Markets Today: Stocks Slump on Hawkish Fed and Weakness in Tech Stocks

Morning Markets

December S&P 500 futures (ESZ22) this morning are down -0.94% at a 1-1/2 week low, and December Nasdaq 100 E-Mini futures (NQZ22) are down -1.21% at a 2-1/2 week low.  Stock indexes this morning extended Wednesday’s sell-off on expectations for higher interest rates after Fed Chair Powell warned that interest rates would rise more than previously anticipated.  The 10-year T-note yield jumped to a 1-week high today of 4.204%.

Losses in technology stocks are leading the overall market lower today due to higher interest rates and Qualcomm’s sell-off of more than -7% in pre-market trading after forecasting weaker-than-expected Q4 revenue.   Also, Moderna is down more than -12% after reporting weaker-than-expected Q3 EPS and cutting its guidance for full-year Covid vaccine sales.

U.S. weekly initial unemployment claims unexpectedly fell -1,000 to 217,000, showing a stronger labor market than expectations of an increase to 220,000.

U.S. Q3 nonfarm productivity rose +0.3%, weaker than expectations of +0.5%.  Q3 unit labor costs rose +3.5%, less than expectations of +4.0%.

The Sep U.S. trade deficit of -$73.3 billion was wider than expectations of -$72.2 billion, which had negative GDP implications.

The Bank of England (BOE) voted 7-2 to raise its benchmark rate by +75 bp to 3.00%, as expected, and said the peak interest rate is likely lower than implied by markets.

The Euro Stoxx 50 index today is down by -1.25%.  European stocks are falling on negative carry-over from Wednesday’s plunge in U.S. equity markets after Fed Chair Powell warned the Fed would raise interest rates more than previously anticipated.  Also, European bond yields rose on comments from ECB President Lagarde, who said that a “mild recession” was possible but that it wouldn’t be sufficient in itself to curb soaring prices.  The 10-year German bund yield climbed to a 1-week high today at 2.280%.

The Eurozone Sep unemployment rate fell -0.1 to a record low 6.6%, right on expectations.

ECB President Lagarde warned that a "mild recession" is possible, but "we don't believe it will be able to tame inflation."

ECB Governing Council member Kazaks said, "it's clear that interest rates will need to rise much higher to bring inflation down to the target of 2% over the medium term."

Asian markets today closed lower.  China’s Shanghai Composite closed down -0.19%.  Hong Kong’s Hang Seng Index closed down sharply by -3.08%, and Japan was closed today for the Culture Day holiday.

Asian technology stocks sank today to lead Asian markets lower after Wednesday’s hawkish comments from Fed Chair Powell dashed hopes that the Fed was close to ending its tightening campaign.  Chinese reopening stocks also fell after China’s National Health Commission said the country would “resolutely adhere” to the country’s Covid Zero approach, dampening speculation China would soon ease Covid Zero policies.  Losses in the Shanghai Composite were limited as Chinese agriculture stocks rallied after a post in the People’s Daily said China was planning “supply and marketing cooperatives,” a planned-economy model where agricultural and other products are distributed and sold through centralized platforms.

Today’s Chinese economic news was bearish for stocks after the China Oct Caixin services PMI fell -0.9 to 48.4, weaker than expectations of 49.0 and the steepest pace of contraction in 5 months.

Pre-Market U.S. Stock Movers

Qualcomm (QCOM) tumbled more than -7% in pre-market trading after forecasting Q4 revenue of $9.2 billion-$10 billion, well below the consensus of $12.03 billion, citing an economic slowdown and Covid lockdowns in China. 

Moderna (MRNA) sank more than -12% in pre-market trading after reporting Q3 EPS of $2.53, well below the consensus of $3.59, and cut its guidance for full-year Covid vaccine sales to $18 billion-$19 billion from a previous forecast of $21 billion. 

Roku (ROKU) plunged -20% in pre-market trading after forecasting a Q4 adjusted loss of -$135 million before interest, taxes, depreciation, and amortization, a much bigger loss than the consensus of -$45.5 million.

Cognizant Technology Solutions (CTSH) sank nearly -10% in pre-market trading after reporting Q3 revenue of $4.86 billion, weaker than the consensus of $5.00 billion, and lowered its full-year revenue forecast to $19.3 billion from a prior forecast of $19.7 billion-$19.9 billion, below the consensus of $19.76 billion. 

Fortinet (FTNT) tumbled more than -12% in pre-market trading after forecasting Q4 billings of $$1.67 billion-$1.72 billion, below the consensus of $1.74 billion, and cutting its full-year billing forecast to $5.54 billion-$5.60 billion from a previous forecast of $5.56 billion-$5.64 billion, weaker than the consensus of $5.60 billion.

Lumen Technologies (LUMN) plunged more than -14% in pre-market trading after reporting Q3 revenue of $4.39 billion, below the consensus of $4.42 billion and eliminated its quarterly dividend. 

CF Industries (CF) tumbled more than -5% in pre-market trading after reporting Q3 net sales of $2.32 billion, weaker than the consensus of $2.40 billion.

Datadog (DDOG) rallied more than +10% in pre-market trading after reporting Q3 revenue of $436.5 million, better than the consensus of $412.9 million, and raised its full-year revenue estimate to $1.65 billion from a prior forecast of $1.61 billion-$1.63 billion, stronger than the consensus of $1.63 billion. 

Booking Holdings (BKNG) climbed more than +5% in pre-market trading after reporting Q3 revenue of $6.05 billion, better than the consensus of $5.91 billion.  Also, Expedia Group (EXPE) also rose more than +3% on the news

Etsy (ETSY) jumped more than +9% in pre-market trading after reporting Q3 revenue of $594.5 million, stronger than the consensus of $563.6 million. 

Crocs (CROX) rose more than +4% in pre-market trading after forecasting Q3 adjusted EPS of $2.97, above the consensus of $2.61. 

Today’s U.S. Earnings Reports (11/3/2022)

Air Products and Chemicals Inc (APD), Ameren Corp (AEE), AmerisourceBergen Corp (ABC), Amgen Inc (AMGN), Aptiv PLC (APTV), AvalonBay Communities Inc (AVB), Ball Corp (BALL), Celanese Corp (CE), Cigna Corp (CI), ConocoPhillips (COP), Corteva Inc (CTVA), Coterra Energy Inc (CTRA), Cummins Inc (CMI), DXC Technology Co (DXC), EOG Resources Inc (EOG), EPAM Systems Inc (EPAM), Exelon Corp (EXC), Expedia Group Inc (EXPE), Federal Realty Investment Trus (FRT), Fidelity National Information (FIS), Huntington Ingalls Industries (HII), Illumina Inc (ILMN), Intercontinental Exchange Inc (ICE), Iron Mountain Inc (IRM), Johnson Controls International (JCI), Kellogg Co (K), Live Nation Entertainment Inc (LYV), Marriott International Inc/MD (MAR), MetLife Inc (MET), Mettler-Toledo International I (MTD), Microchip Technology Inc (MCHP), Moderna Inc (MRNA), Monster Beverage Corp (MNST), Motorola Solutions Inc (MSI), Organon & Co (OGN), Parker-Hannifin Corp (PH), PayPal Holdings Inc (PYPL), Pinnacle West Capital Corp (PNW), Quanta Services Inc (PWR), Regency Centers Corp (REG), Regeneron Pharmaceuticals Inc (REGN), Royal Caribbean Cruises Ltd (RCL), Sempra Energy (SRE), Skyworks Solutions Inc (SWKS), Starbucks Corp (SBUX), Targa Resources Corp (TRGP), Ventas Inc (VTR), Warner Bros Discovery Inc (WBD), Zoetis Inc (ZTS).

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