Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are up +0.04%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.29%.
Stock indexes this morning are slightly higher ahead of a raft of mega-cap stock earnings results, with Microsoft and Alphabet due to report their first earnings since the AI craze began after today’s close. A jump in the 10-year T-note yield to a 1-1/2 week high today limits the upside in stock index futures. Market activity may be muted through tomorrow afternoon on uncertainty over what the Fed might say regarding interest rates and the economy following the Tue/Wed FOMC meeting.
Global stock bourses have carryover support from today’s rally in China’s Shanghai Composite Stock Index by more than +2% as market sentiment improved after Chinese leaders at this week’s Politburo meeting laid out a pre-growth tone that was more dovish than markets expected.
The markets are expecting the Fed and the ECB this week to both raise their respective interest rates by 25 bp and will look for guidance from the central banks to see if more rate hikes are likely.
The markets are discounting the odds at 97% for a +25 bp rate hike at the Tue/Wed FOMC meeting. The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.
Global bond yields are higher. The 10-year T-note yield climbed to a 1-1/2 week high of 3.904% and is up +2.2 bp to 3.894%. The 10-year German bund yield is up +2.1 bp at 2.446%. The 10-year UK Gilt yield is up +0.6 at 4.262%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.21%. China’s Shanghai Composite Index today closed up +2.13%. Japan’s Nikkei Stock Index closed down -0.06%.
The Euro Stoxx 50 today is slightly higher. Some positive corporate quarterly earnings results are boosting stocks today. Unilever Plc is up more than +4% after reporting stronger-than-expected Q2 sales. Also, Remy Cointreau rallied more than +6% as booming spirit sales in China boosted its Q1 revenue. On the negative side, Bayer AG fell more than -2% after cutting its outlook for the year amid persistently low prices for agriculture products. Also, a dismal business outlook reading from German was negative for stocks and the euro after the German Jul IFO fell more than expected to an 8-month low.
The German Jul IFO business climate fell -1.3 to an 8-month low of 87.3, weaker than expectations of 88.0.
China’s Shanghai Composite today rallied to a 1-week high and closed sharply higher. Chinese stocks rose sharply today as market sentiment improved after this week’s Politburo meeting laid out a pre-growth tone that was more dovish than markets expected. The ruling Communist Party’s 24-member Politburo, China’s top decision-making body led by President Xi Jinping, promised “counter-cyclical” policies, which imply an easing bias. Property stocks surged after the Politburo signaled an “adjustment” of restrictions in the property sector and to “adjust and optimize property policies timely.” Also, the likelihood that the PBOC would cut interest rates further supported gains in stocks as the Politburo signaled “aggregate” monetary policy tools would be used to revive growth. In addition, the Politburo vowed to speed up the issuance and use of local government special bonds, a strategy typically used to boost infrastructure growth.
Supporting today’s rally in Chinese stocks is an influx of foreign buying. Overseas investors purchased a net 19 billion yuan ($2.7 billion) of onshore stocks via the trading links with Hong Kong, the biggest daily inflow since December 2021.
Japan’s Nikkei Stock Index today closed slightly lower. Japanese stocks were in a holding pattern today, awaiting interest rate decisions Wednesday from the Federal Reserve and on Friday from the Bank of Japan. Weakness in Japanese cosmetics firms weighed on the overall market after Piper Sandler downgraded Estee Lauder on Monday to neutral from overweight on downside risks such as weakness in China. On the positive side, Japanese companies that supply Apple rose after Bloomberg reported that Apple is asking suppliers to produce about 85 million new iPhones this year, about the same as last year. Also, defense-related stocks may move higher after Kyodo reported after the close that the Japanese government is making preparations to ease a ban on exporting defense equipment jointly developed with other countries to third nations.
Pre-Market U.S. Stock Movers
Walmart (WMT) rose more than +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral.
General Electric (GE) climbed more than +3% in pre-market trading after reporting Q2 adjusted revenue of $15.90 billion, better than the consensus of $14.73 billion, and raised its full-year adjusted free cash flow to $4.1 billion-$4.6 billion from a previous forecast of $3.6 billion-$4.2 billion.
Verizon Communications (VZ) is up more than +2% in pre-market trading after reporting Q2 adjusted EPS of $1.21, stronger than the consensus of $1.16.
NXP Semiconductors (NXPI) gained more than +1% in pre-market trading after reporting Q2 revenue of $3.30 billion, above the consensus of $3.21 billion, and forecast Q3 revenue of $3.30 billion-$3.50 billion, the midpoint well above the consensus of $3.31 billion..
U.S.-listed Chinese stocks rallied in pre-market trading after China’s pledge to support the economy bolstered speculation that fresh stimulus measures were on the way. As a result, Alibaba Group Holding (BABA), Baidu (BIDU), PDD Holdings (PDD), NetEase (NTES), and JD.com (JD) are all up more than +1%.
Datadog (DDOG) climbed more than +3% in pre-market trading after Wolfe Research upgraded the stock to outperform from peer perform.
F5 Inc (FFIV) jumped more than +8% in pre-market trading after reporting Q3 net revenue of $702.6 million, above the consensus of $699.3 million, and said it was “confident in our ability to achieve our target of double-digit non-GAAP earnings growth for fiscal year 2023.”
Alaska Air Group (ALK) tumbled more than -4% in pre-market trading after warning that declining airfares can hurt Q3 results and that there was a softening in demand for domestic travel. Other airline stocks fell as well, with United Airlines Holdings (UAL), American Airlines Group (AAL), Delta Air Lines (DAL), and Southwest Airlines (LUV) down more than -1%.
Rackspace Technology (RXT) dropped more than -4% in pre-market trading after Citigroup downgraded the stock to sell from neutral, saying the valuation does not reflect the estimated downside potential.
Danaher (DHR) fell more than -5% in pre-market trading after reporting Q2 adjusted free cash flow of $1.59 billion, below the consensus of $1.73 billion.
Raytheon Technologies (RTX) slid more than -3% in pre-market trading after cutting its full-year free cash flow estimate to $4.3 billion from a previous estimate of $4.8 billion, below the consensus of $4.82 billion.
Goldman Sachs (GS) slid nearly -1% in pre-market trading after Citigroup downgraded the stock to neutral from buy.
Today’s U.S. Earnings Reports (7/25/2023)
3M Co (MMM), Alaska Air Group Inc (ALK), Alphabet Inc (GOOGL), Archer-Daniels-Midland Co (ADM), Avery Dennison Corp (AVY), Biogen Inc (BIIB), Chubb Ltd (CB), Corning Inc (GLW), CoStar Group Inc (CSGP), Danaher Corp (DHR), Dover Corp (DOV), Dow Inc (DOW), EQT Corp (EQT), GE HealthCare Technologies Inc (GEHC), General Electric Co (GE), General Motors Co (GM), Invesco Ltd (IVZ), Kimberly-Clark Corp (KMB), Lamb Weston Holdings Inc (LW), Microsoft Corp (MSFT), Moody's Corp (MCO), MSCI Inc (MSCI), NextEra Energy Inc (NEE), Nucor Corp (NUE), NVR Inc (NVR), PACCAR Inc (PCAR), PulteGroup Inc (PHM), Raytheon Technologies Corp (RTX), Robert Half Inc (RHI), Sherwin-Williams Co/The (SHW), Texas Instruments Inc (TXN), Universal Health Services Inc (UHS), Verizon Communications Inc (VZ), Visa Inc (V), Waste Management Inc (WM).
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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