Markets Today: Stocks Climb on Positive China Developments and Lower Bond Yields

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.54%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.88%. 

U.S. stock index futures are moderately higher following positive economic developments out of China and signs of easing European inflation.  China’s Shanghai Composite climbed to a 2-week high today as technology stocks rallied on signs that China’s regulatory clampdown on its internet sector is easing. Also, Chinese real estate stocks rallied today as Chinese authorities are planning measures to ease liquidity stress for some of China's large property developers.  European stocks rallied to a 3-week high today as price pressures in France and Germany eased.   

Stocks are also seeing support from lower bond yields as the 10-year T-note yield this morning dropped to a 2-week low of 3.670%.  T-note yields are lower on carry-over after the 10-year German bund yield today fell to a 2-week low of 2.271% when France's Dec CPI and German Nov import prices rose less than expected. 

Strength in technology stocks in pre-market trading is another bullish factor for U.S stock index futures.  Tesla is up more than +1% after funds backed by Cathie Wood’s Ark Investment Management purchased 176,000 shares of Tesla’s stock during Tuesday’s -12% plunge. Also, Amazon.com and Meta Platforms are up more than +1% after New Street Research initiated buy recommendations on the stocks. 

Overseas markets today are mixed.  The Euro Stoxx 50 index is up +1.70%.  The Shanghai Composite index closed up +0.22%, and Japan’s Nikkei Stock index closed down by -1.45%.

The Euro Stoxx 50 today rallied to a 3-week high on signs of slower inflation in the Eurozone.  Today’s economic news showed France’s Dec consumer prices rose less than expected, and Germany’s Nov import price index was weaker than expected. European stocks are also climbing on optimism that China’s reopening will improve global economic prospects.  In addition, lower government bond yields are supportive for stocks after the 10-year German bund yield fell today to a 2-week low of 2.275%. 

The Eurozone Dec S&P Global composite PMI was revised upward by +0.5 to 49.3 from the initially reported 48.8.

The German Nov import price index rose 14.5% y/y, weaker than expectations of +18.0% y/y and the slowest pace of increase in 17 months.

France's Dec CPI (EU harmonized) rose +6.7% y/y, weaker than expectations of +7.3% y/y.

China’s Shanghai Composite climbed to a 2-week high today on strength in technology and property stocks.  Technology stocks rallied today on signs that China is easing its regulatory clampdown on the internet sector after regulators approved Ant Group's plan to raise 10.5 billion yuan ($1.5 billion) for its consumer unit.  Real estate and property stocks also rallied today on signs that Chinese authorities are planning measures to ease liquidity stress for some of China's large property developers.  China’s Financial Stability and Development Committee told banking and securities regulators to help shore up the balance sheets of some "systemically important" developers.

Japan’s Nikkei Stock index tumbled to a 3-month low today and closed moderately lower after it reopened following its 2-day New Year holiday. Negative carry-over from Tuesday’s slide in U.S. equity markets undercut Japanese stocks today.  Also, a stronger yen undercut exporter stocks, with the yen just below Tuesday’s 7-month high.   Stocks fell today despite the action by the BOJ to boost QE.

The BOJ boosted QE today as they conducted unscheduled bond-buying for the fourth day, offering to buy unlimited 2-year and 5-year debt and 600 billion yen of 1- to 25-year bonds.

Pre-Market U.S. Stock Movers

Tesla (TSLA) is up more than +1% in pre-market trading after funds backed by Cathie Wood’s Ark Investment Management purchased 176,000 shares of Tesla’s stock during Tuesday’s -12% plunge.

Meta Platforms (META), Amzon.com (AMZN), Snap (SNAP), and Match Group (MTCH) are up +1% or more after New Street Research initiated buy recommendations on the stocks, citing “attractive valuation entry points.”

Salesforce Inc (CRM) jumped more than +3% in pre-market trading after it said it would cut 10% of its workforce during its restructuring. 

Etsy (ETSY) climbed more than +2% in pre-market trading after Needham upgraded the stock to buy from hold, citing an attractive valuation.

Merck & Co (MRK) is up nearly +2% in pre-market trading after Bank of America upgraded the stock to buy from neutral.

U.S.-listed Chinese stocks moved higher in pre-market trading amid signs that China is easing its regulatory clampdown on the internet sector after Chinese regulators approved a plan by Ant Group to raise 10.5 billion yuan ($1.5 billion) for its consumer unit.  Alibaba Group Holding (BABA) is up more than +6%.  Also, Pinduoduo (PDD), JD.com (JD), Baidu (BIDU), and NetEase (NTES) are up more than +4%. 

Veeva Systems (VEEV) climbed more than +2% in pre-market trading after Barclays upgraded the stock to overweight from equal weight.

Newmont Corp (NEM) rose more than +2% in pre-market trading after the price of gold rallied to a 6-1/2 month high.

Transunion (TRU) is up more than +2% in pre-market trading after Morgan Stanley upgraded the stock overweight from neutral.

Microsoft (MSFT) fell more than -2% in pre-market trading after UBS downgraded the stock to neutral from buy.

Target (TGT) slid more than -1% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Pfizer(PFE) is down more than -1% in pre-market trading after Bank of America downgraded the stock to neutral from buy.

Norfolk Southern (NSC) dropped more than -3% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Today’s U.S. Earnings Reports (1/4/2023)

Ermenegildo Zegna NV (ZGN), Resources Connection Inc (RGP), Simulations Plus Inc (SLP), UniFirst Corp/MA (UNF).

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