Stocks Fall on Unfavorable U.S. CPI Report

Morning Markets

June S&P 500 futures (ESM22) fell by about  -1% after this morning’s negative CPI report.  The stock market added to Thursday’s sharp sell-off when the S&P 500 index plunged by -2.38% and the Nasdaq 100 index fell by -2.74%. 

Today’s U.S. May CPI data was stronger than expected and added to concerns that the Fed will be forced to raise interest rates aggressively.  Today’s May CPI report of +1.0% m/m and +8.6% y/y was stronger than expectations of +0.7% and +8.3%, respectively.  Today’s May core CPI of +0.6% m/m and +6.0% y/y was slightly stronger than expectations of +0.5% and +5.9%, respectively.  The headline May CPI rose to a new 40-year high of 8.6% y/y, but the core CPI eased to a 4-month low of +6.0% from 8.3% in April and March’s 40-year high of +8.5%.

U.S. stocks are being undercut by today’s sharp -2.2% decline in the Euro Stoxx 50 index, which is still seeing negative carry-over from Thursday’s news.  The German 10-year bund yield on Thursday rose to an 8-year high of 1.465% after the ECB said it would soon end asset purchases and begin to raise interest rates.  The market is expecting a +25 bp ECB rate hike at its next meeting on July 21.

Asian markets today settled mixed.  China’s Shanghai Composite Index rallied to a new 1-1/2 month high and closed up by +1.42%. However, Japan’s Nikkei stock index fell back from Thursday’s 4-1/2 month high and closed sharply lower by -1.49%. Japanese stocks fell after the yen recovered mildly by +0.33% from Thursday’s 20-year low, which was negative for Japanese exporters.

Pre-Market U.S. Stock Movers

DocuSign (DOCU) is down -25% in pre-market trading after the company’s poor earnings news and subsequent analyst downgrades.

U.S.-listed Chinese stocks are higher this morning as the markets continue to hope for a more favorable regulatory climate for Chinese tech stocks.  Bloomberg reported earlier this week that China’s regulator is working to revive the IPO for Ant Group, although the regulator on Thursday denied that report.  Alibaba Group Holding (BABA), Baidu (BIDU), and Pinduoduo (PDD) are all up more than +3% in pre-market trading. 

Rent the Runway (RENT) is up +7% in pre-market trading on positive analyst comments after the company reported favorable results.

Netflix (NFLX), Roblox (RBLX), Ebay (EBAY), and Frontdoor (FTDR) are all lower this morning after Goldman Sachs cut its ratings on those stocks to sell from neutral, partly due to Goldman’s outlook for a weaker economy.

Morgan Stanley downgraded IHeartMedia (IHRT) to underweight from equal-weight and downgraded Lamar Advertising (LAMR) to equal-weight due to reduced advertising spending forecasts for 2023.

Vonage (VG) is down -2% in pre-market trading after Craig-Hallum Capital Group downgraded the stock to sell from hold due lower odds that Ericsson will proceed with the deal to buy Vonage.

Today’s U.S. Earnings Reports (6/10/2022)

CIRCOR International Inc (CIR), Nathan's Famous Inc (NATH), Republic First Bancorp Inc (FRBK), 

Seneca Foods Corp (SENEB), View Inc (VIEW).