Stocks Slide Before the Open as Global Outlook Weakens, ECB Minutes in Focus

June S&P 500 futures (ESM23) are down -0.76%, and June Nasdaq 100 E-Mini futures (NQM23) are down -1.12% this morning after three major U.S. benchmark indices finished the regular session mixed as market participants digested a mixed bag of corporate earnings from major names.

In Wednesday’s trading session, the blue-chip Dow underperformed major benchmarks, weighed down by weakness in Walt Disney (DIS) and UnitedHealth Group Inc (UNH) shares following weaker-than-expected results from their rivals. Meanwhile, energy stocks were one of the biggest drags on the market as the price of WTI crude dropped over -1% on growing concerns that major central banks will continue their tightening cycle. Chip stocks also slumped on demand concerns after ASML Holdings (ASML) reported a 46% drop in first-quarter net bookings.

The Federal Reserve released its Beige Book survey on Wednesday, noting the U.S. economic activity stalled in recent weeks amid slowing hiring and inflation as well as narrowing access to credit. “Overall economic activity was little changed in recent weeks, with expectations for future growth were mostly unchanged,” according to the Federal Reserve’s Beige Book. 

New York Fed President John Williams said Wednesday that inflation is still high and the U.S. central bank policymakers “will use monetary policy tools to restore price stability.” He also noted that recent stress in the banking sector would likely weigh on economic activity.

U.S. rate futures have priced in an 80.2% probability of a 25 basis point rate increase and a 19.8% chance of no hike at the May meeting.

On the earnings front, shares of Tesla Inc (TSLA) plunged over -7% in pre-market trading after the company’s Q1 adjusted earnings per share and gross margin fell short of estimates. At the same time, International Business Machines (IBM) rose over +2% in pre-market trading after the company reported better-than-expected Q1 EPS and gave a positive full-year revenue outlook.

First-quarter earnings season kicks into full gear, with quarterly results expected from global companies like Philip Morris (PM), AT&T (T), American Express (AXP), Union Pacific (UNP), and Blackstone Group (BX). Analysts expect corporate earnings from S&P 500 companies to fall 4.8% year-over-year for the quarter. 

Today, all eyes are focused on the U.S. Philadelphia Fed Manufacturing index in a couple of hours. Economists, on average, forecast that the April Philadelphia Fed Manufacturing index will stand at -19.2, compared to the previous value of -23.2.

Also, investors are likely to focus on U.S. Existing Home Sales data, which was at 4.58M in February. Economists foresee the new figure to be 4.50M.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 240K, compared to last week’s value of 239K.

In addition, investors will likely focus on a batch of speeches from Fed officials Waller, Harker, Mester, Bostic, Bowman, and Logan for fresh clues on the outlook for rates.

In the bond markets, United States 10-Year rates are at 3.564%, down -1.05%.

The Euro Stoxx 50 futures are down -0.53% this morning as investors continued to digest more corporate earnings while awaiting the release of the minutes from the ECB’s latest policy meeting. Losses in automobile stocks are leading the overall market lower, with shares of Renault (RNO.FP) plunging over -6% as concerns over pricing pressure across the auto industry outweighed the company’s better-than-expected Q1 sales. Meanwhile, European Central Bank Governing Council member Klaas Knot said in an interview published Thursday that the ECB might need to hike interest rates in June and July following next month’s increase. “It’s too early to talk about a pause,” the Dutch central bank chief warned. In other corporate news, Sartorius Sted Bio (DIM.FP) plunged over -8% after the Franco-German lab equipment maker reported weaker-than-expected Q1 results.

Germany’s PPI and France’s Business Survey data were released today.

The German March PPI has been reported at -2.6% m/m and +7.5% y/y, weaker than expectations of -0.5% m/m and +9.8% y/y.

The French April Business Survey stood at 101, weaker than expectations of 103.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.09%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.18%.

China’s Shanghai Composite today closed slightly lower as data released earlier this week pointed to uneven economic recovery, resulting in muted market sentiment. Investor sentiment was also hampered by growing fears of rising global interest rates after strong Eurozone and U.K. inflation prints on Wednesday bolstered expectations that major central banks would stay on their hawkish path. Meanwhile, shares of Hong Kong and China-listed electric car companies notched steep losses following Tesla’s first-quarter results that missed Wall Street estimates. At the same time, strength in artificial intelligence, semiconductor, and media stocks amid the frenzy around OpenAI’s ChatGPT chatbot helped limit losses. The People’s Bank of China kept its key lending rates at historic lows for the eighth consecutive month on Thursday, bolstering liquidity support for the economy.

Japan’s Nikkei 225 Stock Index recovered from early losses and closed slightly higher today, helped by gains in chip and retailer stocks. Also, a weakening yen boosted export-oriented stocks. Meanwhile, retailer stocks rallied on Thursday amid an increase in foreign visitors, with Takashimaya Co Ltd climbing over +3% and Fast Retailing Co Ltd rising more than +1%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 0.37% and hit a new 1-month low of 16.04.

The Japanese March Exports stood at +4.3% y/y, stronger than expectations of +2.6% y/y.

The Japanese March Imports came in at +7.3% y/y, weaker than expectations of +11.4% y/y.

The Japanese March Trade Balance was at -754.5B, stronger than expectations of -1,294.8B.

The Japanese Tertiary Industry Activity Index has been reported at +0.7% m/m, stronger than expectations of +0.4% m/m. 

Pre-Market U.S. Stock Movers

Las Vegas Sands Corp (LVS) climbed more than +4% in pre-market trading after the China-focused casino operator posted stronger-than-expected Q1 results. 

Zions Bancorporation (ZION) slid over -4% in pre-market trading after the regional lender reported Q1 earnings that fell short of expectations.

F5 Networks Inc (FFIV) plunged more than -7% in pre-market trading after the company reported upbeat Q2 results but posted weaker-than-expected Q3 guidance and cut its FY23 revenue growth view to “low-single-digit” from 9%-11%. 

Alcoa Corp (AA) fell about -3% in pre-market trading after the company reported downbeat Q1 results.

Wheaton Precious Metals Corp (WPM) dropped about -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.

Health Catalyst Inc (HCAT) soared over +4% in pre-market trading after KeyBanc upgraded the stock to overweight from sector weight.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - April 20th

Philip Morris (PM), AT&T (T), American Express (AXP), Union Pacific (UNP), Blackstone Group (BX), Marsh McLennan (MMC), CSX (CSX), Truist Financial Corp (TFC), Nucor (NUE), DR Horton (DHI), PPG Industries (PPG), Genuine Parts (GPC), Fifth Third (FITB), Huntington Bancshares (HBAN), WR Berkley (WRB), Pool (POOL), Seagate (STX), Snap-On (SNA), Watsco (WSO), KeyCorp (KEY), Watsco B Inc (WSOb), Knight Transportation (KNX), SEI (SEIC), East West Bancorp (EWBC), Iridium (IRDM), Webster Financial (WBS), AutoNation (AN), Valmont Industries (VMI), Comerica (CMA), Alaska Air (ALK), Synovus (SNV), Home BancShares (HOMB), Glacier (GBCI), ManpowerGroup (MAN), Badger Meter (BMI), Virtu Financial Inc (VIRT), Herc Holdings (HRI), Independent Bank (INDB), Associated Banc-Corp (ASB), Texas Capital (TCBI), Cathay (CATY), First Financial Bancorp (FFBC), Hilltop (HTH), OFG Bancorp (OFG), S&T Bancorp (STBA), Sandy Spring (SASR), OceanFirst (OCFC), Berkshire Hills Bancorp (BHLB), Forestar (FOR), Banc of California (BANC), Heritage Financial Co (HFWA), Amerant Bancorp A (AMTB), Insteel Industries (IIIN), Five Point (FPH), Capstar Financial (CSTR), Alpine Income (PINE), Rite Aid (RAD), SB Financial (SBFG).

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