Stocks Climb as Powell Eases Rate-Hike Worries

Morning Markets

June S&P 500 futures (ESM22) this morning are currently up by +1.45% as they rebound from Thursday’s 13-1/2 month low.  An easing of rate-hike worries sparked a rally in stock indexes in overnight trade after Fed Chair Powell late Thursday pushed back against speculation of steeper Fed rate hikes. 

Strength in mega-cap technology stocks is leading U.S. stock indexes higher today, with Apple, Amazon.com, and Microsoft up more than +2% in pre-market trading.  Stock indexes extended their gains this morning as inflation concern eased slightly after the U.S. Apr import price index ex-petroleum rose less than expected.

Carry-over support from a +0.96% rally in China’s Shanghai Composite is also helping to lift U.S. stock indexes after Shanghai said it plans to end pandemic lockdowns by May 20.

Late Thursday, Fed Chair Powell reaffirmed the Fed is likely to raise interest rates by 50 bp at each of its next two meetings and said the Fed isn't "actively considering" a 75 bp move.

The U.S. Apr import price index ex-petroleum rose +0.4% m/m, weaker than expectations of +0.7% m/m.

The Euro Stoxx 50 index this morning is up +1.67% at a 1-week high.  European stocks are seeing support from the overnight rally in U.S. stock indexes.  A smaller-than-expected decline in Eurozone Mar industrial production also eased growth concerns and supported stock gains.  Strength in telecom stocks is leading the overall market higher, with Deutsche Telekom AG up +3% after reporting Q1 adjusted Ebitda after leases of 9.90 billion euros, above the consensus of 9.54 billion euros.   

Eurozone Mar industrial production fell -1.8% m/m, a smaller decline than expectations of -2.0% m/m.

Asian markets today closed higher, with China’s Shanghai Composite Index closing up +0.96% and Japan’s Nikkei Stock Index closing up +2.64%. Chinese stocks rallied today on signs that pandemic restrictions may soon be easing after Shanghai said it aims to achieve “no community spread” in the middle of May and plans to start reopening the city from lockdowns by May 20. 

China Apr new yuan loans rose +645.4 billion yuan, weaker than expectations of +1.53 trillion yuan and the smallest increase in more than five years.  China Apr aggregate financing, the broadest measure of credit growth, rose +910.2 billion yuan, weaker than expectations of +2.20 trillion yuan and the smallest increase in 2 years.

Japanese stocks rallied sharply today, led by gains in technology stocks.  Also, better-than-expected quarterly earnings from SoftBank Group and Tokyo Electron boosted market sentiment and pushed the overall market higher.  Dovish comments from BOJ Governor Kuroda were bullish for stocks when he said monetary easing must stay in place to support the economy that is still in the middle of recovering from the pandemic. 

Pre-Market U.S. Stock Movers

Mega cap technology stocks are moving higher in pre-market trading on some dip-buying after this week’s plunge.  Nvidia (NVDA) and Micron Technology (MU) are up more than +3%.  Also, Apple (AAPL), Amazon.com (AMZN), Advanced Micro Devices (AMD), and Meta Platforms (FB) are up more than +2%, and Microsoft (MSFT) and Intel (INTC) are up more than +1%. 

Compass (COMP) jumped +7% in pre-market trading after reporting Q1 revenue of $1.4 billion, above the consensus of $1.3 billion. 

Cryptocurrency-exposed stocks are climbing in pre-market trading, with the price of Bitcoin up more than +6%.  MicroStrategy (MSTR) and Coinbase Global (COIN) are up more than +9%.  Also, Riot Blockchain (RIOT) and Marathon Digital (MARA) are up more than +7%. 

First Solar (FSLR) rose nearly +3% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral.

Affirm Holdings (AFRM) surged +30% in pre-market trading after reporting Q3 revenue of $354.8 million, better than the consensus of $344.3 million, and raised guidance on its full-year revenue forecast to $1.33 billion-$1.34 billion from a prior view of $1.31 billion. 

U.S.-listed Chinese stocks are moving higher in pre-market trading after Shanghai said it would end pandemic lockdowns and start reopening the city by May 20.  JD.com (JD), Baidu (BIDU), and Pinduoduo (PDD) are up more than +4%.  Also, Alibaba Group Holding (BABA) and NetEase (NTES) are up more than +3%. 

Twitter (TWTR) sank 18% in pre-market trading after Elon Musk said his deal to buy the company is “temporarily on hold pending details supporting calculation that spam/fake accounts on Twitter represent less than 5% of users.” 

United Parcel Service (UPS) fell -1% in pre-market trading after JPMorgan Chase cut its recommendation on the stock to neutral from overweight. 

New Relic (NEWR) tumbled -9% in pre-market trading after it forecast full-year revenue of $920 million-$930 million, the midpoint below the consensus of $928.8 million.

Today’s U.S. Earnings Reports (5/13/2022)

Embecta Corp (EMBC), Globant SA (GLOB).