Markets Today: Stocks Climb on Strong Earnings and Lower Bond Yields

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.31%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.52%. 

U.S. stock index futures this morning are mildly higher on mostly positive quarterly corporate earnings results. Stocks are also seeing support from lower T-note yields that resulted from soft retail sales and producer price news. 

Positive corporate news this morning is bullish for stocks.  Moderna is up more than +5% in pre-market trading after reporting a Phase 3 study of its RSV vaccine met primary efficacy endpoints.  Also, United Airlines and Interactive Brokers Group are up more than +2% after reporting better-than-expected Q4 EPS.

On the bearish side for stocks, IBM and Morgan Stanley are down more than -1% in pre-market trading after being downgraded. Also, PNC Financial Services Group dropped more than -4% after reporting weaker-than-expected Q4 EPS.

Lower global bond yields are supportive of stocks. The 10-year T-note yield today is down -12.5 bp at 3.423%, and the 10-year German bund yield tumbled to a 1-month low of 2.004%.  Also, the 10-year Japan JGB bond yield fell to a 3-week low of 0.361%. 

U.S. Dec retail sales fell -1.1% m/m, weaker than expectations of -0.9% m/m and the biggest decline in a year.   Dec retail sales ex-autos fell -1.1% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 22 months.

The U.S. Dec final-demand PPI rose +6.2% y/y, weaker than expectations of +6.8% y/y and the smallest gain in 1-3/4 years.  Also, Dec PPI ex-food and energy rose +5.5% y/y, weaker than expectations of +5.6% y/y and the smallest gain in 19 months.

Overseas markets today are mostly higher.  The Euro Stoxx 50 index is up +0.34%.  The Shanghai Composite Stock index closed unchanged, and Japan’s Nikkei Stock index closed up by +2.50%.

The Euro Stoxx 50 today is moderately higher and is just below Monday’s 11-1/4 month high.  Also, hawkish ECB comments pushed European bond yields higher and weighed on stocks today. Strong corporate earnings results are underpinning stocks today after ASM International and Just Eat Takeaway.com rallied after reporting better-than-expected quarterly profits. A decline in bond yields is supportive for stocks after the 10-year German bund yield fell to a 1-month low today of 2.036%.

Today’s Eurozone economic news was mixed for stocks. Eurozone Dec new car registrations rose +12.8% y/y, the fifth consecutive monthly increase. Conversely, Eurozone Nov construction output fell -0.8% m/m.

ECB Governing Council member Villeroy de Galhau said ECB President Lagarde's guidance for the ECB to continue to raise interest rates by 50 bp is still valid.

The Shanghai Composite Stock index today closed little changed.  Chinese stocks found support today after Goldman Sachs said the outlook for non-U.S. assets has become more supportive, and inflows into those stock markets may accelerate amid factors including a weakening dollar and China’s reopening.  Chinese internet stocks also gained today after Citigroup said that the approval of 88 domestic game approvals so far this year by Chinese regulators exceeded expectations and indicates “a supportive regulatory policy for the gaming industry. 

Japan’s Nikkei Stock Index rallied sharply today to a 4-week high after the BOJ kept interest rates unchanged in negative territory and announced no change to its yield curve policy.  A decline in the yen today boosted exporter stocks.  Stocks found support on lower bond yields after the 10-year JGB Japanese government bond yield tumbled to a 3-week low today of 0.361%. Bond yields tumbled today after the BOJ said it would ramp up bond purchases if needed to keep the 10-year bond yield below its 0.50% upper range of its 10-year yield target. 

Today’s Japanese economic news was bearish for stocks after Nov core machine orders fell -8.3% m/m, weaker than expectations of -1.0% m/m and the biggest decline in 9 months.

The BOJ voted 9-0 to keep its policy balance rate at -0.1% and to maintain its trading band of 50 bp around 0% for the 10-year JGB yield. The BOJ said it would continue large-scale bond buying and increase purchases on a flexible basis if needed.

The BOJ cut its 2023 Japan GDP forecast to 1.7% from 1.9% and raised its 2023 core CPI ex-energy forecast to 1.8% versus 1.6%.

Pre-Market U.S. Stock Movers

United Airlines Holdings (UAL) climbed more than +2% in pre-market trading after reporting Q4 adjusted EPS of $2.46, better than the consensus of $2.12, and forecasting Q1 adjusted EPS of 50 cents to $1.00, stronger than the consensus of 2 cents.  Other airlines also rose on the news, with Delta Air Lines (DAL) and American Airlines Group (AAL) up more than +1%. 

Moderna (MRNA) jumped more than +5% in pre-market trading after reporting a Phase 3 study of its RSV vaccine met primary efficacy endpoints. 

Tesla (TSLA) rose more than +2% in pre-market trading after Bank of America said the stock now “appears fairly valued.”

Interactive Brokers Group (IBKR) rallied more than +3% in pre-market trading after reporting Q4 adjusted EPS of $1.30, stronger than the consensus of $1.17.

Zscaler (ZS) climbed more than +2% in pre-market trading after Scotiabank initiated coverage on the stock with an outperform recommendation.

Seagate Technology Holdings (STX) rose more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight. 

International Business Machines (IBM) fell more than -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.

Morgan Stanley (MS) fell nearly -1% in pre-market trading after Citigroup downgraded the stock to neutral from buy.

PNC Financial Services Group (PNC) tumbled more than -4% in pre-market trading after reporting Q4 adjusted EPS of $3.49, well below the consensus of $3.96.

Skechers (SKX) slid more than -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight on valuation. 

Exact Sciences (EXAS) slid more than -1% in pre-market trading after Raymond James downgraded the stock to market perform from outperform.

Today’s U.S. Earnings Reports (1/18/2023)

Charles Schwab Corp/The (SCHW), Discover Financial Services (DFS), JB Hunt Transport Services Inc (JBHT), Kinder Morgan Inc (KMI), PNC Financial Services Group I (PNC), Prologis Inc (PLD).

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