Markets Today: Stocks Continue Their Downward Trend

Morning Markets

Stock indexes this morning are continuing to head lower after the sharp losses seen last week.  The S&P 500 ($SPX) are down -0.50% this morning and the Nasdaq ($NASX) is down -1%. 

After a +5% jump in Tesla in pre-market trading due to a poll of Twitter users said they favored CEO Musk stepping down, which would presumably allow Mr. Musk to refocus his attention on Tesla, the stock is now down more than -1.5%.  In M&A activity, L3Haris Technologies agreed to purchase Aerojet Rocketdyne Holdings for $4.7 billion.

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 2.221%.  That weighed on other global government bond markets as the 10-year UK gilt yield climbed to a 5-week high of 3.484%, and the 10-year T-note yield is up +7.7 bp at 3.559%.

Morgan Stanley said a looming earnings recession "by itself could be similar to what transpired in 2008/2009," which could spark a new stock-market low that's "much worse than what most investors are expecting."

Overseas stocks today are mixed.  The Euro Stoxx 50 index is up by +0.53%.  Stocks saw support after today’s news that the German Dec IFO business confidence index rose more than expected to a 4-month high.  European energy stocks are higher as crude oil prices rose on optimism that Chinese energy demand will increase after Chinese leaders pledged to revive consumption and support the private sector.  However, hawkish ECB comments pushed European government bond yields higher, limiting stock gains.  The 10-year German bund yield rose to a 1-1/4 month high of 2.215%.

The German Dec IFO business climate index rose +2.2 to a 4-month high of 88.6, stronger than expectations of 87.5.

ECB Vice President Guindos said the ECB would continue to raise interest rates at a "similar pace" to its last +50 bp rate hike until projections show that unprecedented Eurozone price gains are headed back to the bank's 2% target. 

ECB Governing Council member Kazimir said he has "no doubt" the ECB will raise interest rates at its next meeting in February and that bringing inflation under control will require not only that rates move to levels that restrict the economy but that interest rates would stay there "much longer."

China’s Shanghai Composite closed down -1.92%, and Japan’s Nikkei Stock Market Index closed down by -1.05%.

The Shanghai Composite tumbled to a 3-week low today on concern that surging Covid cases in China will lead to economic disruptions that slow the reopening of the economy.  Weakness in Chinese property stocks also weighed on the overall market as news of additional share sales by property developers dragged on market sentiment. 

Japan’s Nikkei Stock Index today dropped to a 5-week low and closed sharply lower on negative carry-over from last Friday’s slump in U.S equity markets.  Strength in the yen today weighed on Japanese exporters.  The yen moved higher against the dollar today on speculation the BOJ may be closer to moving to a hawkish pivot.  Kyodo news reported Saturday that Prime Minister Kishida might seek to revise a decade-old accord with the BOJ and consider adding flexibility to the central bank’s 2% inflation goal, potentially paving the way for an end to its dovish policy.  The BOJ is expected to maintain QE and keep policy on hold when it meets on Tuesday.

Pre-Market U.S. Stock Movers

Tesla (TSLA) jumped more than +5% in pre-market trading after a poll of Twitter users showed they favored CEO Musk stepping down as head of the company.

Moderna (MRNA) climbed more than +4% in pre-market trading after Jeffries upgraded the stock to buy from hold. 

Aerojet Rocketdyne Holdings (AJRD) rose more than +3% in pre-market trading after L3Harris Technologies agreed to buy the company for $4.7 billion. 

Netflix (NFLX) gained almost +1% in pre-market trading after Morgan Stanley raised its price target on the stock to $275 from $250.

Verizon Communications (VZ) rose nearly +1% in pre-market trading after Moffett Nathanson upgraded the stock to market perform from underperform.

PerkinElmer Inc (PKI) climbed down more than +3% in pre-market trading after KeyBanc Capital Markets upgraded the stock to overweight from sector weight.

Vertex Pharmaceuticals (VRTX) slid nearly -1% in pre-market trading after Jeffries downgraded the stock to hold from outperform. 

Meta Platforms (META) fell more than -1% in pre-market trading after the company was hit by a formal complaint from European Union watchdogs for allegedly squeezing out classified ad rivals by tying the Facebook Marketplace to its own social network.   

AT&T (T) slid nearly -1% in pre-market trading after MoffettNathanson downgraded the stock to underperform from market perform.

U.S. casinos with exposure to Macau are moving lower in pre-market trading after JPMorgan Chase said the renewal of the casinos’ gaming licenses in Macau could prompt trades to book profits following recent rallies.  Wynn Resorts (WYNN), Las Vega Sands (LVS), and MGM Resorts International (MGM) are down -1% or more.

Today’s U.S. Earnings Reports (12/19/2022)

Ermenegildo Zegna NV (ZGN), HEICO Corp (HEI), Inspirato Inc (ISPO), Mitek Systems Inc (MITK), 

Steelcase Inc (SCS).

More Stock Market News from Barchart

• Option Volatility And Earnings Report For December 19 - 23
• Pre-Market Brief: Stocks Mixed As Recession, Rate Hike Fears Persist
• Will There Be A Santa Claus Rally? That An Other Key Themes To Watch This Week
• AT&T's 6.0% Dividend Yield and Low P/E Are Attracting Value Buyers