Markets Today: Stocks Tick Higher on Strong Bank Earnings and Lower Bond Yields

Morning Markets

December S&P 500 futures (ESZ22) this morning are up by +0.55%.  Stronger-than-expected quarterly earnings results from JPMorgan Chase, Wells Fargo, and UnitedHealth Group are boosting the overall market this morning.  Overall gains in stock futures were limited after today’s economic news showed U.S. Sep retail sales stagnated, and after Morgan Stanley fell nearly -3% in pre-market trading when it reported lower-than-expected Q3 equities trading revenue. 

Lower bond yields this morning are positive for stocks.  The 10-year T-note yield is down 7.3 bp to 3.871% on positive carry-over from a rally in European government bonds.  Also, today’s economic news showed the U.S. Sep import price index ex-petroleum fell more than expected, which eased inflation concerns. 

U.S. Sep retail sales were unchanged m/m, weaker than expectations of +0.2% m/m.  However, Sep retail sales ex-autos unexpectedly rose +0.1% m/m, stronger than expectations of -0.1% m/m. 

The U.S. Sep import price index ex-petroleum fell -0.5% m/m, a bigger decline than expectations of -0.4% m/m.

The Euro Stoxx 50 today is up by +1.19%.  European stocks today are moving higher on carry-over support from Thursday’s sharp rally in U.S. stocks.  Also, low valuations are enticing value buyers as valuations on European equities have fallen to a 10-year low.   A rally in European government bonds is also supportive for stocks.  The 10-year UK gilt yield dropped to a 1-1/2 week low of 3.896% today after UK Prime Minister ousted chancellor Kwarteng and prepared to reverse part of her tax-cutting program.  

ECB President Lagarde said risks to the inflation outlook are primarily on the upside, and "the ECB's Governing Council expects to raise interest rates further over the next several meetings." 

ECB Governing Council member Kazimir said the ECB's inflation-fighting efforts will require taking interest rates to levels that restrict economic expansion.

The German Sep wholesale price index rose +19.9% y/y, the biggest increase in 3 months.

Asian markets today closed sharply higher.  China’s Shanghai Composite closed up +1.84%, and Japan’s Nikkei Stock Index closed up +3.25%. 

China’s Shanghai Composite today rallied to a 1-week high and closed sharply higher.  An easing of inflation concerns gave Chinese stocks a boost after today’s economic news showed China Sep producer prices and consumer prices rose at a slower-than-expected pace.  In addition, airline stocks moved higher on growth optimism after Delta Air Lines Thursday said it sees profit in the final months of the year.  Also, short covering ahead of the twice-a-decade Party Congress that begins Sunday gave Chinese stocks a boost.

China Sep PPI rose +0.9% y/y, weaker than expectations of  +1.0% y/y and the smallest increase in 20 months.  Also, China Sep CPI rose +2.8% y/y, weaker than expectations of +2.9% y/y.

Japan’s Nikkei Stock Index today closed sharply higher.  Japanese stocks rallied on carry-over support from Thursday’s reversal in U.S. stock indexes from sharp early losses to sharply higher by the end of the session.  Strength in Japanese exporter stocks led the overall market higher after the Japanese yen tumbled to a 32-year low against the dollar.  Also, better-than-expected earnings results from Fast Retailing, Asia’s largest retailer, led Japanese retail stocks higher.  In addition, Japanese restaurant stocks rallied after FNN reported that the Tokyo Metropolitan Government would resume the “Go to Eat” voucher program beginning October 26. 

Pre-Market U.S. Stock Movers

JPMorgan Chase (JPM) is up more than +2% in pre-market trading after reporting Q3 investment banking revenue of $1.71 billion, higher than the consensus of $1.59 billion. 

Wells Fargo & Co (WFC) rose more than +1% in pre-market trading after reporting Q3 revenue of $19.51 billion, above the consensus of $18.81 billion.

UnitedHealth Group (UNH) gained +1% in pre-market trading after reporting  Q3 EPS of $5.55, stronger than the consensus of $5.43, and then raised its full-year adjusted EPS forecast to $31.85-$22.05 from a previous forecast of $21,40-$21.90.

Delta Air Lines (DAL) climbed more than +2% in pre-market trading after Cowen upgraded the stock to outperform from market perform. 

Westlake (WLK) jumped more than +5% in pre-market trading after it was announced the company would replace MillerKnoll in the S&P MidCap 400 Index before the opening of trading on October 18.

Netflix (NFLX) is up nearly +2% in pre-market trading after UBS raised its price target on the stock to $250 from $198. 

PNC Financial Services Group (PNC) rose more than +2% in pre-market trading after reporting Q3 adjusted EPS of $3,78, above the consensus of $3.70.

Morgan Stanley (MS) dropped nearly -3% in pre-market trading after reporting Q3 equities trading revenue of $2.46 billion, weaker than the consensus of $2.69 billion. 

Citigroup (C) fell more than -2% in pre-market trading after reporting Q3 FICC sales and trading revenue of $3.06 billion, below the consensus of $3.17 billion. 

Beyond Meat (BYND) tumbled more than -5% in pre-market trading after forecasting Q3 net revenue of $82 million, weaker than the consensus of $115.6 million, and announcing that it is making a strategic shift in pursuit of a more sustainable growth model. 

Stanley Black & Decker (SWK) slid more than -1% in pre-market trading after Credit Suisse cut its recommendation on the stock to neutral from outperform.

First Republic Bank (FRC) fell more than -1% in pre-market trading after reporting Q3 revenue of $1.50 billion, weaker than the consensus of $1.54 billion. 

Today’s U.S. Earnings Reports (10/14/2022)

Citigroup Inc (C), First Republic Bank/CA (FRC), JPMorgan Chase & Co (JPM), Morgan Stanley (MS), 

PNC Financial Services Group I (PNC), UnitedHealth Group Inc (UNH), US Bancorp (USB), Wells Fargo & Co (WFC).

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