Stocks Climb on Strong U.S. Retail Sales Report

Morning Markets

September S&P 500 futures (ESU22) this morning are up by +0.42%.  Stocks are higher on mixed quarterly corporate earnings. Citigroup is up more than +2% in pre-market trading after reporting stronger than expected Q2 trading revenue, and United Health Group is up nearly +2% in pre-market trading after reporting better-than-expected Q2 earnings.  However, Wells Fargo and BlackRock are falling in pre-market trading after reporting disappointing Q2 earnings. 

U.S. stock indexes extended their gains this morning after U.S. June retail sales rose more than expected and the July Empire manufacturing survey general business conditions index unexpectedly rose.  Also, inflation concerns subsided a bit after Jun import prices unexpectedly declined. In addition, a decline in T-note yields is supportive for stocks as the 10-year T-note yield is down -4.4 bp at 2.915%.

U.S. June retail sales rose +1.0% m/m and +1.0% m/m ex-autos, stronger than expectations of +0.9% m/m and +0.7% m/m ex-autos.

The U.S. Jul Empire manufacturing survey general business conditions unexpectedly rose +12.3 to 11.1, stronger than expectations of a decline to -2.0.

U.S. Jun import prices ex-petroleum unexpectedly fell -0.4% m/m, weaker than expectations of +0.2% m/m and the largest decline in more than 2 years.

The Euro Stoxx 50 is up +0.90% today.  European stocks are climbing today as Italian political risks receded after Italian President Mattarella asked Prime Minister Draghi to remain in his position in order to avert a political crisis after Italy’s Five Star Movement boycotted a confidence vote in the Senate Thursday, prompting Draghi to offer his resignation. The move by President Mattarella leaves the door open for a solution that would see Draghi leading the government until elections due in early 2023.  A decline in European government bond yields is also supportive for stocks after the 10-year German bund yield fell to a 1-1/2 month low today of 1.073%.

ECB Governing Council member Rehn said the ECB would start raising interest rates next week with a "likely" 25 bp hike, followed by a "likely" 50 bp rate hike in September. 

China’s Shanghai Composite Index today tumbled to a 1-month low and closed down by -1.14%.  Concerns about a slowdown in China’s economy weighed on stocks today after Q2 China GDP grew less than expected.  Also, Chinese technology stocks sold off today on fears of a renewed regulatory crackdown on the sector following a report that some company executives at Alibaba Group Holding were summoned for talks by authorities in connection with the theft of a vast police database.  In addition, Chinese bank stocks retreated today as a widening boycott on mortgage payments by homebuyers sparked concerns about a buildup in bad debt.

China Q2 GDP of -2.6% q/q and +0.4% y/y was weaker than expectations of -2.0% q/q and +1.2% y/y.

China Jun industrial production rose +3.9% y/y, weaker than expectations of +4.0% y/y.

China Jun new home prices fell -0.1% m/m, the tenth consecutive month that new home prices have declined.

China Jun retail sales rose +3.1% y/y, stronger than expectations of +0.3% y/y and the biggest increase in 5 months.

Japan’s Nikkei Stock Index closed up +0.54% today.  A rally in exporter stocks led the overall market higher today as the Japanese yen fell to a new 24-year low against the dollar.  The weaker yen boosts the earnings prospects of exporters.  Gains in Japanese utility stocks today also supported the overall market after Prime Minister Kishida called for as many as nine nuclear reactors to be brought online to avert a power crunch. 

Japan May industrial production was revised downward to -7.5% m/m from the previously reported -7.2% m/m, the largest decline in 2 years.

Pre-Market U.S. Stock Movers

Citigroup (C) climbed more than +2% in pre-market trading after reporting Q2 FICC sales and trading revenue of $4.08 billion, above the consensus of $3.84 billion.

UnitedHealth Group (UNH) rose nearly +2% in pre-market trading after reporting Q2 adjusted EPS of $5.57, better than the consensus of $5.19, and raised its full-year adjusted EPS estimate to $21.40-$21.90 from a prior estimate of $21.20-$21.70.

Pinterest (PINS) surged +16% in pre-market trading after the Wall Street Journal reported that activist investor Elliot Management had acquired a stake in the company.  

Vonage (VG) jumped +7% in pre-market trading after Ericsson AB received clearance from the Committee on Foreign Investments in the United States to complete its acquisition of the company.

Costco Wholesale (COST) rose more than +1% in pre-market trading after the Brown Advisory Growth Equity Fund disclosed it boosted its holdings in the stock by 10% to 173,594 shares. 

Wells Fargo (WFC) dropped more than -3% in pre-market trading after reporting Q2 revenue of $17.03 billion, weaker than the consensus of $17.54 billion.

BlackRock (BLK) slid more than -1% in pre-market trading after reporting Q2 adjusted EPS of 7.36, well below the consensus of $7.90.

Solar stocks may be under pressure today after Senator Manchin told Democratic leaders he wouldn’t support new spending on climate measures or tax increases.  As a result, Sunrun (RUN) is down more than -6% in pre-market trading.  Also, Array Technologies (ARRY) and SunPower (SPWR) are down more than -5%, and Enphase Energy (ENPH) is down more than -4%.  In addition, First Solar (FSLR) is down more than -3%.

Codexis (CDXS) plunged more than -20% in pre-market trading after it cut its full-year revenue forecast to $135-$141 million from a prior view of $152-$158 million, weaker than the consensus of $155.5 million.

Today’s U.S. Earnings Reports (7/15/2022)

Bank of New York Mellon Corp/T (BK), BlackRock Inc (BLK), Citigroup Inc (C), PNC Financial Services Group I (PNC), Progressive Corp/The (PGR), State Street Corp (STT), UnitedHealth Group Inc (UNH), 

US Bancorp (USB), Wells Fargo & Co (WFC).

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