Markets Today: Stocks Move Lower After CPI Falls 0.1%

Morning Markets

The S&P 500 ($SPX) (SPY) is down -0.7%, the Dow Jones Industrials Index ($DOWI) (DIA) is lower by -0.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) is sinking -1.1%.

The U.S. Dec CPI report came in as expected, falling 0.1%.  Stock indexes spiked lower briefly after the core services gauge excluding shelter, mentioned by Fed Chair Powell as a focus of policymakers, rose +0.25% m/m in Dec, higher than the +0.12% m/m increase in Nov.  Gains in stock indexes were also limited after weekly U.S. jobless claims unexpectedly fell to a 3-1/2 month low, which is hawkish for Fed policy. 

Lower global bond yields this morning are bullish for stocks.  The 10-year UK gilt yield dropped to a 3-1/2 week low today of 3.288%. Also, the 10-year German bund yield fell to a 3-1/2 week low of 2.121%.  In addition, the 10-year T-note yield fell to a 3-1/2 week low of 3.475%. 

American Airlines Group is up more than +5% after reporting preliminary Q4 adjusted EPS above the consensus.  Netflix is down -1% even after Jeffries upgraded the stock to a buy.  In addition, energy stocks are climbing with WTI crude oil up more than +1% at a 1-week high.

U.S. weekly initial unemployment claims unexpectedly fell -1,000 to a 3-1/2 month low of 205,000, showing a stronger labor market than expectations of an increase to 215,000.

U.S. Dec CPI fell -0.1% m/m and rose +6.5% y/y, right on expectations, with the +6.5% y/y gain the slowest annual pace of increase in 14 months. 

U.S. Dec CPI ex-food and energy rose +0.3% m/m and +5.7% y/y, right on expectations, with the +5.7% y/y gain the slowest annual pace of increase in a year.

Overseas markets today are higher.  The Euro Stoxx 50 index is up +0.56%.  The Shanghai Composite Stock index closed up by +0.05%, and Japan’s Nikkei Stock index closed up +0.01%.

The Euro Stoxx 50 today climbed to a 10-3/4 month high and is moderately higher.  Strength in European technology stocks is leading the overall market higher after Taiwan Semiconductor Manufacturing, the world’s largest chip maker, reported quarterly profit that was above expectations.  Also, interest rate-sensitive stocks are climbing today on a decline in government bond yields after the 10-year German bund yield dropped to a 3-1/2 week low today at 2.121%. 

The Shanghai Composite Stock index closed slightly higher.  Benign inflation news data was supportive for stocks after China Dec CPI rose +1.8% y/y, right on expectations, and China Dec PPI fell -0.7% y/y, weaker than expectations.  The yuan climbed to a 5-month high on optimism that economic growth will accelerate with the reopening of China’s economy.  Chinese automakers rose amid BYD’s expansion plans in India, and officials pledged to keep up auto consumption in 2023 and to support the development of new energy vehicle makers. 

Japan’s Nikkei Stock Index rallied to a 2-week high today and closed slightly higher.  Japanese financial stocks gained today after Yomiuri reported that the BOJ would review the side effects of its ultra-easy monetary policy at their policy meeting next week.  However, the Nikkei gave up nearly all of its advance as exporters slumped after the yen rallied to a 1-week high against the dollar.  Also, Japanese government bond yields climbed and undercut stocks after the 10-year JGB bond yield jumped to a 7-1/2 year high of 0.514%, above the BOJ’s upper target limit of 0.50%. 

Today’s Japanese economic news was bullish for stocks.  The Japan Dec eco watchers outlook survey unexpectedly rose +1.9 to 47.0, stronger than expectations of a decline to 45.0.

Pre-Market U.S. Stock Movers

Netflix (NFLX) is up more than +1% in pre-market trading after Jeffries upgraded the stock to buy from hold, citing upside surprises to its 2024 operating margin.

American Airlines Group (AAL) jumped more than +3% in pre-market trading after reporting preliminary Q4 adjusted EPS of $1.12-$1.17, well above the consensus of 60 cents 

Cleveland-Cliffs (CLF) rose more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

Energy stocks and energy service providers are moving higher in pre-market trading, with the price of WTI crude up more than +1% at a 1-week high.  Baker Hughes (BKR), Devon Energy (DVN), Exxon Mobil (XOM), Haliburton (HAL), Marathon Oil (MRO), Occidental Petroleum (OXY), ConocoPhillips (COP), and Schlumberger (SLB) are up more than +1%.  

Cryptocurrency-exposed stocks are climbing in pre-market trading, with Bitcoin up more than +3% at a 4-week high.  Marathon Digital (MARA) is up more than +8%.  Also, Riot Platforms (RIOT) is up more than +5%.  In addition, Coinbase Global (COIN) and MicroStrategy (MSTR) are up more than +2%.

Spotify (SPOT) fell more than -2% in pre-market trading after Jeffries downgraded the stock to hold from buy.

Roku (ROKU) tumbled more than -4%, and Unity Software (U) fell more than -2% in pre-market trading after Jeffries downgraded the stocks to underperform from hold.

KB Home (KB) dropped more than -3% in pre-market trading after reporting Q4 EPS of $2.47, below the consensus of $2.86, and reporting Q4 net orders of 692, well below the consensus of 2,013.

HP Enterprise (HPE) fell more than -1% in pre-market trading after Evercore ISI downgraded the stock to inline from outperform.

Today’s U.S. Earnings Reports (1/12/2023)

Concrete Pumping Holdings Inc (BBCP), F&G Annuities & Life Inc (FG).

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