unit.

Reata Pharmaceuticals, Inc. (RETA) rose around +1% in pre-market trading after the company announced it would not meet with FDA on NDA for omaveloxolone.

Relmada Therapeutics Inc (RLMD) dropped about -2% in pre-market trading, extending yesterday's plunge after the company announced the results of its Phase 3 study of REL-1017.

Today’s U.S. Earnings Spotlight: Friday - October 14th

UnitedHealth (UNH), JPMorgan (JPM), Wells Fargo&Co (WFC), Morgan Stanley (MS), Citigroup (C), PNC Financial (PNC), U.S. Bancorp (USB), First Republic Bank (FRC), Legal & General Group Plc (LGGNY), Ryohin Keikaku Co (RYKKY), TomTom ADR (TMOAY), PAM (PTSI), Karooooo (KARO), Hingham Institution (HIFS), Coastal Financial (CCB), Loop Industries (LOOP), Meritage Hospitality (MHGU), Enzo Biochem (ENZ), Northeast Indiana (NIDB), Intellipharmaceutics (IPCIF), Generex Biotech (GNBT).

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