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

Morning Markets

December S&P 500 futures (ESZ22) this morning are up by +1.31%.  Gains in bank stocks led the overall market higher this morning after Bank of America and Bank of New York Mellon reported stronger-than-expected quarterly revenue.  Also, carry-over support from a rally today in European stocks and government bonds boosted U.S. stock indexes after UK Chancellor Hunt scrapped plans to cut taxes. 

Lower bond yields this morning are positive for stocks.  The 10-year T-note yield is down 9.2 bp to 3.926% on positive carry-over from a rally in European government bonds.  Also, T-notes rallied on today’s economic news that showed the U.S. U.S. Oct Empire manufacturing survey general business conditions contracted more than expected.

The U.S. Oct Empire manufacturing survey general business conditions fell -7.6 to -9.1, weaker than expectations of -4.3.

The Euro Stoxx 50 today is up by +0.83%.  European stocks today are moderately higher, buoyed by lower government bond yields. European government bonds rallied today after the UK government said it would reverse most of the tax cuts it announced two weeks ago.  As a result, the 10-year UK gilt yield fell -3.9 bp to 3.945%, and the 10-year German bund yield fell -10.3 bp to 2.243%. 

ECB Governing Council member and Bundesbank President Nagel said ECB Interest rate increases must continue after October.  He added that due to tensions in energy markets, there are "significant upside risks" to the inflation outlook.

Asian markets today settled mixed.  China’s Shanghai Composite closed up +0.42%, and Japan’s Nikkei Stock Index closed down -1.16%. 

China’s Shanghai Composite today recovered from early losses and climbed to a 2-1/2 week high after the China Securities Journal reported that Chinese regulators would boost efforts to support the stock market, including proposals to encourage companies to buy back stock and to ease curbs on short-term transactions by overseas mutual funds.  Chinese stock today initially moved lower after President Xi Jinping, speaking at the twice-a-decade Party Congress, announced no changes to China’s Covid Zero policy. 

Japan’s Nikkei Stock Index today closed moderately lower.  Japanese stocks fell back on carry-over pressure from last Friday’s slide in U.S stocks.  Japanese software stocks moved lower today, led by a -4% fall in Shift after the company’s quarterly profit and forecast for the current year missed estimates.  The Japanese yen fell to a new 32-year against the dollar today after BOJ Governor Kuroda told the Japanese parliament that it’s appropriate for the BOJ to continue with monetary easing.

The Japan Aug tertiary industry index rose +0.7% m/m, stronger than expectations of +0.3% m/m.

Japan Aug industrial production was revised upward by +0.7 to +3.4% m/m from the previously reported +2.7% m/m.

Pre-Market U.S. Stock Movers

Bank of America (BAC) climbed nearly +3% in pre-market trading after reporting Q3 trading revenue of $4.1 billion, above the consensus of $3.8 billion. 

Splunk (SPLK) jumped more than +5% in pre-market trading after the Wall Street Journal reported that activist investor Starboard Value had built up a nearly 5% stake in the company.

U.S.-listed Chinese stocks rose in pre-market trading after President Xi Jinping reiterated that economic development is the party’s top priority.  JD.com (JD) is up more than +3%, and Pinduoduo (PDD) and Alibaba (BABA) are up more than +2%. 

Bank of New York Mellon (BK) rallied more than +5% in pre-market trading after reporting Q3 revenue of $4.28 billion, above the consensus of $4.20 billion.

Church & Dwight (CHD) climbed more than +3% in pre-market trading after Morgan Stanley upgraded the stock to equal weight from underweight.

Cloudflare (NET) rallied more than +5% in pre-market trading after Wells Fargo upgraded the stock to overweight from equal weight. 

Continental Resources (CLR)  jumped fell more than +8% in pre-market trading after it agreed to be acquired by the Hamm family for $74.28 per share.  

Opendoor Technologies (OPEN) fell nearly -2% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral.

Fox Corp (FOXA) dropped -3% in pre-market trading after Loop Capital downgraded the stock to hold from buy. 

Hims & Hers Health (HIMS) slid nearly -2% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight.

Today’s U.S. Earnings Reports (10/17/2022)

Bank of America Corp (BAC), Bank of New York Mellon Corp/T (BK), Charles Schwab Corp/The (SCHW).

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