Stock Indexes Stabilize as Recent Selling Subsides

Morning Markets

September S&P 500 futures (ESU22) this morning are up +0.48%.   Stock indexes this morning are moderately higher as the heavy selling over the past two sessions subsided.  Lower T-note yields are supportive for stocks, with the 10-year T-note yield this morning down -1.1 bp to 3.091%.  A more than +5% jump in Best Buy in pre-market trading is also bullish for stocks after the company reported better-than-expected Q2 earnings. 

Credit Suisse today recommended that investors go underweight global equities as the argument for an early dovish pivot by the Fed and other major central banks are now "clearly out the window."  Markets are now confronted with slowing growth, rising recession risks, and elevated inflation, and "the next few months are thus likely going to be painful."   

The Euro Stoxx 50 today is up +1.49%.  European stocks today rebounded from Monday’s rout as cheaper valuations lured dip-buyers into the market.  Banks and automaker stocks led the gains in the overall market, while energy and mining stocks underperformed.  Also, concerns about an energy crisis eased slightly as European nat-gas prices fell to a 1-week low today as the European Union is preparing to intervene in the short-term to dampen soaring power costs.  European Commission President von der Leyen said the EU seeks to develop an instrument to break the link between gas and electricity prices.

Today’s Eurozone economic reports were negative for stocks. Eurozone Aug economic confidence fell -1.3 to a 1-1/2 year low of 97.6, weaker than expectations of 98.0.  Also, German Aug CPI (EU harmonized) rose a record +8.8% y/y, up from +8.5% in July.

ECB comments today were hawkish for monetary policy and bearish for stocks.  ECB Chief Economist Lane said the ECB needs a "steady pace" of interest rate increases in fighting record inflation to minimize negative consequences.  Also, ECB Governing Council member Vasle said, "we haven't seen the highest numbers for inflation in the Eurozone," and he expects inflation to peak next quarter before subsiding in the first half of 2023.

Asian markets today settled mixed.  China’s Shanghai Composite index closed down -0.42%, and Japan’s Nikkei index closed up +1.14%. 

China’s Shanghai Composite today posted moderate losses on weakness in bank stocks.  China’s banking industry reported outstanding non-performing loans rose to a record 2.95 trillion yuan as of June.  Also, Chinese property developers retreated, led by an -8% fall in CIFI Holdings when it reported the first half of 2022 net income plunged -80% y/y. 

Japan’s Nikkei Stock Index today rebounded moderately after heavy selling on Monday.  Better-than-expected Japanese labor market data today gave stocks a lift after Japan’s July job-to-applicant ratio unexpectedly rose +0.02 to a 2-1/4 year high of 1.29, showing a stronger labor market than expectations of 1.27.  Weakness in the yen also boosted exporters after the yen fell to a 6-week low against the dollar Monday.

Pre-Market U.S. Stock Movers

Best Buy (BBY) climbed more than +5% in pre-market trading after reporting Q2 adjusted EPS of $1.54, better than the consensus of $1.35. 

Advanced Micro Devices (AMD) is up more than +1% in pre-market trading, with Wedbush holding an outperform rating on the stock, saying the firm’s new Ryzen 7000 series processor chips offer “significant improvement” from the Ryzen 5000 offerings. 

Cryptocurrency-exposed stocks are climbing in pre-market trading, with the price of Bitcoin up more than +1%.  Marathon Digital (MARA) is up more than +5%.  Also, Riot Blockchain (RIOT) is up more than +4%, and Microstrategy (MSTR) and Coinbase Global (COIN) are up more than +3%.

The Gap (GPS) is up more than +3% in pre-market trading after Barclays raised its recommendation on the stock to equal weight from underweight.

Gran Tierra Energy (GTE) jumped more than +8% in pre-market trading after the company said it would buy back as many as 36 million shares in a 1-year period ending August 31, 2023. 

U.S.-listed Chinese stocks are moving higher in pre-market trading, led by a +4% gain in Baidu (BIDU) after it reported Q2 operating profit of 5.49 billion yuan, well above the consensus of 3.30 billion yuan.  Also, Pinduoduo (PDD) rose more than +3%, and JD.com (JD) and Alibaba Group Holding (BABA) rose +1%.

Lucid Group (LCID) fell -2% in pre-market trading after filing for the potential sale of up to $8 billion of mixed securities, which may include common stock, by the company.

Twitter (TWTR) is down more than -1% in pre-market trading after Elon Musk cited the recent accusations from a Twitter whistle-blower as a new reason to terminate his $44 billion takeover of the company. 

Today’s U.S. Earnings Reports (8/30/2022)

Best Buy Co Inc (BBY), Hewlett Packard Enterprise Co (HPE), HP Inc (HPQ), PVH Corp (PVH).

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