Stocks Under Pressure as Weak Chinese Trade News Sparks Global Growth Concerns

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.67%.  

Stocks this morning are mixed, with the Nasdaq 100 falling to a 3-1/2 week low.  Weaker-than-expected Chinese trade news is fueling concerns about global growth and is weighing on stocks.  China Nov exports fell -8.7% y/y, weaker than expectations of -3.9% y/y and the biggest decline in 2-3/4 years.  The markets are concerned that the Covid pandemic in China may mushroom as restrictions are eased, thus forcing new economic shutdowns.

Weakness in Apple and its suppliers is weighing on technology stocks today. Apple is down more than -1% after key iPhone supplier Murata Manufacturing said it expects Apple to cut its iPhone 14 production plans further in the coming months because of weak demand. 

Bitcoin (^BTCUSD) is down more than -1% at a 1-week low, which is a risk-off factor for stocks.  The markets remain on watch for any fresh news of contagion from last month’s collapse of FTX.com. 

Lower bond yields are supportive for stocks as the 10-year T-note yield today is down -7.3 bp at 3.459%.  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. 

Today’s U.S. economic news was bullish for stocks after Q3 nonfarm productivity was revised upward to +0.8% from the initially reported +0.6%.  Also, Q3 unit labor costs were revised downward to +2.4% from the initially reported +3.1%.

Today’s stock movers…

M&T Bank (MTB) is down more than -8% today to lead losers in the S&P 500 after Keefe, Bruyette & Woods cut their price target on the stock to $180 from $215. 

Expedia Group (EXPE) is down more than -5% after Wolfe Research downgraded the stock to underperform from peer perform. 

Brown-Forman (BF/B) is down more than -6% after reporting Q2 EPS of 47 cents, weaker than the consensus of 55 cents. 

Welltower (WELL) is down more than -5% after Hindenburg Research released a report saying they’ve taken a short position in the stock as it is an “overpriced-to-perfection” real estate investment trust “obfuscating its distressed assets.”

Airline stocks are under pressure after the Air Transport Association predicted a slump in demand for air cargo would continue into next year, with a decline also dragging down air freight rates. Southwest Airlines (LUV), American Airlines Group (AAL), and Delta Air Lines (DAL) are down more than -3%. Also, United Airlines Holdings (UAL) and Alaska Air Group (ALK) are down more than -2%.

Airbnb (ABNB) is down more than -6% to lead losers in the Nasdaq 100 after Morgan Stanley downgraded the stock to underweight from equal weight.

Booking Holdings (BKNG) is down more than -4% after Wolfe Research downgraded the stock to peer perform from outperform.

Chinese stocks listed in the U.S. are moving lower today after weaker-than-expected Chinese trade data sparked Chinese growth concerns.  Alibaba Group Holding (BABA), Pinduoduo (PDD), Baidu (BIDU), and JD.com (JD) are down more than -3%. 

State Street (STT) is up more than +9% to lead gainers in the S&P 500 after announcing an increase of up to $500 million in its stock buyback plan for Q4. 

Campbell Soup (CPB) is up more than +4% after reporting Q1 adjusted EPS continuing operations of $1.02, stronger than the consensus of 88 cents. 

Fifth Third Bancorp (FITB) is up more than +2% after announcing that it will buy back $100 million of its stock from Morgan Stanley. 

Across the markets…

March 10-year T-notes (ZNH23) today are up +10 ticks, and the 10-year T-note yield is down -7.3 bp at 3.459%.  March T-notes climbed to a 2-1/2 month high, and the 10-year T-note yield fell to a 2-1/2 month low of 3.404%.  Concerns about a slowdown in the global economy are pushing T-note prices higher after today’s weaker-than-expected Chinese trade news.  Also, T-notes found carry-over support from a decline in the 10-year German bund yield to a 2-1/2 month low of 1.760%.  T-notes extended their gains after this morning’s U.S. economic news showed that Q3 nonfarm productivity rose more than expected and Q3 unit labor costs rose less than expected.   

The dollar index (DXY00) this morning is down by -0.48%.  The dollar today is under pressure from lower T-note yields. Also, strength in the euro weighs on the dollar on hawkish comments from ECB Governing Council member Kazimir who signaled support for a +75 bp rate hike at next week's ECB meeting.  Today’s upward revision to U.S. Q3 nonfarm productivity and downward revision to Q3 unit labor costs supported the dollar.

EUR/USD (^EURUSD) today is up by +0.54%.  Better-than-expected Eurozone GDP and German industrial production reports were bullish for the euro.  Furthermore, gains in EUR/USD accelerated today on comments from ECB Governing Council member Kazimir who signaled support for a third straight +75 bp rate hike at next week's ECB meeting.

Eurozone Q3 GDP was revised upward to +0.3% q/q and +2.3% y/y from the initially reported +0.2% q/q and +2.1% y/y.

German Oct industrial production fell -0.1% m/m, stronger than expectations of -0.6% m/m.

ECB Governing Council member Kazimir signaled support for a third straight +75 bp rate hike at next week's ECB meeting when he said a slowdown in Eurozone inflation to 10% in November is "no reason to slow monetary tightening."

USD/JPY (^USDJPY) this morning is down by -0.24%.  The yen erased overnight losses and moved higher after the 10-year T-note yield dropped to a 2-1/2 month low.   The yen initially weakened in overnight trade on comments from BOJ Board member Nakamura who said the BOJ needs to continue with monetary easing as the economy is still recovering from the pandemic. 

Today’s Japanese economic news supported the yen after the Japan Oct leading index CI rose +0.8 to 99.0, stronger than expectations of 98.3.

February gold (GCG3) this morning is up +16.7 (+0.94%), and March silver (SIH23) is up +0.590 (+2.64%).  Precious metals prices this morning are moderately higher.  Weakness in the dollar today is bullish for metals prices. Gold prices also garner support today from a decline in global government bond yields.  In addition, gold is also climbing on increased safe-haven demand after weaker-than-expected Chinese trade news today fueled concern about a global economic slowdown.  Gold continues to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/2 year low Monday.

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