Markets Today: Stock Index Futures Climb as China’s Economy Strengthens

Morning Markets

June S&P 500 futures (ESM23) this morning are up +0.49% at a 2-month high, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.79% at a 2-week high.

U.S. stock index futures this morning are moderately higher on improved global economic prospects after today’s news that China’s economy grew more than expected.  China's Q1 GDP rose +4.5% y/y, stronger than expectations of +4.0% y/y.  U.S. housing news today was mixed with Mar housing starts falling less than expected, but Mar building permits dropping more than expected.

On the positive side for stocks, Bank of America and Bank of New York Mellon are up more than +2% in pre-market trading after they reported better-than-expected Q1 earnings results.  Also, Johnson & Johnson is up more than +1% after reporting stronger-than-expected Q1 adjusted EPS and raising its full-year adjusted EPS forecast.  In addition, Nvidia, Chubb, and Brown & Brown are up +1% or more after being upgraded.

On the negative side, Goldman Sachs is down more than -3% in pre-market trading after reporting Q1 FICC sales and trading revenue below consensus.  Also, JB Hunt Transport Services is down more than -2% after reporting Q1 operating revenue below consensus.  In addition, Valero Energy and Marathon Petroleum are down more than -1%  after being downgraded.

U.S. Mar housing starts fell -0.8% to 1.42 million, a smaller decline than expectations of 1.40 million.  Mar housing permits, a proxy for future construction, fell -8.8% m/m to 1.413 million, weaker than expectations of 1.450 million.

Global bond yields are mixed.  The 10-year T-note yield is down -1.5 bp at 3.585%, and the 10-year German bund yield is down -1.2 bp at 2.461%.  However, the 10-year UK gilt yield rose to a 5-week high of 3.756% and is up +4.9 bp at 3.740%.

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.80%.  China’s Shanghai Composite closed up +0.23%, and Japan’s Nikkei Stock Index closed up +0.51%. 

The Euro Stoxx 50 index today is moderately higher and posted a new 17-month high.  Luxury retailers are moving higher today on improved sales prospects after news showed China’s recovery has quickened.  Travel stocks are also climbing after EasyJet Plc raised its earnings target for a second time this year amid strong summer bookings and robust demand seen during the recent Easter holiday.  However, on the negative side was today’s Eurozone news that the German Apr ZEW index unexpectedly fell.  Also, Ericsson AB tumbled more than -6% after giving a tepid outlook for Q2, warning that its telecom customers would remain cautious on capital spending in the near term.

The German Apr ZEW survey expectations of economic growth index unexpectedly fell -8.9 to a 4-month low of 4.1, weaker than expectations of an increase to 15.6.

China’s Shanghai Composite Stock Index today climbed to a 9-1/4 month high and closed moderately higher. Mostly stronger-than-expected Chinese economic news today pushed stocks higher as China’s economic recovery from the ending of Covid Zero restrictions gathers pace.  However, the Shanghai Composite fell back from its best levels today on signs of insider selling after numerous Chinese technology companies unveiled plans by key shareholders to reduce holdings.  According to a Bloomberg calculation, about 40 companies listed on the Chinese mainland announced today that shareholders or senior management plan to offload their shares.  The insider selling adds to concerns that the valuations of some tech stocks have gotten ahead of the market as investors await Q1 earnings. 

China Q1 GDP rose +4.5% y/y, stronger than expectations of +4.0% y/y.

China Mar industrial production rose +3.9% y/y, weaker than expectations of +4.4% y/y.

China Mar retail sales rose +10.6% y/y, stronger than expectations of +7.5% y/y and the largest increase in 1-3/4 years.

The China Mar surveyed jobless rate fell -0.3 to a 7-month low of 5.3%, showing a stronger labor market than expectations of 5.5%.

Japan’s Nikkei Stock Index today rose to a 5-week high and closed moderately higher.  Japanese stocks pushed higher today, following Monday’s rally in U.S. stocks, as strength in financial stocks led the overall market higher after better-than-expected Q1 earnings results from big U.S. banks eased economic concerns and improved market sentiment.  Also, the decline in the yen to a 1-month low today against the dollar boosted exporter stocks.  In addition, better-than-expected Chinese economic news today supported global growth prospects and provided a lift for world equity markets. 

Pre-Market U.S. Stock Movers

Bank of America (BAC) rose more than +2% in pre-market trading after reporting Q1 trading revenue ex-DVA of $5.05 billion, stronger than the consensus of $4.46 billion. 

Bank of New York Mellon (BK) gained nearly +2% in pre-market trading after reporting Q1 total deposits of $281.29 billion, above the consensus of $277 billion.

Nvidia (NVDA) climbed more than +2% in pre-market trading after HSBC upgraded the stock to buy from reduce with a price target of $355.   

Johnson & Johnson (JNJ) rose more than +1% in pre-market trading after reporting Q1 adjusted EPS of $2.68, better than the consensus of $2.52, and raised its full-year adjusted EPS forecast to $10.60-$10.70 from a prior view of $10.45-$10.65, stronger than the consensus of $10.52.

CVS Health Corp (CVS) gained over +1% in pre-market trading after naming Brian Kane as president of the health care benefits segment Aetna, effective Sep 1. 

Chubb (CB) rose more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral with a price target of $229.

Brown & Brown (BRO) gained more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral with a price target of $69. 

Bellus Health (BLU) surged more than +90% in pre-market trading after GSK agreed to acquire the company for about $2 billion.

Innoviva (INVA) jumped more than +8% in pre-market trading after a U.S. FDA advisory committee voted unanimously in support of an approval for its sulbactam-durlobactam drug to treat adults with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia.

Goldman Sachs (GS) fell more than -3% in pre-market trading after reporting Q1 FICC sales and trading revenue of $3.93 billion, weaker than the consensus of $4.19 billion.

JB Hunt Transport Services (JBHT) dropped more than -2% in pre-market trading after reporting Q1 operating revenue of $3.23 billion, below the consensus of $3.40 billion. 

Valero Energy (VLO) and Marathon Petroleum (MPC) fell more than -1% in pre-market trading after Wells Fargo Securities downgraded the stocks to equal weight from overweight. 

Today’s U.S. Earnings Reports (4/18/2023)

Bank of America Corp (BAC), Bank of New York Mellon Corp/T (BK), Goldman Sachs Group Inc/The (GS), Intuitive Surgical Inc (ISRG), Johnson & Johnson (JNJ), Lockheed Martin Corp (LMT), Netflix Inc (NFLX), Omnicom Group Inc (OMC), Prologis Inc (PLD), United Airlines Holdings Inc (UAL).

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