Pre-Market Brief: Stock Indexes Swing Higher on Q4 Earnings Optimism

Morning Markets

March S&P 500 futures this morning recovered from a 4-week low in overnight trade and are up +0.40%.  Optimism about Q4 corporate earnings results is helping to push stocks higher this morning. Bank stocks are climbing in pre-market trading, led by gains of more than +2% for Margan Stanley and Bank of America on positive quarterly earnings results.  Stock index futures initially tumbled in overnight trading on surging T-note yields after the 10-year T-note yield climbed to a new 2-year high of 1.901%.  Stock indexes extended their gains this morning after U.S. Dec housing starts and building permits unexpectedly rose.

The Euro Stoxx 50 index today is up +0.72%.  A rally in retailer stocks is leading gainers in European stocks after Richemont and Burberry Group Plc beat quarterly earnings expectations.  Higher European government bond yields are limiting the upside in stocks today after the 10-year German bund yield turned positive for the first time since 2019 and rose to a 2-1/2 year high of 0.022%.  Surging Covid infections in Europe also weighed on stocks after Germany reported a record 112,323 new Covid infections Wednesday and France reported a record 464,769 new Covid infections Tuesday.

Asian stocks closed lower today.  China’s Shanghai Composite closed down -0.33%, and Japan’s Nikkei Stock Index closed down -2.80%.  Asian equity markets fell back Wednesday as soaring global bond yields prompted the selling of richly valued technology stocks.  Chinese stocks rebounded from their worst levels today as property stocks rallied after Reuters reported that the Chinese government is drafting new rules that will let developers access pre-sale funds in escrow accounts.  Japanese stocks were also under pressure as the Japanese government imposed a 3-week long Covid quasi-emergency for 13 prefectures in Japan as the government tries to slow the spread of Covid infections.

U.S. Dec housing starts unexpectedly rose +1.4% m/m to a 9-month high of 1.702 million, stronger than expectations of a decline to 1.650 million.  U.S. Dec building permits, a proxy of future construction, unexpectedly rose +9.1% m/m to an 11-month high of 1.873 million, stronger than expectations of a decline to 1.703 million.

ECB Governing Council member and Bank of France Governor Villeroy de Galhau said, "if inflation turned out to be more persistent, have no doubt the ECB will have the resolve and the capacity to quickly adapt our monetary policy."

Pre-Market U.S. Stock Movers

Morgan Stanley (MS) rose more than +2% in pre-market trading after it reported Q4 equity sales and trading revenue was $2.86 billion, above the consensus of $2.49 billion. 

Bank of America (BAC) is up more than +3% in pre-market trading after it reported Q4 EPS of 82 cents, above the consensus of 76 cents.

SoFi Technologies (SOFI) jumped +18% in pre-market trading after the Office of the Comptroller granted it a U.S. banking charter.

Procter & Gamble (PG) gained more than +1% in pre-market trading after it raised its full-year organic sales growth estimate to 4% to 5% from an earlier projection of 2% to 4% growth. 

Zogenix (ZGNX) surged more than +60% in pre-market trading after UCB agreed to buy the company for about $1.9 billion.

Freyr Battery (FREY) climbed more than +9% in pre-market trading after it announced it had signed a pact with Honeywell to deploy energy storage solutions via next-generation battery cells.

U.S. Bancorp (USB) dropped -4% in pre-market trading after it reported Q4 EPS of $1.07, weaker than the consensus of $1.10. 

Orion Energy Systems (OESX) fell -11% in pre-market trading after it cut its full-year 2022 revenue estimate to $120 million from a prior view of $150 million.

Cisco (CSCO) slipped more than -2% in pre-market trading after Goldman Sachs cut its recommendation on the stock to neutral from buy. 

Homebuilders are falling in pre-market trading after being downgraded at KeyBanc Capital Markets on a tightening “wall of worry.”  Lennar (LEN), KB Home (KBH), and Toll Brothers (TOL) are down more than -1% after being cut to underweight from sector weight, and DR Horton (DHI) is down more than -1% after being cut to sector weight from overweight.

Today’s U.S. Earnings Reports (1/18/2022)

Bank of America Corp (BAC), Citizens Financial Group Inc (CFG), Citrix Systems Inc (CTXS), Comerica Inc (CMA), Discover Financial Services (DFS), Fastenal Co (FAST), Kinder Morgan Inc (KMI), Morgan Stanley (MS), Procter & Gamble Co/The (PG), Prologis Inc (PLD), State Street Corp (STT), United Airlines Holdings Inc (UAL), UnitedHealth Group Inc (UNH), US Bancorp (USB).