Markets Today: Stocks Lower as Treasury Yields Rise

Morning Markets

The S&P 500 is down -0.53%. Rising bond yields are bearish for stocks as the 10-year T-note yield rose to a new 14-year high today of 4.178%.  T-note yields remained higher after today’s economic news showed U.S. weekly jobless claims unexpectedly declined, a sign of strength in the labor market that is hawkish for Fed policy.

Better-than-expected quarterly earnings results from AT&T, IBM, and American Airlines are positive for stocks today.  U.S. stock indexes also garnered carry-over support from strength in European stocks after UK Prime Minster Truss announced her resignation. However, Tesla (TSLA) is down -5% after it reported lower-than-expected Q3 revenue.

This morning’s economic news was mixed for stocks.  Weekly initial unemployment claims unexpectedly fell -12,000 to 214,000, showing a stronger labor market than expectations of an increase to 233,000. Conversely, the Oct Philadelphia Fed business outlook survey rose +1.2 to -8.7, weaker than expectations of -5.0.

The Euro Stoxx 50 today is up by +0.08%.  European stocks recovered from modest losses and are slightly higher as government bond yields decline.  The UK 10-year gilt yield dropped to a 2-week low of 3.756% today after Sky News reported that UK Prime Minister Truss will announce her resignation today.  UK markets had been in turmoil over the past month after Prime Minister Truss announced an unfunded tax-cutting package that sent gilt yields soaring and knocked the British pound down to a record low. 

Asian markets today closed lower.  China’s Shanghai Composite closed down -1.19%, and Japan’s Nikkei Stock Index closed up +0.37%. 

China’s Shanghai Composite today closed moderately lower. Chinese stocks remain under pressure on concern about consumer demand in China amid lockdowns and rising Covid cases. Also, Chinese electric-vehicle makers declined after Tesla reported Q3 sales that missed estimates.  Chinese stocks recovered from their worst levels late in the day after Bloomberg reported that Chinese government officials debated a shorter mandatory quarantine period for inbound travelers.

Japan’s Nikkei Stock Index today posted moderate losses.  Negative carry-over from Wednesday’s slide in U.S. equity markets undercut Japanese stocks today.  Also, weakness in Japanese chip-equipment makers weighed on the overall market as concerns grew over the impact of a U.S. ban on tech exports to China following earnings results from global peers ASML Holding NV and Lan Research.  The yen recovered slightly from a new 32-year low against the dollar today after Masato Kanda, Japan's top currency official, said excessive moves in currency markets "are becoming even more intolerable."

Strong Japanese trade news was positive for stocks after Japan Sep exports rose +28.9% y/y, stronger than expectations of +26.6% y/y and the biggest increase in 14 months.  Also, Japan Sep imports rose +45.9% y/y, stronger than expectations of +44.9% y/y.

The BOJ today announced unscheduled bond purchases today of 250 billion yen ($1.7 billion) of 5-year maturities and longer after the 10-year JGB bond yield rose above +0.25%, the upper limit of the BOJ's 10-year yield target.

Pre-Market U.S. Stock Movers

International Business Machines (IBM) climbed more than +3% in pre-market trading after reporting Q3 revenue of $14.11 billion, well above the consensus of $13.53 billion. 

AT&T (T) rose +3% in pre-market trading after reporting Q3 adjusted EPS of 68 cents, better than the consensus of 60 cents, and raised its full-year adjusted EPS forecast to at least $2.50 from a prior estimate of $2.42-$2.46. 

American Airlines Group (AAL) climbed more than +2% in pre-market trading after reporting Q3 passenger revenue of $12.40 billion, above the consensus of $12.14 billion, and forecast Q4 adjusted EPS of 50 cents-70 cents, well above the consensus of 27 cents.

Datadog (DDOG) rose +2% in pre-market trading after Canaccord Genuity upgraded the stock to buy from hold. 

Las Vegas Sands (LVS) gained +1% in pre-market trading after reporting Q3 property Ebitda of $191 million, better than the consensus of $170.9 million.

Energy stocks and energy service providers are moving higher in pre-market trading, with the price of WTI crude up more than +1%.  APA Corp (APA), Chevron (CVX), Devon Energy (DVN), Haliburton (HAL), Occidental Petroleum (OXY), and Schlumberger (SLB) are all up more than +1%. 

Allstate (ALL) sank more than -9% in pre-market trading after announcing a preliminary Q3 adjusted net loss of between -$400 million and -$450 million.

Generac Holdings (GNRC) fell more than -3% in pre-market trading after Roth Capital Partners downgraded the stock to sell from buy.

Electric vehicle makers are sliding in pre-market trading after Tesla reported Q3 revenue of $21.45 billion, weaker than the consensus of $22.09 billion.  As a result, Tesla (TSLA) is down more than -5%.  Also, Rivian Automotive (RIVN) and Nikola (NKLA) are down -2%.

Alcoa (AA) tumbled more than -9% in pre-market trading after reporting Q3 adjusted Ebitda of $210 million, below the consensus of $255.7 million. 

Ally Financial (ALLY) dropped more than -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.

Today’s U.S. Earnings Reports (10/20/2022)

Alaska Air Group Inc (ALK), American Airlines Group Inc (AAL), AT&T Inc (T), CSX Corp (CSX), Danaher Corp (DHR), Dover Corp (DOV), Dow Inc (DOW), Fifth Third Bancorp (FITB), Freeport-McMoRan Inc (FCX), Genuine Parts Co (GPC), KeyCorp (KEY), Marsh & McLennan Cos Inc (MMC), Nucor Corp (NUE), Philip Morris International In (PM), Pool Corp (POOL), Quest Diagnostics Inc (DGX), Robert Half International Inc (RHI), Snap-on Inc (SNA), SVB Financial Group (SIVB), Tractor Supply Co (TSCO), Union Pacific Corp (UNP), Whirlpool Corp (WHR).

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