Markets Today: Stock Indexes Mixed After ECB Rate Decision

Morning Markets

The S&P 500 Index ($SPX) (SPY) Thursday morning is up +0.2%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.67%.

U.S. stock index futures this morning are mixed.  A decline in regional bank stocks is weighing on the market.  First Republic Bank is down more than -25% and dragging peers lower after saying it’s considering options, including a sale.  

The European Central Bank (ECB) announced that it was hiking rates 50 basis points and offered banks to supply liquidity if needed.

Adobe is up more than +4% after reporting better-than-expected Q1 adjusted EPS and raising its full-year adjusted EPS forecast.  

The turmoil in global financial markets eased slightly today, on reduced liquidity concerns for Credit Suisse AG after the bank arranged to borrow as much as 50 billion francs from a Swiss National Bank liquidity facility. 

Global bond yields are mixed this morning.  An easing of European banking concerns has reduced the safe-haven demand for government debt and pushed German bund yields higher.  The 10-year German bund yield is up +7.5 bp at 2.205%.  European markets are awaiting the results of today’s ECB meeting with expectations for a 25 bp rate hike from the ECB.  The 10-year T-note yield today is down -3.9 bp at 3.416% as weakness in regional bank stocks in pre-market trading boosted safe-haven demand for T-notes.  However, today’s U.S. economic reports that showed strength in the labor and housing markets limited declines in bond yields.

U.S. weekly initial unemployment claims fell -20,000 to 192,000, showing a stronger labor market than expectations of 205,000.  Weekly continuing claims unexpectedly fell -29,000 to 1.684 million, showing a stronger labor market than expectations of an increase to 1.723 million. 

U.S Feb housing starts rose +9.8% m/m to a 5-month high of 1.450 million, stronger than expectations of 1.310 million.  Feb building permits, a proxy for future construction, rose +13.8% m/m to a 5-month high of 1.524 million, stronger than expectations of 1.343 million. 

U.S. Mar Philadelphia Fed business outlook survey rose +1.1 to -23.2, weaker than expectations of -15.0.

U.S. Feb import price index ex-petroleum unexpectedly fell -0.4% m/m, the biggest decline in 7 months and weaker than expectations of an increase of +0.1% m/m.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +0.94%.  China’s Shanghai Composite stock index closed down -1.12%, and Japan’s Nikkei Stock Index closed down -0.80%. 

The Euro Stoxx 50 index today is moderately higher as bank stocks climb as the turmoil at Credit Suisse Group AG eases after regulators threw a lifeline to the bank.   Credit Suisse Group AG arranged to borrow from a Swiss National Bank (SNB) liquidity facility.  Credit Suisse said it is borrowing up to 50 billion francs ($54 billion) from the SNB to “strengthen its liquidity” and plans to repurchase some senior debt for cash of up to about 3 billion francs.  In addition, the turmoil in the global financial system has reduced expectations for an ECB rate hike today of 25 bp rather than a 50 bp rate hike the market initially expected. 

China’s Shanghai Composite today closed moderately lower.  Concerns over contagion from the turmoil at Credit Suisse Group AG triggered a selloff in Chinese financial stocks.  Also, mining stocks and steelmakers moved lower today after China said it would reduce steel production this year, the third consecutive year in which steel output was reduced.  China, the world’s biggest producer and consumer of steel, is mandating reduced steel output to rein in carbon emissions from the heavily polluting sector. In addition, Chinese companies tied to ByteDance fell after the U.S. government said the firm must sell its TikTok shares or risk the app being banned in the U.S.  On the positive side, China Feb new home prices rose +0.3% m/m, the largest increase in 1-1/2 years.

Japan’s Nikkei Stock Index today dropped to a 1-3/4 month low and closed moderately lower.  Japanese bank stocks retreated today on contagion concerns from the turmoil at Credit Suisse Group AG.  Also, airline and travel stocks fell back and followed overseas peers lower as turmoil in the financial sector raised concerns of a global economic slowdown.  Economic concerns also weighed on Japanese stocks after today’s economic news showed weaker-than-expected trade data for February.  In addition, Exporter stocks were also under pressure as the yen strengthened against the dollar.

Japan Jan industrial production was revised downward by -0.7 to -5.3% m/m from the initially reported -4.6% m/m, the biggest decline in 8 months.

Japan Jan core machine orders rose +9.5% m/m, stronger than expectations of +1.4% m/m and the largest increase in 2-1/4 years.

Japan Feb exports rose +6.5% y/y, weaker than expectations of +7.0% y/y.  Also, Feb imports rose +8.3% y/y, weaker than expectations of +12.4% y/y.

Pre-Market U.S. Stock Movers

First Republic Bank (FRC) plunged more than -25% in pre-market trading after a Bloomberg report said the bank is exploring strategic options that include a sale.  Other regional bank stocks are also falling on the news, with Western Alliance Bancorp (WAL) down more than -8% and Comerica (CMA) and Regions Financial (RF) down more than -2%, 

Fidelity National Information Services (FIS) is down more than -1% in pre-market trading after Truist Securities cut its price target on the stock to $56 from $65.

Baidu (BIDU) tumbled more than -5% in pre-market trading after the company unveiled a ChatGBT-like chatbox in a pre-recorded video that underwhelmed investors. 

Adobe (ADBE) climbed more than +4% in pre-market trading after reporting Q1 adjusted EPS of $3.80, above the consensus of $3.67, and raised its full-year adjusted EPS forecast to $15.30-$15.60 from a previous forecast of $15.15-$15.45, above the consensus of $15.31. 

UiPath (PATH) surged more than +16% in pre-market trading after reporting Q4 total revenue of $308.5 million, better than the consensus of $278.1 million and forecasting 2024 revenue of $1.25 billion-$1.26 billion, stronger than the consensus of $1.21 billion.

Block (SQ) rose more than +2% in pre-market trading after Mizuho Securities upgraded the stock to buy from neutral.

Foot Locker (FL) is up more than +1% in pre-market trading after Telsey Advisory Group upgraded the stock to outperform from market perform.

Progressive Corp (PGR) is up nearly +1% in pre-market trading after Wells Fargo Securities double-upgraded the stock to overweight from underweight, saying the company has “turned the corner on growth.”

Skyworks Solutions (SWKS) rose more than +1% in pre-market trading after Susquehanna Financial upgraded the stock to positive from neutral.

Today’s U.S. Earnings Reports (3/16/2023)

Dollar General Corp (DG), FedEx Corp (FDX), Jabil Inc (JBL), Williams-Sonoma Inc (WSM).

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