Markets Today: Stock Indexes Move Lower Off the Open

Morning Markets

The S&P 500 is down -0.53% this morning and the Nasdaq is down -1%.

Overnight China’s Shanghai Composite Stock Index rallied to a new 2-1/2 month high as the Chinese government accelerates the easing of Covid restrictions.  Beijing today joined Shanghai, Shenzhen, Guangzhou, and other major Chinese cities in scrapping Covid testing requirements to enter most public venues. 

Bond yields are down slightly, with the 10-year T-note down -0.01. Fed officials have recently signaled that the Fed will downshift to a 50 bp rate hike at next week’s FOMC meeting after four straight 75 bp increases. 

Losses in energy stocks in pre-market trading are weighing on the overall market, with the price of WTI crude down more than -1% at a 1-week low.

Today’s U.S. economic news was neutral for stocks after the Oct trade deficit widened to -$78.2 billion from -$74.1 billion in Sep, the most in 4 months but narrower than expectations of -$80.0 billion.

Overseas stocks today are mixed.  The Euro Stoxx 50 index is down -0.26% today.   Losses in energy, financial services, and retailers are leading the overall market lower today.  On the positive side, German Oct factory orders rose more than expected. Also, European government bond yields are moving lower today, with the 10-year German bund yield down -7.9 bp to 1.802%. 

Today’s Eurozone economic news was mixed for stocks.  On the bearish side, the German Nov S&P Global construction PMI fell -2.3 to 41.5, the steepest pace of contraction in 1-3/4 years.  Conversely, German Oct factory orders rose +0.8% m/m, stronger than expectations of +0.1% m/m.

China’s Shanghai Composite rose to a new 2-1/2 month high and closed up by +0.02%, and Japan’s Nikkei Stock Market Index closed up by +0.24%. Chinese stocks have rallied sharply over the past week as Chinese authorities accelerated a shift toward reopening the economy.  Beijing today joined Shanghai, Shenzhen, Guangzhou, and other major Chinese cities in scrapping Covid testing requirements to enter most public venues, except some locations such as restaurants, bars, and nursing homes.  A slowing in the pace of new Covid infections was another positive factor for stocks after China reported 27,164 new Covid infections on Monday, the fewest in 2 weeks. 

The Shanghai Composite today gave up most of its advance as steel and aluminum producers retreated after a Bloomberg report said the U.S. and EU are weighing new tariffs on Chinese steel and aluminum producers in an attempt to fight carbon emissions and global overcapacity.

Japan’s Nikkei Stock Index today closed moderately higher on the outlook for the BOJ to maintain its easing measures after BOJ Governor Kuroda said it’s too early for the BOJ to end its asset purchases and the BOJ won’t quit easing even if wages grow by 3% as long as there is no sustainable inflation.

Today’s Japanese economic news was mixed for stocks.  On the positive side, Oct household spending rose +1.2% y/y, stronger than expectations of +0.9% y/y.  Conversely, Oct real cash earnings fell -2.6% y/y, weaker than expectations of -2.2% y/y and the biggest decline in more than seven years.

Pre-Market U.S. Stock Movers

JPMorgan Chase (JPM) rose more than +1% in pre-market trading after Morgan Stanly double-upgraded the stock to overweight from underweight. 

General Electric (GE) gained more than +1% in pre-market trading after Oppenheimer upgraded the stock to outperform from neutral

Alcoa (AA) rose nearly +1% in pre-market trading after Bloomberg reported that the U.S. and EU are weighing climate-based tariffs on Chinese steel and aluminum. 

Xponential Fitness Microsystems (XPOF) rallied more than +8% in pre-market trading after Citigroup initiated coverage of the stock with a buy rating and a price target of $29. 

Gitlab (GTLB) surged more than +18% in pre-market trading after reporting Q3 revenue of $113.0 million, better than the consensus of $106.2 million, and raising its 2023 revenue forecast to $420.5 million-$421.5 million from a prior forecast of $411.0 million-$414.0 million, above the consensus of $413.3 million.

Kimberly-Clark (KMB) fell more than -1% in pre-market trading after Deutsche Bank downgraded the stock to sell from hold.

Energy stocks and energy service providers are under pressure in pre-market trading, with the price of WTI crude down more than -1% at a 1-week low.  ConocoPhillips (COP), Devon Energy (DVN), Haliburton (HAL), Schlumberger (SLB), and Valero Energy (VLO) are down more than -1%. 

Bank of New York Mellon (BK) slid more than -1% in pre-market trading after Morgan Stanley downgraded the stock to underweight from equal weight. 

NRG Energy (NRG) tumbled more than -8% in pre-market trading after agreeing to buy Vivint Smart Home for $2.8 billion. 

General Mills (GIS) slid more than -1% in pre-market trading after Deutsche Bank downgraded the stock to hold from buy.

Edwards Lifesciences (EW) dropped more than -2% in pre-market trading after Stifel downgraded the stock to hold from buy. 

Today’s U.S. Earnings Reports (12/6/2022)

AutoZone Inc (AZO), Casey's General Stores Inc (CASY), Guidewire Software Inc (GWRE), MongoDB Inc (MDB), SentinelOne Inc (S), Toll Brothers Inc (TOL).

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