Markets Today: Stock Index Futures Pressured by Weak Tech Stocks

Morning Markets

June S&P 500 futures (ESM23) this morning are down -0.78%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.94%.

U.S. stock index futures this morning are moderately lower.  Weakness in technology stocks is a drag on the overall market, with Tesla down more than -7% in pre-market trading after reporting weaker-than-expected Q1 earnings results.  Also, chip stocks are retreating after Taiwan Semiconductor Manufacturing Co., the main supplier of chips to Apple, forecasted weaker-than-expected revenue for the current quarter. 

Stock indexes maintained moderate losses despite falling bond yields after weekly U.S. jobless claims rose more than expected. Also, the Apr Philadelphia Fed business outlook survey unexpectedly contracted by the most in nearly three years.

U.S. weekly initial unemployment claims rose +5,000 to 245,000, showing a weaker labor market than expectations of 240,000.  Weekly continuing claims rose +61,000 to a 16-month high of 1.865 million, showing a weaker labor market than expectations of 1.825 million.

The U.S. Apr Philadelphia Fed business outlook survey unexpectedly fell -8.1 to a nearly 3-year low of -31.3, weaker than expectations of an increase to -19.3.

Global bond yields are lower.  The 10-year T-note yield is down -4.8 bp at 3.543%.  Also, the 10-year German bund yield is down -4.0 bp at 2.475%. The 10-year UK gilt yield is down -5.3 bp at 3.803%.

On the bearish side for stocks, Tesla is down more than -7% after reporting weaker-than-expected Q1 adjusted EPS and Q1 gross margin that was below consensus.  Also, AT&T is down more than -4% after reporting Q1 free cash flow that was well below consensus.  In addition, Comerica is down more than -3% in pre-market trading after reporting Q1 deposits that were below expectations.

On the positive side, International Business Machines is up more than +2% in pre-market trading after reporting stronger-than-expected Q1 operating EPS.  Also, Las Vegas Sands is up more than +4% after reporting Q1 net revenue above consensus. In addition,  DR Horton is up more than +4% after reporting better-than-expected Q2 revenue and forecasting full-year revenue that was above consensus.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.21%.  China’s Shanghai Composite closed down -0.09%, and Japan’s Nikkei Stock Index closed up +0.18%. 

The Euro Stoxx 50 index today is moderately lower. Weakness in automakers is leading the overall market lower, with Renault SA down more than -7% despite reporting better-than-expected Q1 sales as pricing concerns offset the positive Q1 sales beat.  Also, hawkish comments from ECB Governing Council member Knot weighed on stocks when he said the ECB might have to continue raising interest rates at least through July.  On the positive side, German producer prices in March rose at a slower-than-expected pace, easing inflation concerns. 

ECB Governing Council member Knot said, "It's too early to talk about a rate pause," and the ECB may have to raise interest rates again in June and July following next month's hike.

German Mar PPI eased to +7.5% y/y from +15.8% y/y in Feb, weaker than expectations of +9.8% y/y and the smallest pace of increase in 1-3/4 years.

China’s Shanghai Composite Stock Index today closed slightly lower.  Chinese suppliers to Tesla and electric battery makers declined today after Tesla reported weaker-than-expected Q1 profit estimates. Losses in the overall market were muted as Chinese computer-related companies rallied after the Shanghai municipal government published guidelines to push forward the industry’s development and ensure sufficient supply.  Also, China’s Ministry of Information Technology said it would work with other government departments to study and roll out policies to stabilize car sales and boost domestic demand.

The Peoples Bank of China (PBOC) today kept loan prime rates unchanged and pledged to make sure interest rates are appropriate and that credit remains stable.  The PBOC has not taken steps toward major stimulus measures this year, refraining from cutting interest rates, but instead reducing the reserve requirement ratio for banks in March to inject long-term liquidity into the banking system. 

Japan’s Nikkei Stock Index today closed moderately higher. Gains in consumer goods makers and retailers led the overall market higher.  Japanese stocks tied to tourism were mixed after the Japan National Tourism Organization reported that the number of foreign visitors surged last month to 1.8 million versus 66,121 last year as pandemic travel restrictions were lifted.  Weakness in technology stocks limited gains in the overall market after Taiwan Semiconductor Manufacturing Co forecasted worse-than-anticipated revenue for the current quarter, signaling a persistent slump in global chip demand. 

Japan trade news was mixed, with Japan Mar exports climbing +4.3% y/y, stronger than expectations of +2.4% y/y.  However, Mar imports rose +7.3% y/y, weaker than expectations of +11.6% y/y.

The Japan Feb tertiary industry index rose +0.7% m/m, stronger than expectations of +0.4% m/m.

Pre-Market U.S. Stock Movers

Tesla (TSLA) sank more than -7% in pre-market trading after reporting Q1 adjusted EPS of 85 cents, below the consensus of 86 cents, with Q1 gross margin of 19.3%, weaker than the consensus of 21.2%.

Chip stocks are falling today on demand concerns after Taiwan Semiconductor Manufacturing Co, the main supplier of chips to Apple, reported Q2 sales of $15.2 billion-$16 billion, below the consensus of $16.1 billion. As a result, Applied Materials (AMAT), Nvidia (NVDA), Advanced Micro Devices (AMD), Microchip Technology (MCHP), Micron Technology (MU), KLA Corp (KLAC), and Marvell Technology (MRVL) are down more than -1%. 

AT&T (T) tumbled more than -4% in pre-market trading after reporting Q1 free cash flow of $1 billion, well below the consensus of $3.02 billion. 

KeyCorp (KEY) slid more than -2% in pre-market trading after reporting Q1 revenue of $1.71 billion, weaker than the consensus of $1.79 billion.

Comerica (CMA) dropped more than -3% in pre-market trading after reporting Q1 deposits of $64.7 billion, below the consensus of $67.6 billion.

Alcoa (AA) dropped more than -3% in pre-market trading after reporting Q1 adjusted Ebitda of $240 million, weaker than the consensus of $248.3 million.

F5 Inc (FFIV) tumbled more than -7% in pre-market trading after forecasting Q3 adjusted EPS of $2.78-$2.90, weaker than the consensus of $3.06.

Bath & Body Works (BBWI) fell more than -3% in pre-market trading after Piper Sandler downgraded the stock to neutral from outperform. 

Charles Schwab (SCHW) slid more than -1% in pre-market trading after Reburn downgraded the stock to sell from neutral.

International Business Machines (IBM) rose more than +2% in pre-market trading after reporting Q1 operating EPS of $1.36, stronger than the consensus of $1.25.

Las Vegas Sands (LVS) jumped more than +4% in pre-market trading after reporting Q1 net revenue of $2.12 billion, above the consensus of $1.83 billion.

DR Horton (DHI) rose more than +4% in pre-market trading after reporting Q2 revenue of $7.97 billion, well above the consensus of $6.59 billion and forecast full-year revenue of $31.5 billion-$33.0 billion, stronger than the consensus of $28.19 billion. 

Lam Research (LRCX) gained nearly +1% in pre-market trading after reporting Q3 adjusted EPS of $6.99, higher than the consensus of $6.50. 

Chegg Inc (CHGG) rose more than +1% in pre-market trading after Craig-Hallum Capital Group upgraded the stock to buy from hold.

Today’s U.S. Earnings Reports (4/20/2023)

Alaska Air Group Inc (ALK), American Express Co (AXP), AT&T Inc (T), Comerica Inc (CMA), CSX Corp (CSX), DR Horton Inc (DHI), Fifth Third Bancorp (FITB), Genuine Parts Co (GPC), Huntington Bancshares Inc/OH (HBAN), KeyCorp (KEY), Marsh & McLennan Cos Inc (MMC), Nucor Corp (NUE), Philip Morris International In (PM), Pool Corp (POOL), PPG Industries Inc (PPG), Seagate Technology Holdings PL (STX), Snap-on Inc (SNA), Truist Financial Corp (TFC), Union Pacific Corp (UNP), W R Berkley Corp (WRB).

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