Stocks Move Higher on Hopes of Easing Price Pressures

Morning Markets

September S&P 500 futures (ESU22) this morning are up by +0.72% at a 1-week high. The prospects for price pressures to ease have reduced concerns of aggressive Fed policy after the 10-year breakeven inflation rate dropped to a 4-month low Thursday.  Also, the 10-year T-note yield is hovering just above Thursday’s 2-week low, which is fueling gains in technology stocks.

Data from EPFR Global shows investors continue to pull money from equity funds.  About $16.8 billion exited global stock funds in the week through June 22, with U.S. equities seeing their first outflow in seven weeks at $17.4 billion.

The Euro Stoxx 50 today is up by +1.61%.  European stocks are climbing today as lower valuations and a decline in interest rates have enticed dip buyers.  The Euro Stoxx 50 is trading at about 11.5 time forward earnings, near its lowest valuation since the start of the pandemic in March 2020.  Also, the 10-year German bund yield fell to a 2-week low today, which is supportive for stocks. 

The German Jun IFO business climate fell -0.7 to 92.3, weaker than expectations of 92.8.

Asian markets today closed higher.  China’s Shanghai Composite Index closed up by +0.89%, and Japan’s Nikkei stock index closed up by +1.23%. 

Gains in technology stocks today led Chinese stocks higher.  China’s move to dial back Covid restrictions has improved market sentiment and is giving equity prices a lift.  Stocks also rose on signs of a gradual easing in China’s regulatory crackdown in the technology sector.  Electric-vehicle makers rallied for a second day today after Chinese state television reported Thursday that the government might extend tax exemptions on electric-car purchases. 

Japanese stocks posted moderate gains today on strength in technology and in food makers after Ajinomoto said it would raise the prices of seasoning products for domestic households. Reduced inflation concerns also gave Japanese stocks a boost after Japan's May national CPI ex-fresh food & energy rose +0.8% y/y, right on expectations.

Japan's May PPI services prices rose +1.8% y/y, stronger than expectations of +1.7% y/y and the fastest pace of increase in 2 years.

Pre-Market U.S. Stock Movers

FedEx (FDX) climbed more than +3% in pre-market trading after forecasting 2023 adjusted EPS of $22.50 to $24.50, stronger than the consensus of $22.36. 

Major U.S. bank stocks are up +0.5 to +1.0% in pre-market trading after the Federal Reserve announced late Thursday that all banks passed its annual stress test.  Goldman Sachs (GS) and Bank of America (BAC) are up +1%, and JPMorgan Chase (JPM) and Morgan Stanley (MS) are up +0.5%. 

U.S.-listed shares of Chinese technology stocks are climbing in pre-market trading amid a gradual easing in China’s regulatory crackdown on tech companies.  Alibaba Group Holding (BABA) and Pinduoduo (PDD) are up more than +3%, and Baidu (BIDU) and JD.com (JD) are up more than +2%. 

Zendesk (ZEN) surged more than 50% in pre-market trading after Dow Jones reported that the company is close to a deal to from a group of buyout firms. 

Wolfspeed (WOLF) rose more than +1% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral. 

Lending Tree (TREE) dropped -10% in pre-market trading after cutting its Q2 adjusted Ebitda forecast to $26 million-$29 million from a previous estimate of $35 million-$40 million.

Ameriprise (AMP) slid -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.

CalAmp (CAMP) sank more than -15% in pre-market trading after reporting Q1 revenue of $64.7 million, well below the consensus of $69.4 million.  Morgan Stanley assumed coverage of the stock with a recommendation of underweight and a price target of $36

HB Fuller (FUL) fell -1% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral.

Today’s U.S. Earnings Reports (6/24/2022)

CarMax Inc (KMX), Carnival Corp (CCL), Eros Media World PLC (EMWP), Quotient Ltd (QTNT), 

Republic First Bancorp Inc (FRBK).

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