Markets Today: Stocks Extend Wednesday’s Surge as Bond Yields Fall

Morning Markets

December S&P 500 futures (ESZ22) this morning are up +0.42% at a 2-1/2 month high, and December Nasdaq 100 E-Mini futures (NQZ22) are up +0.54% at a 2-1/4 month high. 

Stock indexes this morning are extending Wednesday’s sharp gains.  Positive carry-over from Wednesday’s comments from Fed Chair Powell is underpinning stocks after Powell confirmed the Fed would slow its pace of interest rate hikes.  The markets expect a +50 bp rate hike at the upcoming December 13-14 meeting after the FOMC has raised rates by +75 bp at each of its last four meetings.

Market sentiment also improved today after China’s Shanghai Composite Stock Index rallied to a new 2-1/2 month high on signs that China is continuing to ease its Covid restrictions. Optimism about a quicker economic reopening in China also boosted energy stocks as crude prices are up more than +1% at a 1-week high.

 A decline in T-note yields today is bullish for stocks after the 10-year T-note yield dropped to an 8-week low of 3.563%.  Today’s U.S. economic news was mixed for stocks.

U.S. weekly initial unemployment claims fell -16,000 to 225,000, showing a stronger labor market than expectations of 235,000.

U.S. Oct personal spending rose +0.8% m/m right on expectations and the largest increase in 4 months.  Oct personal income rose +0.7% m/m, stronger than expectations of +0.4% m/m and the biggest increase in a year.

The U.S. Oct PCE core deflator, the Fed's preferred inflation gauge, rose +5.0% y/y, right on expectations, and eased from the +5.2% y/y pace in Sep.

Overseas stocks today are higher.  The Euro Stoxx 50 index today is up by +0.75% at an 8-month high.  European stocks today are rallying on carry-over from Wednesday’s surge in U.S. equity markets after Fed Chair Powell said the Fed would slow down the pace of its interest rate increases.  Also boosting market sentiment today is an easing of China’s Covid restrictions after Beijing announced that it would allow some virus-infected people to isolate at home.  In addition, a decline in European government bond yields is supportive for stocks after the 10-year German bund yield fell to an 8-week low today of 1.795%. 

Today’s Eurozone economic news was mixed for stocks.  On the positive side, the Eurozone Oct unemployment rate unexpectedly fell -0.1 to a record low 6.5%, showing a stronger labor market than expectations of unchanged at 6.6%.  Conversely, the Eurozone Nov S&P Global manufacturing PMI was revised downward by -0.2 to 47.1 from the initially reported 47.3.  Also, German Oct retail sales fell -2.8% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 10 months.

China’s Shanghai Composite rallied to a new 2-1/2 month high today and closed up by +0.45%.  Japan’s Nikkei Stock Market Index closed up +0.92%.  Chinese stocks rallied for the third day, and the yuan climbed to a 2-week high against the dollar, on signs China is making progress in relaxing harsh Covid restrictions. China's top official in charge of fighting Covid-19 said China's efforts to combat the virus are entering a new phase, with the omicron variant weakening and more Chinese getting vaccinated. Also, Beijing is now allowing some Covid patients to isolate at home.

Today’s Chinese economic news was bullish for stocks after the China Nov Caixin manufacturing PMI unexpectedly rose +0.2 to 49.4, stronger than expectations of a decline to 48.9.

Japan’s Nikkei Stock Market Index today closed moderately higher.  Japanese stocks rallied today on positive carry-over from Wednesday’s surge in U.S. stocks.  Also, signs of stronger capital spending were supportive for stocks after today’s news that Japan's Q3 capital spending ex-software rose +8.0% y/y, stronger than expectations of +6.2% y/y and the biggest increase in more than four years. On the negative side, the Japan Nov consumer confidence index unexpectedly fell -1.3 to a 2-1/2 year low of 28.6, weaker than expectations of an increase to 30.0.  Also, the Japan Nov Jibun Bank manufacturing PMI was revised downward by -0.4 to 49.0 from the initially reported 49.4, the steepest pace of contraction in 2 years.

Pre-Market U.S. Stock Movers

Okta (OKTA) surged more than +15% in pre-market trading after reporting Q3 revenue of $481.0 million, better than the consensus of $464.2 million, and raised its 2023 revenue forecast to $1.84 billion from a prior forecast of $181 billion-$1.82 billion, stronger than the consensus of $1.82 billion. 

Kroger (KR) rose more than +4% in pre-market trading after reporting Q3 sales of $34.20 billion, better than the consensus of $3.98 billion.

PVH Corp (PVH) jumped more than +9% in pre-market trading after reporting Q3 adjusted EPS of $2.60, well above the consensus of $2.18, and raised its 2023 adjusted EPS forecast to $8.25 from $8.00, stronger than the consensus of $7.95. 

Splunk (SPLK) rallied more than +8% in pre-market trading after reporting Q3 revenue of $929.8 million, well above the consensus of $846.7 million, and raising its 2023 revenue forecast to $3.46 billion-$3.49 billion from $3.35 billion-$3.40 billion, above the consensus of $3.39 billion.

Nutanix (NTNX) climbed more than +2% in pre-market trading after reporting Q1 revenue of $433.6 billion, better than the consensus of $412.7 million, and forecasting Q2 revenue of $460 million-$470 million, stronger than the consensus of $452.2 million.

Five Below (FIVE) jumped more than +9% in pre-market trading after reporting Q3 net sales of $645.0 million, stronger than the consensus of $613.9 million, and raising its 2023 net sales forecast to $3.04 billion-$3.06 billion from a prior estimate of $2.97 billion-$3.02 billion, above the consensus of $3.0 billion. 

Energy stocks and energy service providers are climbing in pre-market trading, with the price of WTI crude up more than +1% at a 1-week high.  ConocoPhillips (COP), Diamondback Energy (FANG), Haliburton (HAL), Exxon Mobil (XOM), and Schlumberger (SLB) are up more than +1%.

Salesforce (CRM) tumbled more than -7% after forecasting Q4 revenue of $7.93 billion-$8.03 billion, weaker than the consensus of $8.03 billion. The stock also fell after CEO Taylor said he is stepping down, effective Jan 31.

Snowflake (SNOW) dropped more than -6% in pre-market trading after forecasting Q4 product revenue of $525 million-$540 million, weaker than the consensus of $551.8 million. 

Costco Wholesale (COST) dropped more than -3% in pre-market trading after reporting November total comparable sales rose +4.3%, weaker than the consensus of +7.7%.

Dollar General (DG) tumbled more than -6% in pre-market trading after cutting its 2023 EPS growth forecast to +7% to +8% from a prior view of +12% to +14%.

Ally Financial (ALLY) and Synchrony Financial (SYF) are down more than -3% in pre-market trading, and Capital One Financial (COF) is down more than -2% after Morgan Stanley downgraded the stocks to underweight from equal weight. 

Today’s U.S. Earnings Reports (12/1/2022)

ChargePoint Holdings Inc (CHPT), Dollar General Corp (DG), Kroger Co/The (KR), Marvell Technology Inc (MRVL), Smartsheet Inc (SMAR), UiPath Inc (PATH), Ulta Beauty Inc (ULTA), Veeva Systems Inc (VEEV), Zscaler Inc (ZS).

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