Markets Today: Stocks Climb on China Reopening Optimism

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.57% at a 3-week high, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.72% at a 2-week high. 

U.S. stock index futures this morning are moderately higher on optimism about China’s reopening and expectations of slower Fed interest rate hikes.  Stock indexes have carry-over support from today’s rally in China’s Shanghai Composite to a 3-1/2 week high on signs the government will offer more support to help China’s economy recover from the end of its Covid-Zero policy.  Stocks also have support on expectations the Fed will slow its pace of tightening monetary policy after last Friday’s economic news showed the Dec ISM services index contracted at its steepest pace in 2-1/2 years.

Energy stocks are climbing in pre-market trading, with the price of WTI crude oil up more than +3%.  Also, upgrades to Oracle, Ally Financial, Mastercard, and Visa are lifting those stocks by more than +1% in pre-market trading and are giving the overall market a boost.

Morgan Stanley warns that the S&P 500 could fall by -22% from current levels in the event of a mild recession, as corporate profit estimates are still too high and the equity risk premium is at its lowest since 2008.

Overseas markets today are higher.  The Euro Stoxx 50 index is up +0.70%.  The Shanghai Composite Stock index closed up by +0.58%, and Hong Kong’s Hang Seng Stock Index closed up +1.89%.  Japan was closed today for the Coming of Age Day holiday.

The Euro Stoxx 50 today rallied to a 10-1/2 month high and is moderately higher.  Optimism about China’s reopening and an easing of European energy crisis concerns boosted stocks today.  German Economy Minister Habeck said a meltdown of Europe’s energy industry looks to have been averted as mild weather, a wider array of gas suppliers, and efforts to reduce demand have helped refill European gas reserves. Mining stocks are moving higher today, with the price of copper climbing to a 6-1/2 month high and gold prices jumping to an 8-month high.

Today’s Eurozone economic news was mixed for stocks.  On the positive side, Eurozone Jan Sentix investor confidence rose +3.5 to a 7-month high of -17.5, stronger than expectations of -18.0.  Conversely, German Nov industrial production rose +0.2% m/m, slightly weaker than expectations of +0.3% m/m.

ECB Chief Economist Lane said that price pressures in the Eurozone will remain elevated even if surging energy costs start to ease and that the original energy shock resulting from Russia's war in Ukraine and pandemic reopening effects will feed into wages "for the next two or three years."

China’s Shanghai Composite rallied to a 3-1/2 week high today, and the yuan posted a 4-3/4 month high on optimism about China’s reopening. Chinese stocks have moved higher since the beginning of the year as easing regulatory risks and more support measures to revive the property sector have underpinned the market.  Hong Kong’s Hang Seng Stock Index posted a 6-month high today as technology stocks rallied after Guo Shuqing, party secretary of the People’s Bank of China (PBOC), said that a regulatory clampdown on the tech sector is coming to an end.

PBOC party secretary Guo Shuqing said China's economic growth will return to its "normal" path as the government provides more financial support to households and private companies to help them recover after it ended its Covid-Zero policy. 

Pre-Market U.S. Stock Movers

Oracle (ORCL) is up more than +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral. 

Energy stocks and energy service providers are climbing in pre-market trading, with the price of WTI crude up more than +3%.  Devon Energy (DVN), Diamondback Energy (FANG), Haliburton (HAL), Occidental Petroleum (OXY), Exxon Mobil (XOM), Schlumberger (SLB), and Valero Energy (VLO) are up more than +2%.   

Crypto currency-exposed stocks are moving higher in pre-market trading, with Bitcoin up more than +1% at a 3-week high. Coinbase Global (COIN) and Riot Blockchain (RIOT) are up more than +5%.  Also, Marathon Digital (MARA) and MicroStrategy (MSTR) are up more than +3%. 

Uber (UBER) climbed more than +2% in pre-market trading after Piper Sandler upgraded the stock to overweight from equal weight.

Ally Financial (ALLY) gained more than +1% in pre-market trading after Piper Sandler upgraded the stock to neutral from underweight.

Mastercard (MA) and Visa (V) both climbed more than +1% in pre-market trading after KeyBanc Capital Markets upgraded the stocks to overweight from sector.

Prudential Financial (PRU) dropped more than -2% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral.

PayPal Holdings (PYPL) fell more than -1% in pre-market trading after KeyBanc Capital Markets downgraded the stock to sector weight from overweight.

Mosaic (MOS) lost more than -1% in pre-market trading after Credit Suisse downgraded the stock to underperform from outperform on fertilizer price pessimism.

DoorDash (DASH) tumbled more than -4% in pre-market trading after Piper Sandler downgraded the stock to underweight from neutral.

Macy’s (M) dropped more than -4% in pre-market trading after forecasting full-year net sales at the low-end to mid-point of a prior forecast of $8.161 billion-$8.401 billion, weaker than the consensus of $8.310 billion.

Today’s U.S. Earnings Reports (1/9/2023)

Accolade Inc (ACCD), Acuity Brands Inc (AYI), Applied Digital Corp (APLD), AZZ Inc (AZZ), Commercial Metals Co (CMC), E2open Parent Holdings Inc (ETWO), Jefferies Financial Group Inc (JEF), PriceSmart Inc (PSMT), Pure Cycle Corp (PCYO), Vinco Ventures Inc (BBIG), WD-40 Co (WDFC).

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