Markets Today: Stocks Slip on Higher Bond Yields and Chip Stock Weakness

Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are down -0.08%, and Sep Nasdaq 100 E-Mini futures (NQU23) are down -0.25%.

Stock index futures this morning are mixed.  Stock index futures gave up overnight gains and turned lower as bond yields rose after a measure of New York state factory activity unexpectedly expanded this month. Stock index futures initially moved higher in overnight trade on signs that China’s economy rebounded in August after consumer spending and factory output strengthened. 

Nasdaq stock index futures are under pressure this morning as chip stocks retreat in pre-market trading after Reuters reported that Taiwan Semiconductor Manufacturing Co asked its major suppliers to delay shipment of high-end chipmaking equipment. 

Bank of America said EPFR Global data shows investors poured $26.4 billion into U.S. equities in the week ended September 13, the biggest weekly inflow since March 2022.  Also, global stocks attracted $25.3 billion of inflows.

Market activity today may be volatile due to the triple witching options event.  Derivatives contracts tied to stocks, index options, and futures for September are scheduled to expire today, prompting traders to roll over their existing positions or start new ones.

The U.S. import price index ex-petroleum was unchanged m/m for a second month, right on expectations.

The U.S. Sep Empire manufacturing survey general business conditions rose +20.9 to 1.9, stronger than expectations of -10.0.

The markets are discounting the odds at 4% for a +25 bp rate hike at the September 20 FOMC meeting and 37% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields are higher.  The 10-year T-note yield is up +3.2 bp at 4.318%.  The 10-year German bund yield is up +6.0 bp at 2.653%.  The 10-year UK gilt yield is up +5.8 bp at 4.339%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.83%.  China’s Shanghai Composite Index closed -0.28%.  Japan’s Nikkei Stock Index closed +1.10%.

The Euro Stoxx 50 today rallied to a 2-week high and is moderately higher.  European stocks today extended Thursday’s post-ECB meeting gains after the ECB signaled it was pausing its interest rate hike cycle. Also, stronger-than-expected Chinese economic reports today boosted market sentiment and stocks exposed to China, such as luxury goods makers and mining stocks.  On the negative side, ASML Holding NV and other chip-equipment stocks fell after Reuters reported that Taiwan Manufacturing Semiconductor Co asked its major suppliers to delay shipment of high-end chipmaking equipment. 

Eurozone Q2 labor costs eased to +4.5% y/y from +5.2% y/y in Q1.

ECB President Lagarde said the level of borrowing costs and the length of time they stay elevated "will matter significantly" and that the ECB is not discussing interest rate cuts.

ECB Governing Council member Vasle said core inflation is still "relatively high" and "I wouldn't exclude that further interest rate hikes might be necessary."

China’s Shanghai Composite Index gave up an early advance and posted moderate losses. Weakness in property stocks led the overall market lower after China reported that new home prices in August fell for the third consecutive month by the most in 10 months.  Also, aggressive selling by foreign investors weighed on the overall market as foreign investors sold 5.6 billion yuan ($770 million) worth of onshore China shares.  Stocks today initially opened higher as the market reacted positively to the PBOC’s cut in the reserve requirement ratio for banks, which was done after the markets closed on Thursday.   Also, signs that China’s economy picked up steam in August after today’s news showed industrial production activity and retail sales rose more than expected. 

The yuan climbed to a 2-week high against the dollar today after Bloomberg reported that the PBOC asked some Chinese brokerage firms to reduce proprietary trading in the foreign exchange market.  This adds to the PBOC's other measures, including verbal warnings and tightening offshore funding costs to shore up the yuan.

China Aug industrial production rose +4.5% y/y, stronger than expectations of +3.9% y/y and the biggest increase in 4 months.

China Aug retail sales rose +4.6% y/y, stronger than expectations of +3.0% y/y.

China Aug new home prices fell -0.29% m/m, the biggest decline in 10 months, and the third straight month prices have fallen.

Japan’s Nikkei Stock Index climbed to a 2-week high and closed moderately higher.  Japanese stocks moved higher today, following stronger-than-expected U.S. retail sales news for August that boosted confidence that the Federal Reserve can engineer a soft landing of the U.S. economy.  Japanese stocks extended their gains after better-than-expected Chinese economic reports on industrial production and retail sales showed China’s economy improved last month.  Stocks also found support after JPMorgan Chase said Prime Minister Kishida's reshuffling of the cabinet on Wednesday should be positive for stock prices in the near term. 

The Japan Jul tertiary industry index rose +0.9% m/m, stronger than expectations of +0.3% m/m.

Pre-Market U.S. Stock Movers

Chip stocks are moving lower in pre-market trading after Reuters reported that Taiwan Semiconductor Manufacturing Co asked its major suppliers to delay shipment of high-end chipmaking equipment.  As a result, ASML Holding NV (ASML), KLA Corp (KLAC), Lam Research (LRCX), and Applied Materials (AMAT) are down more than +1%. 

Adobe (ADBE) fell more than -2% in pre-market trading after reporting Q3 earnings results that beat expectations but gave an outlook that analysts see as conservative. 

Lindsay Corp (LNN) tumbled more than -10% in pre-market trading after Stifel downgraded the stock to hold from buy, citing a challenging near-term outlook and a lack of positive catalysts.

Nucor (NUE) dropped more than -3% in pre-market trading after reporting Q3 preliminary EPS of $4.10-$4.20, weaker than the consensus of $4.56. 

DocuSign (DOCU) slid more than -1% in pre-market trading after HSBC initiated coverage of the stock with a recommendation of reduce and a price target of $42. 

DoorDash (DASH) fell more than -1% in pre-market trading after MoffettNathanson downgraded the stock to market perform from outperform. 

Unity Software (U) jumped more than +3% in pre-market trading after Bank of America upgraded the stock to buy from neutral with a price target of $56. 

KeyCorp (KEY) rose more than +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $13.50. 

Celsius Holdings (CELH) gained more than +1% in pre-market trading after Cowen initiated coverage on the stock with a recommendation of outperform and a price target of $250. 

Apellis Pharmaceuticals (APLS) climbed more than +2% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $64.

Earnings Reports (9/15/2023)

Forafric Global PLC (AFRI).

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