Stocks Lower as U.S. PPI Surges to a Record

Morning Markets

June S&P 500 futures this morning are down -0.05%.  U.S. stock index futures gave up overnight gains and are modestly lower after U.S. March producer prices rose more than expected at a record pace.  Also, hawkish comments from St. Louis Fed President Bullard and Richmond Fed President Barkin weighed on stocks.  In addition, a -2% decline in JPMorgan Chase in pre-market trading is undercutting stocks after it reported a -$524 million loss in Q1 tied to market fallout from Russia’s invasion of Ukraine.  Strength in airline stocks in pre-market trading is limiting losses in the overall market after Delta Air Lines said it expects a strong rebound in summer travel bookings.

U.S. Mar PPI final demand rose a record +1.4% m/m and +11.2% y/y (data from 2010), stronger than expectations of +1.1% m/m and +10.6% y/y.  Mar PPI ex-food and energy rose +1.0% m/m and a record +9.2% y/y, stronger than expectations of +0.5% m/m and +8.4% y/y.

St. Louis Fed President Bullard said it's "fantasy" to think modest interest rate rises tame CPI and that the FOMC needs to be more aggressive to root out inflation.

Richmond Fed President Barkin said, "the best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing and how persistent inflation has become.  Then, if necessary, we can move further" if inflation pressures persist.

The Euro Stoxx 50 index today is down by -1.00% but remains above Tuesday’s 4-week low.  Weakness in travel and leisure stocks is leading the overall market lower on concern about a prolonged war in Ukraine after Russian President Putin vowed to continue the war.  European stocks also fell after Goldman Sachs said margins for the Stoxx 600 are near a record and could start to come under pressure from higher input costs.

Asian markets today settled mixed.  China’s Shanghai Stock Index closed down by -0.82%, and Japan’s Nikkei Stock closed up by +1.93%. China’s stocks were under pressure today on signs the country will maintain its strict pandemic lockdowns. China’s top virus expert of the China CDC said that the dynamic zero Covid strategies are currently the best option for China to fight the recent wave of Covid infections.  Weak trade data that signals waning consumer demand also weighed on stocks after China's Mar imports unexpectedly fell -by 0.1% y/y, weaker than expectations of +8.4% y/y.

Japan’s Nikkei Stock Index rallied moderately today, led by strength in exporter stocks after the yen sank to a nearly 20-year low against the dollar.  Stocks rallied, and USD/JPY soared today after BOJ Governor Kuroda said that the BOJ would continue with powerful easing persistently.  Japanese stocks also garnered support from lower T-note yields Tuesday after U.S. Mar core CPI rose less than expected.

Today’s Japanese economic data was bearish for stocks after Japan Feb core machine orders fell -9.8% m/m, weaker than expectations of -1.5% m/m and the biggest decline in 1-3/4 years.

Pre-Market U.S. Stock Movers

Delta Air Lines (DAL) jumped more than +6% in pre-market trading after it reported Q1 adjusted revenue of $8.16 billion, stronger than the consensus of $8.12 billion. 

Airline stocks are climbing in pre-market trading after Delta Air Lines said it expects a strong rebound in summer travel bookings.  American Airlines Group (AAL) and United Airlines Holdings (UAL) are up more than +5%, Alaska Air Group (ALK) is up more than +4%, and Southwest Airlines (LUV) is up more than +3%. 

JPMorgan Chase (JPM) fell more than -1% in pre-market trading after it reported Q1 investment-banking revenue of $2.1 billion, below the consensus of $2.3 billion, and reported a $524 million loss tied to the fallout from Russia’s invasion of Ukraine. 

Sierra Oncology (SRRA) surged +38% in pre-market trading after GlaxoSmithKline agreed to buy the company for $55 a share in cash.

Fastenal (FAST) rose more than +2% in pre-market trading after reporting Q1 net sales of $1.70 billion, better than the consensus of $1.68 billion.

CarMax (KMX) slid nearly -1% in pre-market trading after JPMorgan Chase cut its recommendation on the stock to neutral from overweight.

NonoString Technologies (NSTG) plunged more than -25% in pre-market trading after it reported preliminary Q1 product and service revenue of $31 million, well below its forecast of $34 million-$38 million.

Hillman Solutions (HLMN) tumbled nearly -9% in pre-market trading after holders offered 10 million shares of the stock between $10 to $10.50 via Jeffries, Baird, and Stifel.

Today’s U.S. Earnings Reports (4/13/2022)

BlackRock Inc (BLK), Delta Air Lines Inc (DAL), Fastenal Co (FAST), First Republic Bank/CA (FRC), JPMorgan Chase & Co (JPM).