Markets Today: Stocks Moderately Lower on Nationwide Protests in China Over Covid Restrictions

Morning Markets

December S&P 500 futures (ESZ22) this morning are down -0.71%, and December Nasdaq 100 E-Mini futures (NQZ22) are down -0.66%. 

Stock indexes this morning are falling as political unrest in China raises concerns about global growth. Sporadic nationwide protests in China have broken out in the past several days over the government’s strict Covid Zero policies.  China reported a record 38,808 new Covid infections on Sunday.  The rise in infections dampens optimism that China’s economy may soon fully reopen as the government is forced to expand lockdowns and pandemic restrictions. 

Also, a fall of more than -2% in Apple in pre-market trading is weighing on technology stocks after a Bloomberg report said that lockdowns and turmoil at a key Chinese factory could lead to a production shortfall of close to 6 million iPhone Pro units this year.  In addition, energy stocks are moving lower today, with WTI crude down more than -2% at an 11-month low on global energy demand concerns. 

Goldman Sachs warns that while monetary policy should become less of a headwind next year, slowing global growth will keep stocks under pressure.  Goldman also said stocks don't yet reflect the risk of a U.S. recession as their model implies a 39% probability of a U.S. growth slowdown in the next 12 months, but risk assets are pricing in only an 11% chance. 

Overseas stocks today are lower.  The Euro Stoxx 50 index today is down by -0.86%.  Global growth concerns are undercutting European stocks today as growing protests in China against Covid curbs have dampened optimism about the reopening of China’s economy.   Also, hawkish ECB comments today weighed on stocks when ECB Governing Council member Knot said it is a "bit of a joke" to talk about the ECB over-tightening now.

Eurozone Oct M3 money supply rose +5.1%y/y, weaker than expectations of +6.1% y/y and the smallest increase in 2-3/4 years.

ECB Governing Council member Knot said it is a "bit of a joke" to talk about the ECB over-tightening now.  "To bring inflation back to target in the Eurozone, we will need a protracted period of time at which at least growth is below potential because otherwise, we will never get disinflation going."

China’s Shanghai Composite fell to a 2-week low and closed down -0.75%, and Japan’s Nikkei Stock Market Index closed down -0.42%.  Chinese stocks tumbled today, and the yuan fell to a 2-week low against the dollar, due to nationwide protests over the government’s Covid Zero policies.  Also, the pandemic in China continues to worsen, dampening hopes that economic activity in China will return to normal anytime soon.

Today’s economic news was bearish for Chinese stocks after China Oct industrial profits fell -3.0% y/y, the biggest decline in 2 years and the fourth consecutive month profits have fallen.

Japanese stocks today posted moderate losses.  Asian suppliers to Apple retreated today after a Reuters report said that production of iPhones could drop by at least 30% due to worker protests at China’s Foxconn play, Apple’s biggest plant.  Also, Japanese exporter stocks were under pressure today after the yen rallied to a 2-3/4 month high against the dollar, as the stronger yen reduced the profit prospects of exporters. 

Pre-Market U.S. Stock Movers

Apple (AAPL) is down more than -2% in pre-market trading on a Bloomberg report that said lockdowns and turmoil at a key Chinese factory could lead to a production shortfall of close to 6 million iPhone Pro units this year. 

Energy stocks and energy service providers are falling in pre-market trading, with the price of crude oil down more than -3% at an 11-month low.  Devon Energy (DVN), Marathon Oil (MRO), Haliburton (HAL), Diamondback Energy (FANG), Schlumberger (SLB), and ConocoPhillips (COP) are down -2% or more.

U.S.-listed Chinese stocks are falling in pre-market trading, with record new Covid cases in China and nationwide protests against the government’s Covid Zero policies. Alibaba Group Holding (BABA), Baidu (BIDU),  and JD.com (JD) are down more than -2%.  Also, NetEase (NTES) is down more than -1%.

Beyond Meat (BYND) and Tyson Foods (TSN) are down more than -2% in pre-market trading after Barclays downgraded both stocks to underweight from equal weight. 

Williams-Sonoma (WSM) dropped more than -3% in pre-market trading after S&P Morgan Stanley downgraded the stock to underweight from equal weight.

Twilio (TWLO) tumbled more than -3% in pre-market trading after Jeffries downgraded the stock to hold from buy.

DraftKings (DKNG) fell more than -4% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral.

Activision Blizzard (ATVI) gained more than +1% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight.

Shopify (SHOP) jumped more than +6% in pre-market trading on record Black Friday sales, announcing sales of $3.36 billion from the start of Black Friday in New Zealand through the end of Black Friday in California, a +17% increase from 2021. 

Live Nation Entertainment (LYV) rose more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral.

Today’s U.S. Earnings Reports (11/28/2022)

Anavex Life Sciences Corp (AVXL), Arrowhead Pharmaceuticals Inc (ARWR), AZEK Co Inc/The (AZEK), 

Hyzon Motors Inc (HYZN), Inspirato Inc (ISPO), National Energy Services Reunited Corp (NESR), Provident Bancorp Inc (PVBC).

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