Markets Today: Stocks Climb as U.S. Price Pressures Ease

Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.64%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +1.03%.

Stock indexes this morning are climbing on signs of easing price pressures after the U.S. Q2 employment cost index rose at the slowest pace in 2 years and after the U.S. Jun PCE core deflator, the Fed's preferred gauge of inflation, rose less than expected. Also, strength in technology stocks is boosting the overall market, with Intel up more than +8% in pre-market trading after reporting better-than-expected Q2 revenue. 

U.S. Jun personal spending rose +0.5% m/m, stronger than expectations of +0.4% m/m.  Jun personal income rose +0.3% m/m, weaker than expectations of +0.5% m/m.

The U.S. Jun PCE core deflator, the Fed's preferred gauge of inflation, eased to +4.1% y/y from +4.6% y/y in May, better than expectations of +4.2% y/y and the slowest pace of increase in 1-3/4 years.

The U.S. Q2 employment cost index rose +1.0% (q/q annualized), slower than expectations of +1.1% and the smallest pace of increase in 2 years.

The markets are discounting the odds at 18% for a +25 bp rate hike at the September 20 FOMC meeting. 

Global bond yields are mixed.  The 10-year T-note yield fell from a 2-1/2 week high of 4.038% and is down -2.8 bp to 3.971%.  The 10-year German bund yield rose to a 2-week high of 2.585% and is up +0.2 bp at 2.476%.  The 10-year UK Gilt yield rose to a 1-1/2 week high of 4.389% and is up +2.5 at 4.335%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.12%.  China’s Shanghai Composite Index today closed up +1.84%.  Japan’s Nikkei Stock Index closed down -0.40%.

The Euro Stoxx 50 today is slightly higher.  European stocks recovered from early losses and moved higher on signs of easing price pressures in the Eurozone after German Jul consumer prices rose less than expected.  A jump in global bond yields initially weighed on stocks today after the BOJ adjusted its yield curve control and effectively doubled the upper limit on its 10-year yield range to 1.0% from 0.5%.  The 10-year German bund yield rose to a 2-1/2 week high of 2.585% on the news.  Also, economic concerns undercut stocks after today’s news showed Eurozone Jul economic confidence fell more than expected to a 9-month low.  On the positive side is strength in bank stocks, led by a +5% jump in Standard Chartered Plc after it reported Q2 adjusted pretax profit of $1.6 billion, above the consensus of $1.39 billion.  Also, airline stocks are higher after British Airways parent IAG SA and Air France-KLM reported better-than-expected Q2 earnings.

German Jul CPI (EU harmonized) eased to +6.5% y/y from +6.8% y/y in Jun, better than expectations of +6.6% y/y.

Eurozone Jul economic confidence fell -0.8 to a 9-month low of 94.5, weaker than expectations of 95.0.

German Q2 GDP was unchanged q/q, weaker than expectations of +0.1% q/q.

France's Q2 GDP rose +0.5% q/q, stronger than expectations of +0.1% q/q.

China’s Shanghai Composite today rallied to a 2-month high and closed moderately higher.  Chinese stocks jumped today on signs that authorities are acting on the policy pledges made at the Politburo meeting.  A report today said authorities asked China’s largest technology companies to provide case studies of their most successful startup investments in consumer, telecom, and media companies, a sign that authorities are willing to grant broader leeway in backing such deals after a crackdown brought them to a halt two years ago.  Also, Bloomberg News reported that the China Securities Regulatory Commission consulted securities firms for possible measures to boost stocks, including a cut in the stamp duty and a slowdown in initial public offerings to help liquidity.

Japan’s Nikkei Stock Index today fell to a 2-week low and closed moderately lower.  Japanese stocks retreated today after Japanese bond yields soared after the BOJ tweaked its yield curve control program.  The 10-year JGB bond yield jumped to a 9-year high of 0.591% after the BOJ effectively raised the upper limit of its 10-year JGB yield target to 1.0% from 0.5%.  The yen also climbed to a 1-1/2 week high against the dollar on the news, undercutting exporter stocks.   In addition, an increase in price pressures weighed on stocks and boosted bond yields after today’s news showed Tokyo Jul consumer prices rose more than expected. Stocks recovered from their worst levels, and the yen gave up some of its gains after BOJ Governor Ueda said today’s move by the BOJ to adjust its yield curve control was not a step toward normalization of BOJ policy and that there is a “long way” before the BOJ raises negative interest rates.

The BOJ, as expected, kept its policy balance rate unchanged at -0.1%.  The BOJ also kept its target for 10-year yields at around 0% but said the 0.5% ceiling was now a reference point and that it would offer to buy 10-year debt at 1.0% each day, suggesting an effective doubling of the upper target of the yield range.

Tokyo Jul CPI rose +3.2% y/y, unchanged from Jun and stronger than expectations of +2.9% y/y. Tokyo CPI ex-fresh food and energy rose +4.0% y/y, stronger than expectations of +3.7% y/y and the most in 40 years.

Pre-Market U.S. Stock Movers

Intel (INTC) rallied more than +8% in pre-market trading after reporting Q2 revenue of $12.90 billion, well above the consensus of $12.02 billion, and forecast Q3 revenue of $12.9 billion-$13.9 billion, the midpoint above the consensus of $13.28 billion.

Reata Pharmaceuticals (RETA) soared more than +51% in pre-market trading after Biogen agreed to buy the company for about $7.3 billion.  

Dexcom (DXCM) climbed more than +3% in pre-market trading after reporting Q2 revenue of $871.3 million, stronger than the consensus of $840.2 million, and raising its full-year revenue forecast to $3.50 billion-$3.55 billion from a previous forecast of $3.40 billion-$3.52 billion, above the consensus of $3.50 billion.

Roku (ROKU) rallied more than +9% in pre-market trading after reporting Q2 net revenue of $847.2 million, well above the consensus of $774.7 million.

Skechers (SKX) jumped more than +4% in pre-market trading after reporting Q2 adjusted EPS of 97 cents, well above the consensus of 53 cents, and raising its full-year EPS forecast to $3.25-$3.40 from a previous forecast of $3.00-$3.20, stronger than the consensus of $3.18.   

Trade Desk (TTD) rose more than +3% in pre-market trading after BTIG LLC upgraded the stock to buy from neutral.

Procter & Gamble (PG) gained more than +1% in pre-market trading after reporting Q4 net sales of $20.55 billion, better than the consensus of $20.06 billion. 

Juniper Networks (JNPR) tumbled more than -6% in pre-market trading after it said it is “currently facing some near-term order weakness from its Cloud and to a lesser degree its Service Provider customers.”

Ford Motor (F) slid more than -2% in pre-market trading after it said it now expects to see losses from electric vehicles hit $4.50 billion this year, above the consensus of a -$3.25 billion loss.

Chemours (CC) dropped more than -3% in pre-market trading after reporting Q2 net sales of $1.64 billion, below the consensus of $1.70 billion.

Southwest Airlines (LUV) is down more than -1% in pre-market trading after Raymond James downgraded the stock to outperform from a strong buy.

Sleep Number (SNBR) plunged more than -22% in pre-market trading after reporting Q2 net sales of $458.8 million, weaker than the consensus of $471.6 million.

ArcBest (ARCB) dropped more than -3% in pre-market trading after reporting Q2 adjusted EPS of $1.54, well below the consensus of $2.02.

Wingstop (WING) tumbled more than -4% in pre-market trading after Wedbush downgraded the stock to neutral from outperform.

Today’s U.S. Earnings Reports (7/28/2023)

Aon PLC (AON), Centene Corp (CNC), Charter Communications Inc (CHTR), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Colgate-Palmolive Co (CL), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), Newell Brands Inc (NWL), Procter & Gamble Co/The (PG), T Rowe Price Group Inc (TROW).

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