Pre-Market Brief: Stocks Move Higher on Hopes of Fed Pivot

Morning Markets

December S&P 500 futures (ESZ22) are trending up +0.03% this morning after three major US benchmark indices notched their second day of gains as soft economic data suggested the effects of the Fed's aggressive policy aimed at cooling decades-high inflation are beginning to take root. Three major U.S. stock indexes were fueled primarily by gains in the Telecoms, Healthcare, and Technology sectors.

A report from S&P Global disclosed a contraction in U.S. business activity for a fourth straight month, suggesting the Fed's steep interest rate increases are having the desired effect, boosting hopes that the central bank could start decelerating the pace of future rate hikes. In addition, Fed officials indicated that the pace of tightening would be debated at November's meeting.

"It’s a sign the economy is slowing down, and what the Fed is doing is working. They may be achieving their goal, and we might be approaching the fourth quarter of rate hikes, to use a football analogy," said Peter Tuz, a president of Chase Investment Counsel in Charlottesville, Virginia. 

Meanwhile, U.S. rate futures have priced in a 2.8% chance of a 50 basis point rate increase and a 97.2% chance of a 75 basis point hike at November's monetary policy meeting.

As for now, almost one-fifth of the companies in the S&P 500 have reported their earnings, with 74.7% delivering upbeat results. At the same time, analysts expect third-quarter profits for S&P 500 companies to grow +3.0% on a year-over-year basis, compared to an +4.5% increase expected at the start of October.

Today, all eyes are focused on the U.S. CB Consumer Confidence data in a couple of hours. Economists, on average, forecast that October CB Consumer Confidence will stand at 106.5, compared to the previous value of 108.0.

Also, investors are likely to focus on the U.S. S&P/CS HPI Composite - 20 n.s.a. data, which was at +16.1% y/y in July. Economists foresee the new figure to be +14.4% y/y.

In the bond markets, United States 10-Year rates are at 4.184%, down -1.14%.

The Euro Stoxx 50 futures are up +0.23% this morning, extending the previous session’s positive tone as investors digest quarterly earnings from the banking sector. European equity markets have received a positive handover from Wall Street and Asia after main indexes closed in the green, boosted by hopes of abating the Federal Reserve. Another supportive factor for European equities is the more than +4% jump in SAP Se (SAP.D.DX) after the German business software maker reported faster-than-expected revenue growth in Q3.

Germany Business Expectations, Ifo Business Climate Index, and Current Assessment data were released today. 

The German October Business Expectations came in at 75.6, stronger than expectations of 75.0.

Germany's October Ifo Business Climate Index has been reported at 84.3, stronger than expectations of 83.3.

The German October Current Assessment stood at 94.1, stronger than expectations of 92.4.

Asian stock markets today settled mainly in the green, tracking a recovery on Wall Street. China’s Shanghai Composite Index (SHCOMP) closed down -0.04%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.02%.

China’s Shanghai Composite today closed in the red as investors were rattled by President Xi Jinping's growing power, with China's yuan slumping to a nearly 15-year low. Xi Jinping's new leadership team has increased worries that China will more and more prioritize the state at the cost of the private sector.

"Conflict between Beijing's security and economic growth objectives have been rendered starker," said Vishnu Varathan, a head of economics at Mizuho Bank in Singapore.

At the same time, Japan’s Nikkei 225 Stock Index closed higher today amid growing hopes that the Fed would curb its pace of interest rate hikes. The index's upward momentum was fueled by gains in the Transportation Equipment, Electrical/Machinery, and Precision Instruments sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 4.03% to 25.03.

The Bank of Japan's Core CPI has been reported at +2.0% y/y, stronger than expectations of +1.9% y/y.

Pre-Market U.S. Stock Movers

Weber Inc (WEBR) jumped over +21% in pre-market trading after its shareholder BDT Capital offered to acquire the shares it does not currently own for $6.25 per share.

Taysha Gene Therapies Inc (TSHA) climbed about +40% in pre-market trading after the company announced a strategic investment of $50M from Astellas Pharma to support the advancement of Taysha's adeno-associated virus gene therapy programs.

Mullen Automotive Inc (MULN) gained about +16% in pre-market trading, extending yesterday's gains after the company announced a compact urban delivery EV, the I-GO.

ADTRAN Inc (ADTN) rose over +3% in pre-market trading after the company reported preliminary Q3 revenue.

Zions Bancorporation (ZION) plunged over -6% in pre-market trading after the company delivered a mixed Q3 earnings report. 

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - October 25th

Alphabet A (GOOGL), Alphabet C (GOOG), Visa A (V), Coca-Cola (KO), Novartis ADR (NVS), Texas Instruments (TXN), United Parcel Service (UPS), NextEra Energy (NEE), Raytheon Technologies (RTX), Lockheed Martin (LMT), HSBC ADR (HSBC), SAP ADR (SAP), Chubb (CB), General Electric (GE), Canadian National Railway (CNI), 3M (MMM), Air Liquide ADR (AIQUY), Illinois Tool Works (ITW), Sherwin-Williams (SHW), General Motors (GM), Valero Energy (VLO), Archer-Daniels-Midland (ADM), UBS Group (UBS), Vinci ADR (VCISY), Moody’s (MCO), Centene (CNC), Chipotle Mexican Grill (CMG), Biogen (BIIB), Twitter Inc (TWTR), Kimberly-Clark (KMB), Lonza Group AG (LZAGY), MSCI (MSCI), PACCAR (PCAR), Halliburton (HAL), Ameriprise Financial (AMP), CoStar (CSGP), DSV ADR (DSDVY), Corning (GLW), Equity Residential (EQR), Orange ADR (ORAN), Spotify Tech (SPOT), Synchrony Financial (SYF), IDEX (IEX), Avangrid Inc (AGR), ASM ADR (ASMIY), Boston Properties (BXP), Telefonica Brasil ADR (VIV), First Quantum Minerals (FQVLF), Norsk Hydro ASA ADR (NHYDY), Teradyne (TER), Hubbell (HUBB), TransUnion (TRU), Alfa Laval ADR (ALFVY), Ares Capital (ARCC), Juniper (JNPR), F5 Networks (FFIV), PulteGroup (PHM), Randstad Holdings NV (RANJY), Manhattan Associates (MANH), Cleveland-Cliffs (CLF), Matador (MTDR), Robert Half (RHI), Logitech (LOGI), Masimo (MASI), Mattel (MAT), AB SKF (SKFRY), Pentair (PNR), Graphic Packaging (GPK), Wyndham Hotels (WH), EastGroup Properties (EGP), Nextera Energy Partners LP (NEP), Boyd Gaming (BYD), TIM Participacoes (TIMB), Polaris Industries (PII), Old National Bancorp (ONB), Littelfuse (LFUS), United Bankshares (UBSI), Axalta Coating Systems (AXTA), SSAB ADR (SSAAY), ChampionX Corp (CHX), Kilroy (KRC), First Interstate BancSystem (FIBK), Chemours Co (CC), Zurn Water Solutions (ZWS), UMB Financial (UMBF), Franklin Electric (FELE), Portland General Electric (POR), Lundin Mining (LUNMF), Armstrong World Industries (AWI), Aerojet Rocketdyne (AJRD), Tenable (TENB), Quantumscape (QS), GATX (GATX), Asbury Automotive (ABG), Crestwood Equity Partners LP (CEQP), Simmons First National (SFNC), First Bancorp (FBP), Equity Commonwealth (EQC), Highwoods Properties (HIW), Nextier Oilfield Solutions (NEX), CommVault (CVLT), First Merchants (FRME), Encore Wire (WIRE), Arch Resources (ARCH), MaxLinear (MXL), Xerox (XRX), JetBlue (JBLU), WesBanco (WSBC), Yamazaki Baking ADR (YMZBY), Navient (NAVI), Trustmark (TRMK), American Assets (AAT), Stride (LRN), Trinity Industries (TRN), Retail Opportunity (ROIC), NBT Bancorp (NBTB), Flagstar Bancorp (FBC), Shutterstock (SSTK), Hope Bancorp (HOPE), First Bancorp (FBNC), First Busey (BUSE), First Commonwealth Financial (FCF), Nabors Industries (NBR), USANA Health Sciences (USNA), First Foundation Inc (FFWM).

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