Markets Today: Stock Indexes Climb on Hopes U.S. CPI Will Continue to Moderate

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.20%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.47%.

U.S. stock index futures this morning are moderately higher on hopes that U.S. inflation pressures will continue to ease.  Tuesday’s monthly inflation report is expected to show that U.S. Jan CPI eased to 6.2% y/y from 6.5% y/y in Dec.  Also, Jan core CPI is seen easing to 5.5% y/y from 5.7% y/y in Dec. 

U.S. stock index futures are also climbing on positive carry-over from a +0.77% gain in the Euro Stoxx 50 today after the EU Commission raised its 2023 Eurozone GDP forecast and lowered its 2023 Eurozone inflation forecast.

Stocks are also receiving a boost from positive earnings results and analyst upgrades.  Monday.com is up more than +10% in pre-market trading after reporting stronger-than-expected Q4 adjusted EPS, and Check Point Software is up more than +1% after reporting better-than-expected Q4 revenue.  Also, Zillow Group,  Newmont, and Proto Labs are all up more than +1% after being upgraded. 

On the negative side, Advanced Auto Parts, Caterpillar, Capri Holdings, and Zim Integrated Shipping Services Ltd are all down -1% or more in pre-market trading after being downgraded.  Also, higher bond yields are bearish for stocks, with the 10-year T-note yield climbing to a 5-week high of 3.753%.

In a note to clients, Morgan Stanley warned that U.S. stocks are ripe for a selloff after prematurely pricing in a pause in Fed rate hikes, saying, "while the recent move higher in front-end rates is supportive of the notion that the Fed may remain restrictive for longer than appreciated, the equity market is refusing to accept this reality."

Overseas markets are mixed.  The Euro Stoxx 50 index is up +0.77%.  China’s Shanghai Composite stock index closed up +0.72%, and Japan’s Nikkei Stock index closed down -0.88%. 

The Euro Stoxx 50 index today is moderately higher and garnered support after the European Union Commission raised its 2023 Eurozone GDP forecast and cut its 2023 inflation forecast.  Also, positive comments from ECB Vice President Guindos gave the overall market a boost when he said the ECB and the European Commission are "a bit more positive" on the Eurozone economic outlook.  On the negative side, European government bond yields are moving higher, with the 10-year German bund yield climbing to a 1-1/4 month high of 2.401%.

ECB Governing Council member Centeno said inflation is coming down faster than expected, but the ECB "really needs to see inflation converging to 2% in the medium term" to moderate the pace of interest rate increases.

The European Union Commission raised its Eurozone 2023 GDP forecast to 0.9% from a prior estimate of 0.3% and cut its 2023 inflation forecast to 5.6% from a previous forecast of 6.1%.

China’s Shanghai Composite today climbed to a 1-week high and posted moderate gains.  Chinese gaming stocks moved higher today after regulators approved 87 new games, prompting Citigroup to say it was a “positive sign” that bodes well for domestic gaming revenue in 2023. Strength in Chinese defense stocks was another positive factor for the market after a Chinese news outlet, The Paper, said China is ready to take down an unidentified object flying over waters near the port city of Qingdao, home to a major Chinese naval base. 

Japan’s Nikkei Stock Index today fell to a 2-1/2 week low and closed moderately lower.  Japanese stocks fell back on speculation that Kazuo Ueda, who is expected to be nominated as Japan’s next BOJ governor, will adopt faster policy normalization from the BOJ’s current ultra-easy policy. Japanese Prime Minister Kishida nominated former BOJ member Ueda to be BOJ Governor after Deputy BOJ Governor Amamiya turned down an offer for the post.  Ueda is considered more hawkish than Amamiya.  On the positive side, Japanese bank stocks rose in hopes that a faster normalization of monetary policy would be positive for bank earnings. 

Pre-Market U.S. Stock Movers

Microsoft (MSFT) is up more than +1% in pre-market trading after Stifel reiterated its buy rating on the stock and said fiscal 2024 is “positioned for more consistent results as Azure growth likely stabilizes.” 

Zillow Group (Z) jumped more than +4% in pre-market trading after Evercore ISI upgraded the stock to outperform from in line.

Monday.com (MNDY) surged more than +10% in pre-market trading after reporting Q4 adjusted EPS of 44 cents, above the consensus of 40 cents, and forecast full-year revenue of $688 million-$693 million, stronger than the consensus of $660.2 million.

Newmont (NEM) rose more than +1% in pre-market trading after Exane BNP Paribas upgraded the stock to outperform from hold. 

Yum China (YUMC) climbed more than +11% in pre-market trading after Industrial Securities initiated coverage of the stock with a buy rating and a price target of $72.61. 

Check Point Software (CHKP)  rose more than +1% in pre-market trading after reporting Q4 revenue of $638.5 million, better than the consensus of $636 million.

Proto Labs (PRLB) climbed more than +2% in pre-market trading after Benchmark upgraded the stock to buy from hold. 

Advanced Auto Parts (AAP) slid more than -1% in pre-market trading after Roth downgraded the stock to neutral from buy, saying it can no longer dismiss the company’s “serial under-performance” against peers and that its market share is “unwinding quickly.” 

Caterpillar (CAT) fell down more than -1% in pre-market trading after Baird downgraded the stock to neutral from outperform. 

Capri Holdings (CPRI) slid more than -1% in pre-market trading after Cowen downgraded the stock to market perform from outperform.

Zim Integrated Shipping Services Ltd (ZIM) dropped more than -2% in pre-market trading after Barclays downgraded the stock to underweight from equal weight. 

Today’s U.S. Earnings Reports (2/13/2023)

Arch Capital Group Ltd (ACGL), Arista Networks Inc (ANET), Cadence Design Systems Inc (CDNS), Eversource Energy (ES), FirstEnergy Corp (FE), SolarEdge Technologies Inc (SEDG).

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