Inflation Report Meets Expectations Setting Stock Markets to Recover Losses

Morning Markets

June S&P 500 futures this morning are up +0.66%.  U.S. stock index futures recovered from overnight losses and are moderately higher. The June E-mini S&P futures contract recovered from a 3-week low in overnight trade and is moving higher as T-note yields decline.  The 10-year T-note yield fell back from a 3-1/4 year high of 2.832% and is down -5.5 bp at 2.725%.  T-note yields declined as inflation concerns eased after the Mar core CPI rose less than expected.  U.S. stocks also found support today on a rebound in Chinese stocks after China’s Shanghai Composite recovered from a 3-1/2 week low and settled higher on speculation the Chinese government will soon boost stimulus measures.

U.S. Mar CPI rose +8.5% y/y, stronger than expectations of +8.4% y/y and the fastest pace of increase in 40-1/4 years.  U.S. Mar CPI ex-food & energy rose +6.5% y/y, the fastest pace of increase in 39-1/2 years but slightly weaker than expectations of +6.6% y/y.

The Euro Stoxx 50 index today is down by -0.63% and dropped to a 4-week low.  Weakness in European bank stocks is leading the overall market lower today after U.S. investment firm Capital Group liquidated its stake in Deutsche Bank AG and Commerzbank AG, two of Germany’s biggest banks.  Also, a slump in German investor confidence weighed on stocks after the German Apr ZEW expectations of economic growth index fell to a 2-year low. 

The German Economic Institutes cut their 2022 German GDP estimate to 2.7% from a previous estimate of 4.8%.

The German Apr ZEW expectations of economic growth fell -1.7 to a 2-year low of -41.0.

The German Mar wholesale price index jumped +a record 6.9% m/m and +22.6% y/y (data from 1968).

Asian markets today settled mixed.  China’s Shanghai Stock Index closed up by +1.46%, and Japan’s Nikkei Stock fell to a 3-1/2 week low and closed down by -1.71%.  China’s Shanghai Stock Index recovered from a 3-1/2 week low and settled moderately higher on speculation the Chinese government will soon boost stimulus measures to revive economic growth after Chinese Premier Li Keqiang issued a third warning about economic growth risks in less than a week. 

Japan’s Nikkei Stock Index posted moderate losses today on concern about rising price pressures at the factory level after today’s nes that Japan’s Mar PPI rose +9.5% y/y, stronger than expectations of +9.2% y/y.  Also, Japanese technology stocks retreated on the heels of Monday’s slump in U.S. technology stocks after the 10-year T-note yield jumped to a 3-1/4 year high.

Pre-Market U.S. Stock Movers

Cisco Systems (CSCO) fell more than -2% in pre-market trading after Citigroup cut its recommendation on the stock to sell from neutral. 

Hewlett Packard Enterprise (HPE) dropped more than -3% in pre-market trading after Morgan Stanley downgraded the stock to underweight from equal weight as it lowered its industry view for telecom and networking equipment to cautious from in-line.  F5 (FFIV) and NetApp (NTAP) both fell more than -1% after they were also downgraded by Morgan Stanley to equal weight from overweight. 

CarMax (KMX) tumbled over -5% in pre-market trading after it reported Q4 EPS of 98 cents, weaker than the consensus of $1.32.

STMicroelectronics NV (STM) slid more than -1% in pre-market trading after Barclays cut its recommendation on the stock to equal weight from overweight.

CrowdStrike (CRWD) climbed nearly +3% in pre-market trading after Goldman Sachs raised its recommendation on the stock to buy from neutral.

Cardinal Health (CAH) rose more than +3% in pre-market trading after Morgan Stanley raised its recommendation on the stock to overweight from equal weight.

Ferrari (RACE) gained nearly +2% in pre-market trading after Exane BNP Paribas upgraded the stock to outperform from neutral.

Today’s U.S. Earnings Reports (4/12/2022)

Albertsons Cos Inc (ACI), CarMax Inc (KMX).