Markets Today: Stocks Slump as Hot Jobs Report Boosts Bond Yields

Morning Markets

December S&P 500 futures (ESZ22) this morning are down -1.58% at a 2-1/2 month high, and December Nasdaq 100 E-Mini futures (NQZ22) are down -2.29%. 

Stock indexes tumbled this morning, and bond yields jumped after this morning’s stronger-than-expected U.S Nov payrolls report may pressure the Fed to keep monetary policy tighter for longer.  The 10-year T-note yield is up +10.9 bp at 3.614% after U.S. Nov nonfarm payrolls and Nov average hourly earnings rose more than expected.

Technology stocks may also be under pressure this morning, with Marvell Technology down more than -6% in pre-market trading after reporting weaker-than-expected Q3 revenue and forecasting Q4 revenue that was below consensus.

U.S. Nov nonfarm payrolls rose +263,000, stronger than expectations of +200,000.  The Nov unemployment rate was unchanged at 3.7%, right on expectations.

U.S Nov average hourly earnings eased to +5.1% y/y from +5.6%  y/y in Oct but were still higher than expectations of +4.6% y/y.

Bank of America said investor optimism around a cooling labor market and a Federal Reserve pivot is overdone and recommends "selling risk rallies in stocks from here" and that unemployment would replace inflation as the main worry in 2023.

Overseas stocks today are weaker.  The Euro Stoxx 50 index today gave up early gains and is down by -0.83% after U.S. stock indexes sank on a stronger-than-expected U.S. payrolls report. Also undercutting stocks today is higher European government bond yields as the 10-year German bund yield rebounded from a 2-1/2 month low today of 1.763% and is now up +2.0 bp to 1.834%.  Optimism in European equity markets had improved this week as inflation pressures eased in the Eurozone and after Fed Chair Powell said the Fed would slow down the pace of its interest rate increases. 

Today’s Eurozone economic news was mixed for stocks.  On the positive side, Eurozone Oct PPI rose +30.8% y/y, weaker than expectations of +31.7% y/y and the slowest pace of increase in 9 months.  Also, the German Oct import price index rose +23.5% y/y, falling back from the +29.8% y/y gain in Sep and the slowest pace of increase in a year.  On the bearish side is weak German trade news after German Oct exports fell -0.6% m/m, weaker than expectations of -0.2% m/m.  Also, German Oct imports fell -3.7% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 9 months.

China’s Shanghai Composite closed down by -0.29%, and Japan’s Nikkei Stock Market Index closed down by -1.59%.  Chinese stocks today posted moderate losses as prices consolidated after this week’s sharp rally.  Losses were limited on signs China’s central bank may provide additional stimulus measures after PBOC Governor Yi Gang said the PBOC’s attention is now centered on economic growth, a sign policymakers may boost measures to help the economic recovery.  Chinese stocks rallied sharply this week with the Shanghai Composite posting a 2-1/2 month high Thursday as the recent relaxation of some pandemic curbs as well as a shift in the official rhetoric around Covid Zero has fueled hopes China may be preparing to reopen early next year.

Japan’s Nikkei Stock Index today tumbled to a 3-week low and closed moderately lower.  Japanese stocks retreated today on U.S. economic concerns after Thursday’s news showed U.S.  manufacturing activity contracted last month at the steepest pace in 2-1/2 years.  Also, a rally in the yen to a 3-1/2 month high against the dollar today has pressured Japanese exporter stocks.  The stronger yen reduces the earnings prospects of exporters. 

Pre-Market U.S. Stock Movers

Marvell Technology (MRVL) tumbled more than -6% in pre-market trading after reporting Q3 net revenue of $1.54 billion, below the consensus of $1.56 billion, and forecast Q4 net revenue forecast of $1.33 billion-$1.43 billion, well below the consensus of $1.62 billion. 

Zscaler (ZS) dropped more than -8% in pre-market trading after forecasting 2023 calculated billings of $1.93 billion-$1.94 billion, the mid-point below the consensus of $1.94 billion. 

Veeva Systems (VEEV) dropped more than -4% in pre-market trading after forecasting Q4 revenue of $551 million-$553 million, well below the consensus of $560.6 million.

Blackstone (BX) slid more than -1% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.

DoorDash (DASH) fell more than -2% in pre-market trading after TBC Capital Markets downgraded the stock to sector perform from outperform. 

Asana (ASAN) plunged more than -17% in pre-market trading after cutting its 2023 revenue forecast to $541 million-$543 million from a prior estimate of $544 million-$546 million, weaker than the consensus of $545.6 million. 

UiPath (PATH) rallied more than +10% in pre-market trading after reporting Q3 total revenue of $262.7 million, well above the consensus of $246.5 million.

Smartsheet (SMAR) climbed more than +8% in pre-market trading after reporting Q3 revenue of $199.6 million, better than the consensus of $194.1 million, and raising its 2023 revenue forecast to $760 million-$762 million from a previous estimate of $750 million-$755 million, above the consensus of $753.3 million. 

Ulta Beauty (ULTA) gained more than +1% in pre-market trading after reporting Q3 net sales of $2.34 billion, above the consensus of $2.22 billion, and raising its full-year net sales forecast to $9.95 billion-$10.00 billion from a previous estimate of $9.65 billion-$9.75 billion, stronger than the consensus of $9.78 billion. 

Science Applications International (SAIC) rose more than +2% in pre-market trading after the company was awarded a U.S. Transportations Command contract valued at up to $151 million.

Today’s U.S. Earnings Reports (12/2/2022)

Cracker Barrel Old Country Store (CBRL), Genesco Inc (GCO).

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