Markets Today: Stocks Gain Despite a Strong U.S. Payrolls Report

Morning Markets

December S&P 500 futures (ESZ22) this morning are up +0.60% and December Nasdaq 100 E-Mini futures (NQZ22) are up +0.65%.  Stock indexes this morning are climbing on carry-over support from a +2.43% jump in China’s Shanghai Composite on speculation China is poised to exit its strict Covid Zero policy. 

Stock indexes gave up some of their overnight gains as T-note yields climbed on a stronger-than-expected U.S. Oct payrolls report.  The 10-year T-note yield rose +5.6 bp to 4.203% after Oct nonfarm payrolls rose +261,000, stronger than expectations of +193,000.  Also, Sep nonfarm payrolls were revised upward to +315,000 from the previously reported +263,000.

The U.S. Oct unemployment rate rose +0.2 to 3.7%, higher than expectations of 3.6%, as the Oct labor force participation rate edged down to 62.2% from 62.3% in Sep.

U.S. Oct average hourly earnings rose +0.4% m/m and +4.7% y/y, close to expectations.

The Euro Stoxx 50 index today is up by +1.79%.  Gains in European mining stocks and metals producers are leading the overall market higher today on speculation China may be planning to remove some Covid Zero restrictions, which would boost China’s economic growth and industrial metals demand. Also, an upward revision to the Eurozone Oct S&P Global composite PMI is positive for stocks.

Hawkish ECB comments today pushed up bond yields and were negative for stocks.  The 10-year German bund yield rose to a 1-1/2 week high today of 2.319% after ECB President Lagarde said, "withdrawing accommodation may not be enough to bring inflation back to our target," and interest rates may need to be lifted to restrictive levels to bring inflation back to the ECB's 2% target.  Also, ECB Vice President Guindos said inflation in the Eurozone would likely remain above the ECB's 2% target for an extended period, raising the risk of a price-wage spiral.

The Eurozone Oct S&P Global composite PMI was revised upward by +0.2 to 47.3 from the previously reported 47.1.

Eurozone Sep PPI eased to +41.9% y/y from +43.4% y/y in Aug, right on expectations.

German Sep factory orders fell -4.0% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 6 months.

Asian markets today settled mixed.  China’s Shanghai Composite closed up +2.43%, and Japan’s Nikkei Stock Index closed down -1.68%.

China’s Shanghai Composite rallied sharply today to a 2-1/2 week high on speculation China is poised to exit its strict Covid Zero policy.  Bloomberg reported that China's State Council is working on plans to end Covid flight suspensions and scrap a system that penalizes airlines for bringing Covid cases into the country.  Chinese stocks also found support after Bloomberg reported that U.S. audit officials completed their first on-site inspection round of Chinese companies ahead of schedule, a sign of progress to prevent the delisting of U.S.-listed Chinese stocks.

Japanese stocks closed moderately lower today as they reopened from Thursday’s holiday. Export-related stocks fell on concerns that aggressive Fed tightening will trigger a global recession. 

Pre-Market U.S. Stock Movers

Block Inc (SQ) surged more than +13% in pre-market trading after reporting Q3 revenue of $4.52 billion, above the consensus of $4.44 billion. 

Microchip Technology (MCHP) jumped more than +9% in pre-market trading after reporting Q2 adjusted EPS of $1.46, better than the consensus of $1.44, and forecast Q3 adjusted EPS of $1.54-$1.56, stronger than the consensus of $1.46. 

U.S.-listed Chinese stocks soared in pre-market trading amid more reopening speculation and after a Bloomberg report outlined progress in efforts to prevent the delisting of hundreds of Chinese stocks from U.S. exchanges.  Pinduoduo (PDD), JD.com (JD), and Alibaba Group Holding (BABA) are up more than +8%.  Also, Baidu (BIDU) and NetEase (NTES) are up more than +6%. 

DoorDash (DASH) rallied more than +10% in pre-market trading after reporting Q3 revenue of $1.70 billion, better than the consensus of $1.63 billion, and forecasting Q4 Marketplace gross order value of $13.9 billion-$14.2 billion, above the consensus of $13.6 billion. 

Arista Networks (ANET) jumped more than +7% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral. 

Insulet Corp (PODD) climbed more than +12% in pre-market trading after reporting Q3 revenue of $340.8 million, above the consensus of $311.4 million and raising its full-year revenue growth guidance range to up +18%-19% from a previous forecast of up +14%-17%. 

PayPal Holdings (PYPL) tumbled more than -7% in pre-market trading after reporting Q3 total payment volume of $336.07 billion, weaker than the consensus of $343.25 billion, and cutting its full-year revenue forecast to $27.50 billion from a previous forecast of $27.85 billion, below the consensus of $27.86 billion. 

Atlassian Corp (TEAM) plunged more than -24% in pre-market trading after forecasting Q2 revenue of $835 million-$855 million, well below the consensus of $882.6 million.  Piper Sandler then downgraded the stock to neutral from overweight. 

DraftKings (DKNG) sank more than -15% in pre-market trading after forecasting a fiscal 2023 adjusted Ebitda loss of -$475 million-$575 million, worse than the consensus of a loss of -$426 million. 

Warner Bros Discovery (WBD) dropped more than -3% in pre-market trading after reporting Q3 revenue of $9.82 billion, weaker than the consensus of $10.37 billion. 

Illumina (ILMN) fell more than -3% in pre-market trading after cutting its full-year adjusted EPS forecast to $2.35-$2.50 from a prior view of $2.75-$2.90, weaker than the consensus of $2.78. 

Twilio (TWLO) slumped more than -24% in pre-market trading after forecasting Q4 revenue of $995 million-$1.01 billion, below the consensus of $1.07 billion. 

Today’s U.S. Earnings Reports (11/4/2022)

AES Corp/The (AES), Cardinal Health Inc (CAH), Cboe Global Markets Inc (CBOE), Consolidated Edison Inc (ED), Dominion Energy Inc (D), Duke Energy Corp (DUK), Evergy Inc (EVRG), Hershey Co/The (HSY), PPL Corp (PPL).

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