Markets Today: Stocks Slightly Higher as Tesla Rebounds and Bond Yields Fall

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.21%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.17%. 

Stock indexes this morning are trading mildly higher on hopes that China’s rollback of some of its Covid restrictions will boost global economic growth.  China will start issuing new passports and Hong Kong travel permits to mainland residents as it ends pandemic restrictions.  Travel visas to Hong Kong haven’t been issued since early 2020, and China stopped granting new passports in August 2021 for unnecessary and non-urgent reasons.

Tesla is up more than +3% in pre-market trading on dip-buying after a seven-day losing streak. Tesla sank -11% Tuesday to a new 2-year low on news it would slow vehicle productions at its Shanghai factory next month. 

Lower bond yields are supporting stocks today, with the 10-year T-note yield down -2.3 bp at 3.818%. Also, the 10-year German bund yield is down -3.3 bp to 2.491%.  Thin holiday volume may lead to volatile price movements as data from Trace shows trading in U.S Treasury securities fell to $2.27 trillion in the week ended Dec 23, the lowest since July 8.

Overseas markets today are mixed.  The Euro Stoxx 50 index today is up +0.05%.  The Shanghai Composite index closed down -0.26%, and Japan’s Nikkei Stock index closed down by -0.41%.

European stocks are slightly higher on optimism that global growth will improve as China rolls back Covid-related curbs and reopens its economy.  A decline in European government bond yields is also supportive for stocks as the 10-year German bund yield is down -3.3 bp at 2.491%.  Technology stocks underperformed following Tuesday’s slide of more than -1% in the Nasdaq 100.

Chinese stocks today closed slightly lower.  Weakness in telecommunication stocks led the overall market lower as China United Network Communications fell more than -4%.  Also, Tesla-related stocks, including Chinese battery suppliers, closed lower after Tesla sank to a new 2-year low Tuesday on news that it will temporarily halt vehicle production at its Shanghai factory. Losses in the overall market were limited as Chinese tourism and travel stocks rallied on optimism that travel demand will surge after Chinese health authorities said inbound travelers would no longer have to quarantine as the country continues its shift away from strict Covid Zero policies.

Japanese stocks closed moderately lower today.  Weakness in Japanese drugstore chains weighed on the overall market after Sugi Holdings tumbled more than -7% when it posted weaker-than-expected Q3 operating profit.  A supportive factor for stocks was the summary of opinions from the BOJ's Dec 19-20 policy meeting that signaled support for the BOJ to continue with monetary easing.  Also, the BOJ today boosted QE after it unexpectedly announced additional bond purchases.

Japan Nov industrial production fell -0.1% m/m, stronger than expectations of -0.2% m/m.

The BOJ boosted QE after it unexpectedly announced it would buy unlimited amounts of 2-year notes at a fixed yield of 0.03% and 5-year notes at 0.24%, among other purchases of 1-to-10-year securities for a total of 500 billion yen. 

The summary of opinions from the BOJ's Dec 19-20 policy meeting said the BOJ's view that the decision to widen the trading band for the 10-year bond yield wasn't aimed at changing the trajectory of policy.

Pre-Market U.S. Stock Movers

Tesla (TSLA) rose more than +3% in pre-opening trading on some short-covering and dip-buying after the seven-day losing streak. 

Rivian Automotive (RIVN) and Palo Alto Networks (PANW) climbed nearly +1% in pre-market trading after Cantor Fitzgerald named the stocks as their top technology picks for 2023. 

U.S.-listed Chinese stocks are moving slightly higher in pre-market trading on hopes that Chinese economic growth will improve after the government took steps to reopen its economy and end Covid Zero policies. Alibaba Group Holding (BABA), Pinduoduo (PDD), JD.com (JD), Baidu (BIDU), and NetEase (NTES) are up nearly +1%. 

Southwest Airlines (LUV) is down more than -1% in pre-market trading at a 2-month low after CEO Jordan said it plans to fly at a reduced schedule for the next few days and hopes to be back on track before next week.  

Today’s U.S. Earnings Reports (12/28/2022)

Cal-Maine Foods Inc (CALM), F&G Annuities & Life Inc (FG), IronNet Inc (IRNT), Provident Bancorp Inc (PVBC).

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