Markets Today: Stock Indexes Extend Thursday’s Rout on Recession Fears

Morning Markets

March S&P 500 futures (ESH23) this morning are down -1.09%, and March Nasdaq 100 E-Mini futures (NQH23) are down -0.67%, both at 5-week lows. 

Stock indexes this morning extended Thursday’s rout on concern the resolve of the Fed and ECB to keep raising interest rates to fight inflation will tip the global economy into recession.  Also, recession concerns have knocked WTI crude oil prices down more than -2% today, weighing on energy stocks.

Higher global interest rates are bearish for stocks.  Hawkish ECB comments today pushed the 10-year German bund yield to a 1-1/4 month high of 2.212%.  That weighed on other global government bond markets as the 10-year UK gilt yield climbed to a 1-month high of 3.389%, and the 10-year T-note yield is up +7.2 bp at 3.519%.

Amazon.com is down more than -1% in pre-market trading and is weighing on technology stocks after JPMorgan Chase cut its price target on the stock.  Also, Accenture is down more than -2% after reporting weaker-than-expected Q1 bookings.

On the positive side, Adobe is up more than +3% in pre-market trading after reporting stronger-than-expected adjusted Q4 EPS.  Also, Meta Platforms is up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral.   

Overseas stocks today are lower.  The Euro Stoxx 50 index is down by -0.89% and dropped to a 5-week low.  European stocks today extended Thursday’s sharp losses after the ECB signaled additional interest rate hikes.  Losses in interest rate-sensitive real estate and technology stocks today led the overall market lower.  Also, hawkish rhetoric from ECB policymakers today weighed on stocks and pushed the 10-year German bund yield to a 1-1/4 month high of 2.212%.  Stocks recovered from their worst levels on better-than-expected Eurozone manufacturing news.

The Eurozone Dec S&P Global manufacturing PMI rose +0.7 to 47.8, stronger than expectations of no change at 47.1.  The Eurozone Dec S&P Global composite PMI rose +1.0 to 48.8, stronger than expectations of +0.1 to 47.9.

ECB Governing Council member Muller said interest rate would likely rise above levels anticipated by markets as the economic slowdown isn't enough to curb inflation as needed.

ECB Governing Council member Rehn said interest rates in the Eurozone "will still have to rise significantly" to bring inflation down to the ECB's target, and the ECB is likely to raise rates by 50 bp at the Feb and March meetings.

China’s Shanghai Composite closed down -0.02%, and Japan’s Nikkei Stock Market Index closed down by -1.87%.   

The Shanghai Composite fell to a 2-week low today but closed just slightly lower.  Chinese companies tied to chip manufacturing and satellite navigation retreated after the U.S. government blacklisted more than 30 Chinese tech companies.  However, losses in the overall market were muted after Chinese property stocks rallied when Vice Premier Liu He said new measures are being considered to improve the sector’s assets and liabilities.  Also, Chinese technology stocks rose after threats of delisting from U.S. exchanges eased when U.S. officials said they gained sufficient access to audit documents on companies in China and Hong Kong for the first time. 

Top Chinese leaders, including President Xi Jinping, said at the conclusion of today's Central Economic Work Conference that they will pursue an active fiscal policy and "forceful" monetary policy.

Japan’s Nikkei Stock Index today fell to a 1-week low and closed sharply lower on negative carry-over from Thursday’s slump in U.S equity markets.  Japanese media companies moved lower after analysts said demand for domestic ads has weakened from worries over an economic downturn.  Also, weak economic news weighed on stocks after the Japan Dec Jibun Bank manufacturing PMI fell -0.2 to 48.8, the steepest pace of contraction in more than two years.

Pre-Market U.S. Stock Movers

Amazon.com (AMZN) slid more than -1% in pre-market trading after JPMorgan Chase cut its price target on the stock to $130 from $145.

Lincoln National (LNC) dropped more than -2% in pre-market trading after Jeffries downgraded the stock to underperform from hold. 

Energy stocks and energy service providers are falling in pre-market trading, with WTI crude oil prices down more than -2%.  ConocoPhillips (COP), Devon Energy (DVN), Halliburton (HAL), Occidental Petroleum (OXY), Schlumberger (SLB), and Valero Energy (VLO) are down -2% or more.

Accenture (ACN) fell more than -2% in pre-market trading after reporting Q1 bookings of $16.22 billion, below the consensus of $17.27 billion. 

Guardant Health (GH) plunged more than -30% in pre-market trading after disappointing results of a study of its blood test for colorectal cancer. Shares of rival Exact Sciences (EXAS), which makes a test for colorectal cancer called Cologuard that is more accurate, jumped more than +15% on the news.

Cryptocurrency-exposed stocks are falling in pre-market trading, with the price of Bitcoin down more than -2%.  Marathon Digital (MARA) and Riot Blockchain (RIOT) are down more than -2%.  Also, Coinbase Global (COIN) and MicroStrategy (MSTR) are down more than -1%.

Adobe (ADBE) climbed more than +3% in pre-market trading after reporting Q4 adjusted EPS of $3.60, better than the consensus of $3.50. 

Meta Platforms (META) rose more than +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral.   

Cadence Design Systems (CDNS) and Synopsys (SNPS) rose more than +1% in pre-market trading after Bank of America Global Research upgraded the stocks to buy from neutral.

Trip.com Group Ltd (TCOM) climbed more than +2% in pre-market trading UBS upgraded the stock to buy from neutral.

Today’s U.S. Earnings Reports (12/16/2022)

Accenture PLC (ACN), Daily Journal Corp (DJCO), Darden Restaurants Inc (DRI), Urstadt Biddle Properties Inc (UBA), Winnebago Industries Inc (WGO).

• Pre-Market Brief: Stocks Retreat As Recession Fears Weigh On Sentiment
• Stocks Sharply Lower on the Outlook for Higher Global Interest Rates
• FAANG Stocks Lose Their Leadership as Share Prices Fall
• Stocks Plunge as Fed and ECB Signal Higher Interest Rates