Markets Today: Stocks Retreat as Global Bond Yields Climb

Morning Markets

March S&P 500 futures (ESH23) this morning are down -0.61% and March Nasdaq 100 E-Mini futures (NQH23) are down -1.00%. 

Rising bond yields today are undercutting technology stocks and weighing on the overall market.  A jump in the 10-year German bund yield today to an 11-year high today of 2.535% undercut T-note prices and pushed yields higher. The 10-year T-note yield today is up +6.0 bp to 3.875%.  A -1% decline in European stocks today is also weighing on U.S. stock index futures.

Later this morning, the markets will look to the release of the U.S. Dec MNI Chicago PMI report, which is expected to climb +2.8 points to 40.0 from 37.2 in Nov.  

On the positive side, Tesla is up more than +1% in pre-market trading after Cathie Wood’s Ark Investment Management bought Tesla for its fund.  Also, Merck & Co is up nearly +1% after China approved the company’s Covid-19 antiviral treatment for emergency use.

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.  Spain today joined the U.S. and Italy in announcing 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. 

Overseas markets today are mixed.  The Euro Stoxx 50 index is down -0.99%.  The Shanghai Composite index closed up +0.51%, and Japan’s Nikkei Stock index was unchanged.

European stocks today are moderately lower on weakness in technology stocks.  ASML Holding NV is down nearly -2% to lead chipmakers lower.  Also, higher European government bond yields are undercutting stocks, with the 10-year German bund yield climbing to an 11-year high of 2.535%.  A positive factor for stocks was an easing of consumer price pressures in Spain after today’s news showed Spain Dec CPI rose at its slowest pace in 13 months.  Volumes in stocks were lighter than average, with markets in the UK and Germany set to close early today ahead of the New Year holiday. 

Spain's Dec CPI (EU harmonized) rose +5.6% y/y, weaker than expectations of +5.8% y/y and the slowest pace of increase in 13 months. Spain is the Eurozone's fourth-largest economy.

Chinese stocks today posted moderate gains after mobility figures showed economic activity rebounded in several major cities where Covid infections likely peaked.  The number of passengers using subways in Beijing, Chongqing, Chengdu, and Wuhan rose above 40% to 100% in the week through Wednesday, a sign that residents are returning to work, shopping, and restaurants again.  Property and real estate stocks rose today after the PBOC vowed to meet the property industry's reasonable financing needs.

The People's Bank of China (PBOC), in a statement following its quarterly policy meeting, said monetary policy "will focus on stabilizing growth, employment, and prices, as well as supporting the expansion of domestic demand."  It also said it would meet the property industry's reasonable financing needs and push forward mergers and acquisitions in the sector.

Japan’s Nikkei Stock Index closed today unchanged.  Japanese stocks opened lower and remained under pressure on concern that the surge of Covid infections in China may lead to reduced economic activity and increased supply chain turmoil.  However, stocks recovered their losses after Italy reported that it did not find new Covid mutations in travelers from China.  Stocks also found support after the BOJ booted QE and announced a third day of unscheduled bond purchases.

The Bank of Japan (BOJ) today announced a third day of unscheduled bond purchases, saying it will buy unlimited amounts of two-year bonds at a yield of +0.04% and five-year debt at 0.24%, along with a total of 700 billion yen of one-to-10-year bonds and 300 billion of 10-to-25 year debt.  The BOJ's bond purchases climbed to about 17 trillion yen ($128 billion) in December, a monthly record, according to Bloomberg data.

Pre-Market U.S. Stock Movers

Futu Holdings (FUTU) plunged more than -20% in pre-market trading after the China Securities Regulatory Commission asked the company and UP Fintech Holding to correct “illegal acts” in the cross-border securities business. 

Yum China Holdings (YUMC) fell more than -1% in pre-market trading after Bloomberg Intelligence said that beaten-down consumer sentiment would make it tough for Chinese restaurant operators to pass on higher raw materials and labor costs. 

Tesla (TSLA) is up more than +1% in pre-opening trading after a trading update showed Cathie Wood’s Ark Investment Management bought 22,514 shares of the stock.   

Merck & Co (MRK) rose nearly +1% in pre-market trading after China approved the company’s Covid-19 antiviral molnupiravir (Legevrio) for emergency use. 

Today’s U.S. Earnings Reports (12/30/2022)

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• Selling Covered Calls On The Dogs Of The Dow Stocks
• Pre-Market Brief: Stocks Mixed As Brutal Year Nears End
• Stocks Rally Broadly as Bond Yields Fall
• TSMC Ramps Up Chip Production Despite Fears of a Global Slowdown