Stock Indexes Sink on Fed Policy Outlook

Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.73% at a 1-month low.  Stock indexes this morning are extending last Friday’s rout after Fed Chair Powell signaled the Fed would maintain a restrictive policy stance for some time.  In addition, interest rate-sensitive technology stocks are being hammered in pre-market trading after the 10-year T-note yield rose to a 2-month high of 3.127%.  Global stock markets are under pressure today on concerns aggressive central bank rate hikes may exacerbate an economic slowdown.

The Euro Stoxx 50 today fell to a 1-1/4 month low and is down -1.42%.  European stocks today are falling on concerns about the economic impact of further central bank tightening, which was embraced by global central bankers at the Fed’s annual symposium over the weekend in Jackson Hole, Wyoming.  The 10-year German bund yield rose to a 2-month high today at 1.545%.  European stocks also face additional headwinds, including an energy crisis and political turmoil in Italy and the UK. 

ECB Governing Council member Kazaks said the ECB needs to act forcefully and raise interest rates by at least 50 bp next month to bring inflation back under control.

ECB Governing Council member Rehn said the ECB must act forcefully to contain record inflation and keep expectations for future price growth anchored as the weak euro exacerbates a surge in energy costs.

Asian markets today settled mixed.  China’s Shanghai Composite index closed up +0.14%, and Japan’s Nikkei index closed down -2.66%. 

China’s Shanghai Composite today recovered from early losses and closed slightly higher.  Strength in Chinese exporters led the overall market higher after the Chinese yuan today fell to a new 2-year low of 6.9225 yuan/USD.  Chinese stocks also had carry-over support from last Friday when the SEC said the U.S. and China had reached a preliminary agreement to allow U.S. officials to review audit documents of Chinese businesses.

Japan’s Nikkei Stock Index today tumbled to a 2-1/2 week low and settled sharply lower.  Japanese stocks sold off today after last Friday’s hawkish comments from Fed Chair Powell signaled that interest rate hikes would be prolonged, putting downward pressure on the economy.  Losses in technology, financials, and industrial stocks led the overall market lower.

The yen fell to a 6-week low against the dollar today on dovish comments from BOJ Governor Kuroda, who said the BOJ "has no choice other than continued monetary easing until wages and prices rise in a stable and sustainable manner."

Pre-Market U.S. Stock Movers

Large-cap technology stocks are falling in pre-market trading on negative carry-over from last Friday when Fed Chair Powell signaled the Fed is likely to keep raising interest rates.  Amazon.com (AMZN), Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA) are all down more than -1%. 

Cryptocurrency-exposed stocks are moving lower in pre-market trading, with the price of Bitcoin falling more than -4% to a 1-1/2 month low.  Marathon Digital (MARA), Microstrategy (MSTR), and Bit Digital (BTBT) are all down more than -4%.  Also, Coinbase Global (COIN), Riot Blockchain (RIOT), and Hut 8 Mining (HUT) are down more than -3%.

Dow Inc. (DOW) is down -3% in pre-market trading after KeyBanc Capital Markets downgraded the stock to underweight from sector weight, citing the company’s “significant exposure to softening commodity prices amid a weaker economic outlook globally.”

Minerva Neurosciences (NERV) climbed nearly +3% in pre-market trading on carry-over support from last week’s 150% rally in the stock after the company applied to the FDA for approval of its schizophrenia drug candidate roluperidone and after Point72 Asset Management disclosed an 8.8% passive stake in the stock.

Pinduoduo (PDD) surged +15% in pre-market trading after the Chinese e-commerce company reported Q2 revenue of 31.44 billion, well above the consensus of 23.62 billion yuan, and said it saw a rebound in consumer sentiment during the period.

Today’s U.S. Earnings Reports (8/29/2022)

Catalent Inc (CTLT), Cenntro Electric Group Ltd (CENN), Gambling.com Group Ltd (GAMB), HEICO Corp (HEI), Napco Security Technologies In (NSSC), Selectquote Inc (SLQT).

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