Morning Markets
September S&P 500 futures (ESU22) this morning are up +0.29%. Stock indexes this morning are moderately higher after monthly news from ADP showed U.S. companies increased headcount well below expectations, which is dovish for Fed policy. Gains were limited, however, as a more than -2% slump in crude prices to a 1-week low today undercut energy stocks in pre-market trading.
Higher T-note yields are negative for stocks, as the 10-year T-note yield this morning climbed to a new 2-month high of 3.161%. T-note yields are climbing on a jump in European government bond yields on record inflation in the Eurozone after Eurozone Aug CPI climbed at a record pace of +9.1% y/y. That pushed the 10-year German bund yield up to a 2-month high. Also, hawkish comments this morning from Cleveland Fed President Mester weighed on stocks when she said, “in her view, it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there.”
The U.S. Aug ADP employment change rose +132,000, weaker than expectations of +300,000 and the smallest increase in 19 months.
Cleveland Fed President Mester said, "her current view is that it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there” and that she does not anticipate the Fed cutting the fed funds rate target next year.
The Euro Stoxx 50 today is down -0.28% at a 6-week low. Soaring inflation is undercutting European stocks after today’s news showed Eurozone Aug CPI rose a record +9.1% y/y. The consumer price news prompted hawkish comments from ECB Governing Council member and Bundesbank President Nagel, who said the ECB needs a "strong" interest rate hike in September. That helped push the 10-year German bund yield today to a 2-month high of 1.586%. Weakness in utility stocks is weighing on the overall market on concerns over Russian gas supplies as Russia halts gas glows through the Nord Stream pipeline today for three days of planned maintenance.
Eurozone Aug CPI rose a record +9.1% y/y, stronger than expectations of+9.0% y/y. The Aug core CPI rose a record +4.3% y/y, stronger than expectations of +4.1% y/y.
ECB Governing Council member and Bundesbank President Nagel said he sees a risk that high inflation will persist even longer and that the ECB needs a "strong" interest rate hike in September.
Asian markets today closed lower. China’s Shanghai Composite index closed down -0.78%, and Japan’s Nikkei index closed down -0.37%.
China’s Shanghai Composite today fell moderately today, led by losses in metals producers on concern that virus lockdowns in China will hurt demand. Also, Chinese property stocks declined after economic news today showed contract sales plunged in August for China's top 100 property developers. Asian technology stocks were also under pressure after South Korea reported its first monthly decline in semiconductor shipments in almost three years, a sign of flagging demand. However, better-than-expected economic news on manufacturing activity limited losses in Chinese stocks.
The China Aug manufacturing PMI rose +0.4 to 49.4, stronger than expectations of 49.2. The China Aug non-manufacturing PMI fell -1.2 to 52.6, stronger than expectations of 52.3.
China's top 100 property developers saw their combined Aug contract sales plunge -32.9% y/y to 519 billion yuan.
South Korea reported its July semiconductor shipments fell almost -23% y/y, the first decline in shipments in almost three years.
Japan’s Nikkei Stock Index today posted moderate losses. Concerns that aggressive Fed tightening will slow global growth weighed on Japanese stocks. Also, Japanese technology stocks fell after South Korea reported its first decline in semiconductor shipments in almost three years. However, losses in the Nikkei Stock Index were contained by better-than-expected Japanese economic news today on industrial production, retail sales, and consumer confidence.
The Japan Aug consumer confidence index unexpectedly rose +2.3 to 32.5, stronger than expectations of a decline to 29.5.
Japan July industrial production unexpectedly rose +1.0% m/m, stronger than expectations of a decline of -0.5% m/m.
Japan July retail sales rose +0.8% m/m, stronger than expectations of +0.3% m/m.
Pre-Market U.S. Stock Movers
PayPal (PYPL) climbed nearly +3% in pre-market trading after Bank of America upgraded the stock to buy from neutral.
ChargePoint (CHPT) rose more than +2% in pre-market trading after reporting Q2 revenue of $108.3 million, better than the consensus of $103.1 million.
Rocket Lab (RKLB) rose +3% in pre-market trading after Cowen upgraded the stock to outperform from market perform.
Energy stocks and energy service providers are falling in pre-market trading, with the price of WTI crude down more than -2% at a 1-week low. Exxon Mobil (XOM), Devon Energy (DVN), Occidental Petroleum (OXY), Marathon Oil (MRO), and Schlumberger (SLB) are down more than -2%.
HP Inc (HPQ) tumbled more than -6% in pre-market trading after reporting Q3 net revenue of $14.7 billion, weaker than the consensus of $15.6 billion, and cut its full-year adjusted EPS forecast to $4.02-$4/12 from a prior forecast of $4.24-$4.38, below the consensus of $4.30.
Snap (SNAP) dropped -7% in pre-market trading after the company said it plans to lay off around 20% of its 6,500 employees, and Citigroup downgraded the stock to neutral from buy.
HP Enterprise (HPE) slid more than -1% in pre-market trading after it narrowed its full-year adjusted EPS forecast to $1.96-$2.04 from a prior view of $1.96-$2.10, the midpoint below the consensus of $2.02.
Chewy (CHWY) sank -12% in pre-market trading after cutting its fiscal year sales forecast for the current year to no more than $10 billion, weaker than a previous forecast of $10.4 billion.
Today’s U.S. Earnings Reports (8/31/2022)
Brown-Forman Corp (BF/B), Cooper Cos Inc/The (COO), Donaldson Co Inc (DCI), Five Below Inc (FIVE),
MongoDB Inc (MDB), Nutanix Inc (NTNX), Okta Inc (OKTA), Pure Storage Inc (PSTG), SentinelOne Inc (S), Veeva Systems Inc (VEEV).
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