Pre-Market Brief: Stocks Extend Rally After Solid Earnings

Morning Markets

December S&P 500 futures (ESZ22) are trending higher +0.17% this morning after three major US benchmark indices closed higher for a second straight day as upbeat earnings and better-than-expected factory data boosted a risk appetite. Three major U.S. stock indexes were fueled primarily by gains in the Industrials, Basic Materials, and Utilities sectors.

Goldman Sachs Group Inc (GS) shot up 2.33% after reporting a smaller-than-expected drop in quarterly profit amid higher net interest income. Lockheed Martin (LMT) advanced over +8% after its third-quarter results surpassed Wall Street estimates, and the company boosted stock buyback plans, fueling the S&P industrials index.

"The market was a bit oversold leading into Monday, and people were worried about what was going to happen over the weekend. People walked into the week feeling a little better. You're getting a combination of short covering and fear of missing out," said Robert Pavlik, a senior portfolio manager at Dakota Wealth in Fairfield, Conn. 

Meanwhile, analysts expect third-quarter profits for S&P 500 companies to grow just +2.8% on a year-over-year basis, compared to an +11.1% increase expected at the start of July.

Economic data on Tuesday showed that industrial production grew +0.4% m/m, providing signs of economic strength despite the Fed's aggressive monetary policy. The belief that "a recession is coming and the Fed is going to be raising interest rates, with the hope that maybe a pause is going to be coming something next year," is now baked into the market, Pavlik said.

At the same time, U.S. rate futures have priced in a 97.4% chance of a 75 basis point rate increase and a 2.6% chance of a super-sized 100 basis point hike at November's monetary policy meeting.

Today, all eyes are focused on the U.S. Building Permits data in a couple of hours. Economists, on average, forecast that September Building Permits will stand at 1.530M, compared to the previous value of 1.542M.

Also, investors are likely to focus on the Canada Consumer Price Index (CPI) data, which was at -0.3% m/m in August. Economists forecast the new number to be -0.1% m/m.

U.S. September Housing Starts data will be reported today. Economists forecast this figure to stand at 1.475M, compared to the previous value of 1.575M.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to come in at +1.380M, compared to the last week's number of +9.880M.

In the bond markets, United States 10-Year rates are at 4.073%, up +1.88%.

The Euro Stoxx 50 futures are up +0.29% this morning, extending recent gains even as U.K. inflation hit its highest level for decades, pointing to further aggressive monetary tightening. The U.K. consumer price index has been reported at +10.1% y/y in September, stronger than expectations of +10.0% y/y, pressuring the Bank of England to hike interest rates at a steeper pace. 

Also, a supportive factor for European equities is the more than +6% jump in shares of Asml Holding (ASML.NA) after the chip equipment maker reported better-than-expected third-quarter sales and profit.

U.K. Producer Price Index (PPI) Input and Eurozone CPI data were also released today. 

U.K. September PPI Input stood at +0.4% m/m, stronger than expectations of -0.4% m/m.

Eurozone September CPI came in at +1.2% m/m and +9.9% y/y, compared to expectations of +1.2% m/m and +10.0% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.19%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.37%.

China’s Shanghai Composite today closed lower, extending losses into a third consecutive session as investors fretted over a possible economic slowdown and more U.S. curbs on trade. In addition, the Chinese government indefinitely delayed the release of essential third-quarter economic data, fueling investors' concerns over the country’s economy.

At the same time, Japan’s Nikkei 225 Stock Index closed higher today, fueled by gains in the Power, Precision Instruments, and Electrical/Machinery sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 6.51% to 23.39.

Pre-Market U.S. Stock Movers

Netflix Inc (NFLX) climbed about +12% in pre-market trading after the company delivered better-than-expected Q3 EPS and revenue numbers.

Roku Inc (ROKU) rose about +3% in pre-market trading, and Walt Disney Company (DIS) grew over +2% in pre-market trading on Netflix's results.

Olaplex Holdings Inc (OLPX) plunged over -42% in pre-market trading after the company cut its Q3 and FY22 guidance. 

Intuitive Surgical Inc (ISRG) jumped over +10% in pre-market trading after the company reported upbeat Q3 earnings results.

United Airlines Holdings Inc (UAL) rose over +5% in pre-market trading after the company reported strong earnings results for the third quarter.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - October 19th

Tesla (TSLA), Procter&Gamble (PG), Nestle ADR (NSRGY), Abbott Labs (ABT), ASML ADR (ASML), Elevance Health (ELV), IBM (IBM), Prologis (PLD), Crown Castle (CCI), Atlas Copco AB (ATLKY), Lam Research (LRCX), Kinder Morgan (KMI), Travelers (TRV), M&T Bank (MTB), Deutsche Boerse ADR (DBOEY), Telstra Corporation ADR (TLSYY), Nasdaq Inc (NDAQ), PPG Industries (PPG), Las Vegas Sands (LVS), Baker Hughes (BKR), Equifax (EFX), Citizens Financial Group Inc (CFG), Northern Trust (NTRS), Svenska Handelsbanken PK (SVNLY), Steel Dynamics (STLD), Globe Life (GL), Comerica (CMA), Rexford Inl Rty (REXR), MarketAxesss (MKTX), Ally Financial Inc (ALLY), Knight Transportation (KNX), Alcoa (AA), SEI (SEIC), BOK Financial (BOKF), Valmont Industries (VMI), First Industrial RT (FR), Lithia Motors (LAD), Landstar (LSTR), RLI (RLI), SLM (SLM), Umpquas (UMPQ), Texas Capital (TCBI), Unifirst (UNF), Liberty Oilfield (LBRT), Cohen Steers (CNS), PacWest (PACW), Badger Meter (BMI), Rush B (RUSHB), Rush A (RUSHA), SL Green (SLG), WD-40 (WDFC), Banner (BANR), Stepan (SCL), Winnebago Industries (WGO), Eagle (EGBN), Triumph Bancorp (TBK), Preferred Bank (PFBC), Winmark (WINA), Community Trust (CTBI), Great Southern Bancorp (GSBC), Heritage-Crystal Clean (HCCI), Bank First National (BFC), Edgio (EGIO), Farmers & Merchants Bancorp (FMAO), First Internet (INBK), Central Valley Community (CVCY), Tile Shop Holdings (TTSH), Middlefield Banc (MBCN), Private Bancorp of America (PBAM), Brainstorm Cell Therapeutics (BCLI), First Community (FCCO), Sigma Labs (SASI).

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