What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.86%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.55%. Weakness in chip stocks is leading technology stocks lower after Foxconn Technology Group, the world’s largest maker of iPhones, said it might boost production capacity at alternative sites to mitigate potential disruption at its main Covid-stricken plant in China.
Record-high inflation in Europe is boosting government bond yields and is weighing on stocks. The 10-year German bund yield is up +2.3 bp at 2.127%, and the 10-year T-note yield is up +4.4 bp at 4.056% after today’s news showed Eurozone Oct consumer prices rose at a record pace of +10.7% y/y.
The outlook for higher U.S. interest rates is another bearish factor for stocks. The market has priced in a 100% chance the Fed will raise the federal funds target range by +75 bp on Wednesday after the 2-day FOMC meeting concludes. The markets will also scour post-meeting comments from Fed Chair Powell for clues about the size of future rate hikes.
Today’s U.S. economic news was weaker than expected and bearish for stocks. The Oct MNI Chicago PMI unexpectedly fell -0.5 to 45.2, weaker than expectations of an increase to 47.3 and the steepest pace of contraction in 2-1/4 years. Also, the Oct Dallas Fed manufacturing outlook level of general business activity fell -2.2 to -19.4, weaker than expectations of -17.4.
Another negative factor for U.S stocks is economic weakness in China that is bearish for global growth prospects. China’s Shanghai Composite tumbled to a 6-month low today as increased Covid restrictions and weaker-than-expected economic news worsened the outlook for stocks. Chinese authorities imposed fresh lockdowns throughout the country as new Covid cases soar. China reported 2,675 new Covid infections on Sunday, the most in 2-1/2 months.
China’s strict Covid Zero policy has reduced economic activity and hammered growth. Today’s economic news showed that China’s Oct manufacturing PMI fell -0.9 to 49.2, weaker than expectations of 49.8. Also, China’s Oct non-manufacturing PMI fell -1.9 to 48,7, weaker than expectations of 50.1 and the steepest pace of contraction in 5 months.
Today’s stock movers…
Global Payments (GPN) is down more than -6% today to lead loser in the S&P 500 after reporting Q3 adjusted EPS of $2.48, weaker than the consensus of $2.49.
Newell Brands (NWL) is down more than -7% today after Barclays downgraded the stock to underweight from equal weight.
Paramount Global (PARA) is down more than -3% today after Wells Fargo downgraded the stock to underweight from equal weight.
ON Semiconductor (ON) is down more than -4% today after forecasting Q4 adjusted EPS of $1.18-$1.34, the midpoint below the consensus of $1.27.
Apple (AAPL) is down more than -2% today to lead losers in the Down Jones Industrials after reporting that sales of iPhones in China dropped by -27% in the week ended October 24, the third straight week of steep declines.
U.S. semiconductor chip stocks are under pressure today after Foxconn Technology Group, the world’s largest maker of iPhones, said it may boost production capacity at alternative sites to mitigate potential disruption at its main Covid-stricken plant in China. Marvell Technology (MRVL), NXP Semiconductors NV (NXPI), Advanced Micro Devices (AMD), Analog Devices (ADI), Microchip Technology (MCHP), Nvidia (NVDA), and Qualcomm (QCOM) are down -2% or more.
U.S. casino stocks with exposure to Macau are climbing today after Chinese authorities said mainland visitors could apply for electronic travel permits to Macau starting November 1, giving a potential boost to casinos battered by Covid restrictions. Wynn Resorts (WYNN) is up more than +10% to lead gainers in the S&P 500. Also, Las Vegas Sands (LVS) and Melco Resorts & Entertainment (MLCO) are up more than +3%.
Align Technology (ALGN) is up more than +5% today to lead gainers in the Nasdaq 100 after it announced it entered into a new accelerated stock repurchase agreement with Goldman Sachs to buy back $200 million of common stock under the existing $1 billion buyback program.
Fertilizer and grain handling stocks are moving higher today after Russia pulled out of a deal allowing grain exports from Ukraine’s Black Sea ports, which has produced a sharp +6% rally in wheat prices today. Corn is up nearly +2% and soybeans are up +0.6%. Archer-Daniels-Midland (ADM), CF Industries (CF), and Mosaic (MOS) are all up more than +2%.
Verisk Analytics (VRSK) is up more than +1% today after agreeing to sell its energy consulting arm Wood Mackenzie to Veritas Capital for $3.1 billion.
Across the markets…
Dec 10-year T-notes (ZNZ22) this morning are down by -10 ticks, and the 10-year T-note yield is up +4.4 bp at 4.056%. Record-high consumer prices in Europe are pushing up European government bond yields and are weighing on T-note prices. Today’s Eurozone Oct CPI rose by a record +10.7% y/y, which may prompt the ECB to maintain its aggressive rate-hike campaign. The T-note market is also on edge ahead of this week’s FOMC meeting, where the FOMC is unanimously expected to raise rates by +75 bp and may indicate that its aggressive rate-hike regime will continue unimpeded.
The dollar index (DXY00) this morning is up +0.62% at a 4-session high. The dollar is moving higher on today’s weakness in stocks, which has boosted liquidity demand for the dollar. Also, higher T-note yields today are supporting the dollar’s interest rate differentials. In addition, expectations for the FOMC to raise the fed funds target range by 75 bp on Wednesday underpin the dollar.
EUR/USD (^EURUSD) today is down by -0.59%. The euro was undercut by dovish comments today from ECB Governing Council member Visco, who said the ECB should “move gradually” in the face of economic risks.
Today’s Eurozone economic news was mixed for EUR/USD. Eurozone Oct CPI rose a record +10.7% y/y, stronger than expectations of +10.3% y/y. Also, Eurozone Oct core CPI rose a record +5.0% y/y, right on expectations. In addition, Eurozone Q3 GDP rose +0.2% q/q and +2.1% y/y, close to expectations. Finally, German Sep retail sales unexpectedly rose +0.9% m/m, stronger than expectations of a -0.5% m/m decline and the biggest increase in 8 months.
ECB Governing Council member Visco said the ECB should "move gradually" in raising interest rates to fight inflation because of the uncertain nature of economic forecasting amid Russia's war in Ukraine.
USD/JPY (^USDJPY) today is up +0.79%. Higher T-note yields today are weighing on the yen. Also, today’s weaker-than-expected Japanese consumer confidence and industrial production reports were bearish for the yen. In addition, the yen has negative carry-over from last Friday when the BOJ said it would increase the amounts of longer-term government bonds it buys starting next month by increasing the frequency of its monthly asset purchases.
The Japan Oct consumer confidence index fell -0.9 to a 1-3/4 year low of 29.9, weaker than expectations of -0.3 to 30.5.
Japan Sep industrial production fell -1.6% m/m, weaker than expectations of -0.8% m/m and the biggest decline in 4 months.
Japan Sep retail sales rose +1.1% m/m, stronger than expectations of +0.8% m/m.
December gold (GCZ2) this morning is down -3.2 (-0.19%), and December silver (SIZ22) is down -0.077 (-0.40%). Precious metals prices this morning are moderately lower, with gold falling to a 1-week low. A stronger dollar today is weighing on metals prices. Also, higher global government bond yields are undercutting gold prices. In addition, expectations for the FOMC to raise the fed funds target range by 75 bp on Wednesday are bearish for metals prices. Gold has been undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low last Friday.
More Stock Market News from Barchart
- Markets Today: Stocks Decline as Markets Brace for Tighter Fed Policy
- Option Volatility And Earnings Report For October 31 - Nov 4
- Pre-Market Brief: Stocks Lower as Fed Meeting Looms
- Exxon's Huge Q3 Cash Flow Leads to Higher Dividend and Buybacks
/Microsoft%20Corporation%20logo%20on%20phone-by%20rafapress%20via%20Shuterstock.jpg)
/Advanced%20Micro%20Devices%20Inc_%20office%20sign-by%20Poetra_RH%20via%20Shutterstock.jpg)
