Markets Today: Stock Indexes Moderately Higher on M&A Activity

Morning Markets

December S&P 500 futures (ESZ22) this morning are up +0.32%, and December Nasdaq 100 E-Mini futures (NQZ22) are up +0.30%.

Stock indexes this morning are moderately higher.  An increase in M&A activity is supportive for equities after Amgen agreed to buy Horizon Therapeutics for $27.8 billion.  Also, Thoma Bravo agreed to buy Coupa Software for $6.2 billion.  In addition, Microsoft agreed to buy a 4% stake in London Stock Exchange Group Plc as part of a $2.8 billion cloud-computing deal.

The markets are awaiting Tuesday’s U.S. consumer price news for November.  The consensus is for Nov CPI to ease to 7.3% y/y from 7.7% y/y in Oct. Also, the markets are awaiting the status of the Fed’s rate-hike regime after the outcome of the Tuesday/Wednesday FOMC meeting and Fed Chair Powell’s regular post-meeting press conference.   Fed officials have recently signaled that the Fed will downshift to a +50 bp rate hike at the conclusion of this week’s 2-day FOMC meeting on Wednesday after four straight +75 bp increases.

A decline in T-note yields this morning is supportive for stocks, with the 10-year T-note yield down -3.7 bp at 3.542%. 

Overseas stocks today are lower.  The Euro Stoxx 50 index is down -0.54%.  Reduced risk appetite is weighing on stocks today as the markets await the U.S. consumer price report for November.   Stocks are also under pressure on expectations for the Fed to raise interest rates by +50 bp on Wednesday and for the ECB and BOE to raise rates by +50 bp on Thursday. 

China’s Shanghai Composite closed down -0.87%, and Japan’s Nikkei Stock Market Index closed down by -0.21%.  Chinese stocks were weighed down today by concern about a slow reopening of the Chinese economy due to rapidly spreading Covid cases after the country’s pandemic restrictions were unexpectedly unwound last week.  Covid is rapidly spreading through China, with long lines forming outside of hospitals as people struggle to find medicine. Chinese state media is urging people to seek treatment at community clinics instead of going to hospitals. Also, many delivery services in China have been interrupted as couriers become sick. 

Today’s news on credit growth was bearish for Chinese stocks after China’s Nov aggregate financing, the broadest measure of credit growth, rose +1.99 trillion yuan, weaker than expectations of +2.10 trillion yuan.  Also, Nov new yuan loans were 1.21 trillion yuan, weaker than expectations of +1.40 trillion yuan.

Japan’s Nikkei Stock Index today closed slightly lower.  Japanese chip stocks fell after Kyodo reported the U.S. directly asked Japan to cooperate on its chip export curbs against China.  Also, weaker-than-expected economic news undercut Japanese stocks after Japan Nov machine tool orders posted their biggest decline in more than 2 years.

Japan Nov PPI eased to 9.3% from 9.4% in Oct.  However, it was above expectations of 8.8% y/y.

Japan Nov machine tool orders fell -7.8% y/y, the biggest decline in over two years.

Pre-Market U.S. Stock Movers

Horizon Therapeutics (HZNP) rallied more than +13% in pre-market trading after Amgen agreed to buy the company for $116.50 a share in a deal valued at $27.8 billion. 

Coupa Software (COUP) surged more than +23% in pre-market trading after Thoma Bravo agreed to buy the company for $6.2 billion. 

Best Buy (BBY) is up more than +2% in pre-market trading after Goldman Sachs upgraded the stock to neutral from sell.

Lam Research (LRCX) gained more than +1% in pre-market trading after Deutsche Bank upgraded the stock to buy from hold with a price target of $520.

Becton Dickinson (BDX) rose more than +1% in pre-market trading after Citigroup upgraded the stock to neutral from sell. 

The Gap (GPS) climbed more than +3% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $18.. 

Qualcomm (QCOM) slid more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to underweight from equal weight.

Rivian Automotive (RIVN) dropped more than -4% in pre-market trading after it said it would walk away from plans to jointly build electric vans in Europe with Mercedes-Benz.   

Accenture Plc (ACN) fell more than -1% in pre-market trading after Piper Sandler downgraded the stock to underweight from neutral.

Micron Technology (MU) slid more than -1% in pre-market trading after Deutsch Bank downgraded the stock to hold from buy. 

Leggett & Platt (LEG) dropped more than -2% in pre-market trading after Piper Sandler downgraded eh stock to underweight from neutral.

KLA Corp (KLAC) fell more than -1% in pre-market trading after Deutsch Bank downgraded the stock to hold from buy. 

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

Coupa Software Inc (COUP), Oracle Corp (ORCL).

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