Pre-Market Brief: Stocks Mixed but Hopes on Slowing Hikes Persist

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.43% this morning after three major US benchmark indices closed sharply higher on Friday, posting their biggest weekly gain since June as investors digested an increasing inflow of third-quarter earnings results. Three major U.S. stock indexes were driven primarily by gains in the Basic Materials, Consumer Services, and Oil & Gas sectors.

U.S. stocks rallied on Friday after a report said the U.S. Federal Reserve would likely debate about a smaller interest rate hike in December, boosting hopes of a less aggressive policy stance. San Francisco Federal Reserve President Mary Daly said, "It's time to talk about decelerating the pace of the hikes in borrowing costs, and doing so should avoid sending the economy into an unforced downturn by rising interest rates too aggressively." 

Meanwhile, U.S. rate futures have priced in a 95.3% chance of a 75 basis point rate increase and a 4.7% chance of a 50 basis point hike at November's monetary policy meeting.

"You had the report, and then you had some confirmation that 75 seems to be pretty baked in for November here, but perhaps there is room to slow and extend... rather than front-load so high and then have to peel off, you kind of ease to your 4.75% or 5% peak," said Tom Hainlin, a senior investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.

Ahead in the week, market participants will be closely monitoring the CB consumer confidence, goods trade balance, new home sales, durable goods orders, PCE price index, and GDP data. In addition, investors are likely to focus on speeches from Treasury Secretary Yellen and Fed official Waller. 

This week, investors will also be focused on earnings results from major technology companies, including Apple Inc (AAPL), Alphabet Inc (GOOGL), Amazon.com Inc (AMZN), and Microsoft Corporation (MSFT).

Today, all eyes are on the U.S. Manufacturing Purchasing Managers Index (PMI) preliminary data in a couple of hours. Economists, on average, forecast that the October figure will come in at 51.0 compared to the previous value of 52.0.

U.S. Services PMI preliminary data will come in today as well. Economists expect this figure to be 49.2 in October, compared to the previous value of 49.3.

In the bond markets, United States 10-Year rates are at 4.213%, up +0.02%.

The Euro Stoxx 50 futures are up +0.35% this morning, boosted by hopes that the Federal Reserve could slow its pace of interest rate hikes. However, investors remained concerned over decelerating growth in the region as consumer confidence in the Eurozone stayed close to a record low in October. At the same time, the European Central Bank is expected to deliver a second 75 basis point rate hike on Thursday to combat high inflation. In addition, investors will be focusing on earnings from several of Europe’s top investment banks this week, which is a critical gauge of business health.

France Manufacturing & Services PMI (preliminary), Germany Manufacturing & Services PMI (preliminary), Eurozone Manufacturing & Services PMI (preliminary), Eurozone S&P Global Composite PMI (preliminary), U.K. Composite PMI (preliminary), U.K. Manufacturing PMI (preliminary), and U.K. Services PMI (preliminary) data were released today.

The French October Manufacturing PMI has been reported at 47.4, stronger than expectations of 47.1.

The French October Services PMI stood at 51.3, weaker than expectations of 51.5.

The German October Manufacturing PMI came in at 45.7, weaker than expectations of 47.0.

The German October Services PMI was 44.9, stronger than expectations of 44.7.

Eurozone October Manufacturing PMI stood at 46.6, weaker than expectations of 47.8.

Eurozone October S&P Global Composite PMI has been reported at 47.1, weaker than expectations of 47.5.

Eurozone October Services PMI was 48.2, in line with expectations.

U.K. Composite PMI stood at 47.2, weaker than expectations of 48.1.

U.K. Manufacturing PMI was 45.8, weaker than expectations of 48.0.

U.K. Services PMI came in at 47.5, weaker than expectations of 49.6.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -2.02%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.31%.

China’s Shanghai Composite today closed sharply lower as the yuan continued its drop, and Xi Jinping ensured a precedent-breaking third leadership term. In addition, the Chinese delayed GDP data showed that the second-largest economy grew +3.9% y/y in Q3, stronger than expectations of +3.4% y/y, but that still was among the slowest growth in decades amid repeated lockdowns in the country.

The Chinese Industrial Production has been reported at +6.3% y/y in September, stronger than expectations of +4.5% y/y.

At the same time, Japan Nikkei 225 Stock Index closed higher today, driven by gains in the Precision Instruments, Mining, and Electrical/Machinery sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.29% to 24.06.

Pre-Market U.S. Stock Movers

Snap Inc (SNAP) dropped about -3% in pre-market trading, extending Friday's losses after Bernstein, MKM Partners, and BofA downgraded the company after the Q3 report.

Mullen Automotive Inc (MULN) jumped over +9% in pre-market trading, extending Friday's gains after the company announced the hiring of John Schwegman as its CCO.

Hawaiian Holdings Inc (HA) rose over +2% in pre-market trading, extending Friday's gains after the company announced an agreement with Amazon.

Huntington Bancshares Incorporated (HBAN) rose about +1% in pre-market trading, extending Friday's gains after the company reported upbeat quarterly results.

American Express Company (AXP) dropped about -1% in pre-market trading after the company reported better-than-expected Q3 results but provided weak FY22 guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - October 24th

Cadence Design (CDNS), Nidec (NJDCY), Discover (DFS), Alexandria RE (ARE), WR Berkley (WRB), Brown&Brown (BRO), Sun (SUI), Koninklijke Philips ADR (PHG), Packaging America (PKG), Crown (CCK), Grupo Aeroportuario Sureste ADR (ASR), South State (SSB), Qualtrics International (XM), Range Resources (RRC), Crane (CR), Cadence Bancorp (CADE), Medpace Holdings (MEDP), Hexcel (HXL), Kirby (KEX), Trinet Grou (TNET), AGNC Invest (AGNC), Calix (CALX), PotlatchDeltic (PCH), Simpson Manufacturing (SSD), Community Bank System (CBU), Cathay (CATY), Bank of Hawaii (BOH), Aeroportuario del Centro Norte (OMAB), Dorman (DORM), Albany (AIN), Independent Bank Group (IBTX), Apollo Commercial RE Finance (ARI), OceanFirst (OCFC), KKR Real Estate (KREF), HNI (HNI), Celestica Inc. (CLS), Schnitzer (SCHN), Helix (HLX), TrueBlue (TBI), HomeStreet (HMST), Dynex Capital (DX), Bank of Marin (BMRC), Arrow (AROW), Five Star Bancorp (FSBC), PetMed Express (PETS), RBB Bancorp (RBB), Eneti (NETI), Aaron’s (AAN), Flexsteel (FLXS).

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