Markets Today: Stocks Climb as Bond Yields Fall on U.S. Labor Market Weakness

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.58%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.84%. 

Strength in technology stocks is lifting stock indexes this morning.  Tesla is up more than +4% in pre-market trading after Morgan Stanley reiterated its overweight rating on the stock and said the recent slump in the stock had created a buying opportunity.  Also, Netflix is up more than +1% after CFRA upgraded the stock to buy from sell.

Stock indexes extended their gains on this morning’s U.S. economic news that showed weekly continuing unemployment claims jumped to a 10-1/2 month high.  That was dovish for Fed policy and knocked T-note yields lower, which were bullish factors for stocks.  The 10-year T-note yield is down -3.2 bp at 3.850%.

A negative factor for stocks is concern that there could be a global resurgence of Covid after China ended its Covid Zero policies and reopened its borders.  The U.S. and Italy announced Wednesday that all air passengers from China would be required to test for Covid after almost half of the passengers on two flights from China to Milan were found to be infected with the virus. 

Weakness in energy stocks in pre-market trading is a bearish factor for the overall market, with the price of WTI crude oil down more than -1% at a 1-week low. 

U.S. weekly initial unemployment claims rose +9,000 to 225,000, right on expectations.  Weekly continuing claims rose +41,000 to a 10-1/2 month high of 1.71 million, showing a weaker labor market than expectations of 1.69 million.

Overseas markets today are mixed.  The Euro Stoxx 50 index today is up +0.25%.  The Shanghai Composite index closed down -0.44%, and Japan’s Nikkei Stock index closed down by -0.94%.

European stocks today recovered from early losses and are moderately higher.  Strength in European technology stocks is lifting the overall market, while gains are muted due to losses in travel and leisure stocks.  Higher bond yields are also negative for stocks, with the 10-year German bund yield up +1.1 bp at 2.513%. 

Eurozone Nov M3 money supply rose +4.8% y/y, below expectations of +5.0% y/y and the slowest pace of increase in 3-1/2 years.

Chinese stocks today fell moderately on concern a surge in new Covid infections will derail the reopening of the economy since the exploding pandemic is keeping people at home.  The Covid situation is likely to delay the economic recovery into 2023 by limiting consumer spending and disrupting economic activities.  Weakness in travel stocks led the overall market lower on concern that more countries could impose restrictions on visitors from China.

Japan’s Nikkei Stock Index dropped to a 2-3/4 month low today and closed moderately lower on concern about a global spread of Covid as China reopens its borders.  There are also fears that rising Covid infections in China could cause supply chain problems in the short term, which could reduce manufacturing activity and lead to inflationary pressures.  However, a supportive factor for stocks was an increase in bond purchases today by the BOJ. The BOJ has now purchased about 16 trillion yen of government bonds in December, close to a record reached in June.

The BOJ boosted QE today after it offered to buy unlimited amounts of two- and five-year notes at a fixed yield, along with 600 billion yen ($4.5 billion) of 1 to 10-year bonds. 

Pre-Market U.S. Stock Movers

Tesla (TSLA) is up more than +4% in pre-opening trading after Morgan Stanley reiterated its overweight rating on the stock and said the recent slump in the stock had created a buying opportunity. 

Netflix (NFLX) rose more than +1% in pre-market trading after CFRA upgraded the stock to buy from sell with a price target of $310.

TG Therapeutics (TGTX) surged more than +10% in pre-market trading after the FDA approved the company’s biologic license application for its multiple sclerosis therapy Briumvi (ublituximab). 

Energy stocks and energy service providers are under pressure in pre-market trading, with the price of WTI crude down more than -1% at a 1-week low.  Chevron (CVX), Devon Energy (DVN), Haliburton (HAL), Exxon Mobil (XOM), Occidental Petroleum (OXY), Schlumberger (SLB), and Valero Energy (VLO) are down more than -1%.

Today’s U.S. Earnings Reports (12/29/2022)

CENN Cenntro Electric Group Ltd (CENN), ENOB Enochian Biosciences Inc (ENOB).

• Protecting Against A January Volatility Spike
• Pre-Market Brief: Stocks Mixed As COVID Surge in China Weighs On Sentiment
• Stocks Tumble on Fears of Covid Contagion from China
• Dollar Moderately Higher as Bond Yields Climb and Stocks Fall