Markets Today: Stock Indexes Under Pressure Ahead of Central Bank Meetings

Morning Markets

March S&P 500 futures (ESH23) this morning are down -0.77%, and March Nasdaq 100 E-Mini futures (NQH23) are down -1.04%. 

U.S. stock index futures this morning are under pressure ahead of interest rate decisions later this week from the Fed, ECB, and BOE.  The Fed is expected to lift the fed funds target range by 25 bp on Wednesday, dialing back the size of the increase for a second straight meeting after recent data suggest the pace of inflation had slowed.  However, post-FOMC meeting comments on Wednesday from Fed Chair Powell may push back on expectations that the Fed is close to ending its rake hike campaign.

Stock indexes are also falling on negative carryover from a -0.91% decline in the Euro Stoxx 50 on recession risks in Germany after today's report on German Q4 GDP unexpectedly showed the German economy contracted -0.2% q/q, weaker than expectations of no change q/q.

Signs of stubborn inflation pressures in Europe pushed European government bonds lower and weighed on stocks and T-note prices.  Spain Jan CPI unexpectedly quickened to a +5.8% y/y pace, stronger than expectations of +4.8% y/y, which pushed the 10-year German bund yield to a 3-week high of 2.329%. The weakness in bund prices helped push the 10-year T-note yield up to a 1-1/2 week high today at 3.570%.  The ECB and BOE are each projected to raise interest rates by 50 bp when they meet on Thursday. 

Overseas markets are mixed.  The Euro Stoxx 50 index is down -0.91%.  China’s Shanghai Composite stock index closed up +0.14%, and Japan’s Nikkei Stock index closed up +0.19%. 

The Euro Stoxx 50 index today is moderately lower as European government bond yields rose on concern that stubborn price pressures in the Eurozone will force the ECB will maintain its aggressive rate hike campaign.  The 10-year German bund yield rose to a 3-week high today of 2.329% after Spain’s Jan CPI rose more than expected.  Also, economic concerns are weighing on European stocks after todays’ economic news showed the German economy unexpectedly contracted in Q4, raising the risk of recession in Germany, the Eurozone’s largest economy. On the positive side, Eurozone Jan economic confidence rose more than expected, and Royal Philips NV jumped more than +6% after saying it was cutting 6,000 positions or 8% of its workforce in a cost-cutting move.

The Eurozone Jan economic confidence indicator rose +2.8 to 99.9, stronger than expectations of 97.0.

German Q4 GDP fell -0.2% q/q and rose +0.5% y/y, weaker than expectations of unch q/q and +0.8% y/y.

Spain's Jan CPI (EU harmonized) rose +5.8% y/y, stronger than expectations of +4.8% y/y.

China’s Shanghai Composite rallied to a 6-1/2 month high today after reopening from the week-long Lunar New Year holiday.  Chinese stocks found support today  on signs of strength in holiday spending as bookings on hotels, guest houses, and tourist spots exceeded the comparable period in 2019.  However, stocks fell back from their best levels after a report from the China Real Estate Information Corp showed residential property sales declined -14% from a year earlier during the holiday week, underscoring the ongoing weakness in the property sector.   Chinese technology stocks were also under pressure today after the U.S. secured an agreement with the Netherlands and Japan to restrict exports of some advanced chipmaking machinery to China. 

Japan’s Nikkei Stock Index today posted modest gains.  Strength in Japanese courier service firms led the overall market higher after SG Holdings announced parcel-delivery price hikes of about 7% to 10% from April for its Sagawa Express service.   Also, Japanese exporters gained today as the yen weakened after BOJ Governor Kuroda said the BOJ would maintain its 2% inflation target and continue monetary easing. Last Friday’s economic report that showed an increase in Jan Tokyo consumer prices, a precursor to the national CPI data, bolstered speculation that the BOJ would soon announce a change to its ultra-easy monetary policy. 

Pre-Market U.S. Stock Movers

Mega-cap technology stocks are moving lower in pre-market trading as bond yields climb.  Amazo.com (AMZN),  Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Netflix (NFLX), Nvidia (NVDA), and Meta Platforms (META) are all down more than -1%. 

U.S.-listed Chinese stocks retreated in pre-market trading as markets reopened in China after the week-long Lunar New Year holidays.  Alibaba Group Holding (BABA) is down more than -5%.  Also, Pinduoduo (PDD), Baidu (BIDU), and JD.com (JD) are down more than -4%.  In addition, Yum China Holdings (YUMC) and NetEase (NTES) are down more than -3%. 

Edwards Lifesciences (EW) slid more than -2% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight.

General Motors (GM) is down more than -2% in pre-market trading after Berenberg downgraded the stock to hold from buy.

Colgate-Palmolive (CL) rose more than +1% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight, saying the company’s robust long-term organic sales growth is not fully reflected in discounted valuation against peers.

Lockheed Martin (LMT) gained more than +1% in pre-market trading after DZ Bank AG upgraded the stock to buy from hold with a price target of $523. 

Okta (OKTA) rose more than +1% in pre-market trading after Stifel upgraded the stock to buy from hold.

Sofi Technologies (SOFI) jumped more than +6% in pre-market trading after reporting Q4 adjusted net revenue of $443.4 million, stronger than the consensus of $423.8 million.

Stellar Bancorp (STEL) rose more than +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral.

Today’s U.S. Earnings Reports (1/30/2023)

Alexandria Real Estate Equities (ARE), Franklin Resources Inc (BEN), GE HealthCare Technologies Inc (GEHC), NXP Semiconductors NV (NXPI), Principal Financial Group Inc (PFG), Whirlpool Corp (WHR).

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