U.S. Stocks Undercut as T-note Yield Rises

Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.23%.  Stock investors have turned cautious ahead of tomorrow’s U.S. July CPI report, which will be a key factor for the Fed in determining the size of its rate hike at its next meeting on September 20-21. 

Stocks are being undercut this morning by a +4 bp rise in the 10-year T-note yield.  T-note prices are seeing some supply pressure ahead of today’s Treasury sale of $42 billion of 3-year T-notes.  The Treasury will then sell $35 billion of 10-year T-notes on Wednesday and $21 billion of 30-year T-bonds on Thursday.

Stocks are also being undercut today by continued weakness in chip stocks, sparked today by reduced sales and revenue guidance from Micron Technologies (MU).

Taiwan tensions continue after China today held another day of military drills.  Meanwhile, Taiwan today announced its own live-fire artillery drills.

Sep WTI crude oil futures prices are up +1.25% this morning on news that the flow of Russian crude oil in pipelines through Ukraine to Hungary, Slovakia, and the Czech Republic was halted last week because sanctions prevented the payment of the transit fee. However, the crude oil flows in the northern leg of the pipeline through Belarus to Poland and Germany were not affected.

The markets are looking ahead to Wednesday’s U.S. CPI report for indications of whether inflation is peaking.  A stronger-than-expected CPI report on Wednesday could solidify expectations for another large Fed rate hike at its next meeting in September, which were sparked by last Friday’s much stronger-than-expected U.S. July payroll report of +528,000 (vs expectations of +250,000).   The consensus is for Wednesday’s July CPI report to show an increase of +0.2% m/m and +8.7% y/y, down from June’s report of +1.3% m/m and +9.1% y /y.  The July core CPI is expected at +0.5% m/m and +6.1%, compared with June’s report of +0.7% m/m and +5.9% y/y.

The Euro Stoxx 50 today is down -0.77% on broad weakness in most sectors.  China’s Shanghai Composite index today closed up +0.32% despite news of an investigation of the $3 trillion trust industry.  The Nikkei index today closed down -0.88% as investors continue to fret about China’s military drills against Taiwan, which resulted in missiles landing in Japan’s economic zone last week.

Pre-Market U.S. Stock Movers

Chip stocks are weak today, led by a -6.2% drop in Micron Technologies (MU) caused the company’s reduced Q4 revenue forecast on weakening demand.  Micron said a “challenging market” means that sales may miss its forecast.  Nvidia (NVDA) is down -8.8% in pre-market trading, adding to yesterday’s loss of -6.30% on Nvidia’s own guidance downgrade.  Advanced Micro Devices (AMD) is down -2% in pre-market trading.

Norwegian Cruise Lines (NCLH) is down -8.35% in pre-market trading after reporting Q2 revenue of $1.19 billion, below the consensus of $1.28 billion.  The company reported an adjusted loss of $1.14 per share, larger than the consensus of 82 cents.

Crypto stocks are being undercut as Bitcoin (^BTCUSD) is down -3.36%, giving back most of yesterday’s rally.  Coinbase (COIN) is down -5.0% in pre-market trading.  Marathon Digital (MARA) is down -4.1%, and Riot Blockchain (RIOT) is down -3.1%.

Bausch Health (BHC) is down -10% in pre-market trading after a disappointing revenue and earnings report.

Today’s U.S. Earnings Reports (8/9/2022)

Emerson Electric Co (EMR), Sysco Corp (SYY), TransDigm Group Inc (TDG), Norwegian Cruise Line Holdings (NCLH), Ralph Lauren Corp (RL), Akamai Technologies Inc (AKAM), Welltower Inc (WELL), Wynn Resorts Ltd (WYNN).

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