Markets Today: Stocks Push Higher on U.S. CPI Optimism

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.27%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.20%. 

U.S. stock index futures this morning are moderately higher.  Optimism that Thursday’s U.S. Dec CPI report will show a further softening in price pressures is knocking bond yields lower and giving stocks a boost.  An easing of inflation would bolster the case for less-aggressive Fed rate hikes.

Lower global bond yields this morning are bullish for stocks.  The 10-year UK gilt yield dropped to a 3-week low today of 3.435%. Also, the 10-year German bund yield is down -6.1 bp at 2.247%, and the 10-year T-note yield is down -4.3 bp at 3.576%. 

Mining stocks are climbing in pre-market trading on strength in industrial metals.  Iron ore prices climbed to a 5-month high in Singapore today, and COMEX copper prices rose to a 7-month high on hopes the reopening of China’s economy will boost industrial metals demand.

Positive corporate news is supporting stocks, with Warner Bros Discovery and Autodesk up more than +1% in pre-market trading after the stocks received buy recommendations.

On the negative side for stocks this morning is weakness in U.S. airline stocks after an outage in a Federal Aviation Administration (FAA) pilot notification system forced the FAA to temporarily halt flights nationwide.

Overseas markets today are mixed.  The Euro Stoxx 50 index is up +0.96%.  The Shanghai Composite Stock index closed down by -0.24%, and Japan’s Nikkei Stock index closed up +1.03%.

The Euro Stoxx 50 today rallied to a 10-1/2 month high and is moderately higher.  European stocks are climbing on carry-over support from Tuesday’s rally in U.S. stocks on optimism that Thursday’s U.S. Dec CPI report will show inflation pressures continuing to soften.  Lower European government bond yields are also bullish for stocks, with the 10-year UK gilt yield falling to a 3-week low today of 3.435% and the 10-year German bund yield down -5.3 bp at 2.255%. 

Today’s Eurozone economic news was better than expected and bullish for stocks after Italy Nov retail sales unexpectedly rose +0.8% m/m, stronger than expectations of -0.3% m/m.

ECB Governing Council member Holzmann said while there's hope that headline consumer-price gains have peaked, that's not the case for underlying inflation.  Only a slowdown in core inflation can alter the ECB's resolve to raise interest rates.

The Shanghai Composite Stock index fell back from a 4-week high today and closed slightly lower.  Weakness in stocks related to travel and tourism led decliners in the Shanghai Composite today after China on Tuesday suspended issuing some visas for South Korea and Japan in retaliation against the countries against Covid-related curbs on Chinese travelers.  South Korea and Japan were the two largest sources of visitors to China before the pandemic.  A rally in Chinese technology stocks today initially led the overall market higher on hopes the crackdown by regulators on the sector was ending.  Also, Chinese miners and steelmakers rose as iron ore prices jumped to a 5-month high on optimism over industrial metals demand in China.

Japan’s Nikkei Stock Index climbed to a 2-week high today and closed moderately higher on carry-over support from Tuesday's rally in U.S. stocks.  Stocks also found support today after the BOJ boosted QE when it announced unscheduled debt purchases.  The BOJ offered to buy 500 billion yen of 1-to-10-year notes and 250 billion of debt due in more than 10 years.  It also offered to buy unlimited quantities of 1-to-5-year securities at fixed yields. The BOJ has conducted a combination of additional unlimited and fixed-amount purchase operations every business day since Dec 28, except for Jan 5 and Jan 10.

Today’s Japanese economic news was bearish for stocks.  The Japan Nov leading index CI fell -1.0 to a 23-month low of 97.6, right on expectations.

Pre-Market U.S. Stock Movers

Mining stocks are climbing in pre-market trading, with copper prices climbing to 7-month highs and gold prices rallying to an 8-month high.  Freeport-McMoRan (FCX) and Southern Copper (SCCO) are up more than +1%. 

Warner Bros Discovery (WBD) is up nearly 2% in pre-market trading after Guggenheim Securities upgraded the stock to buy from neutral.

Autodesk (ADSK) rose nearly +1% in pre-market trading after Berenberg initiated coverage on the stock with a buy rating and a price target of $230.

Blackstone (BX) gained more than +1% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight.

Illumina (ILMN) rose more than +1% in pre-market trading after HSBC initiated coverage on the stock with a buy rating and a price target of $300.

CarMax (KMX) tumbled more than -4% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral.

Airline stocks are weaker in pre-market trading after an outage in a Federal Aviation Administration (FAA) pilot notification system forced the FAA to temporarily halt flights nationwide.  American Airlines Group (AAL), Delta Air Lines (DAL), Southwest Airlines (LUV), and United Airlines Holdings (UAL) are down more than -1%.

Levi Strauss (LEVI) slid more than -2% in pre-market trading after Citigroup downgraded the stock to neutral from buy.

STMicroelectronics (STM) fell more than -1% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral.

Keysight Technologies (KEYS) dropped nearly -2% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.

Today’s U.S. Earnings Reports (1/11/2023)

KB Home (KBH).

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