Morning Markets
September S&P 500 futures (ESU22) this morning are down -0.60% at a 1-month low. U.S. stock indexes this morning followed world equity markets lower on global growth concerns after China put the city of Chengdu, with a population of 21 million people, under lockdown due to a surge in Covid infections. Chengdu is the biggest city to shut down since Shanghai’s two-month lockdown earlier this year, which exacerbated supply chain issues and undercut global economic activity.
Chipmakers are also falling in pre-market trading after Nvidia warned that new U.S. government rules governing the export of artificial intelligence chips to China might affect hundreds of millions of dollars in revenue.
Higher global bond yields are negative for stocks, as the 10-year T-note yield this morning climbed to a 2-1/4 month high of 3.263%. Global government bond yields are climbing on the outlook for central banks to tighten monetary policy aggressively to combat inflation. The 10-year UK gilt yield soared to an 8-1/2 year high today of 2.906%, and the 10-year German bund yield climbed to a 2-month high of 1.634%.
U.S. weekly initial unemployment claims unexpectedly fell -5,000 to a 2-month low of 232,000, showing a stronger labor market than expectations of an increase to 248,000.
U.S. Q2 nonfarm productivity was revised upward to -4.1% from the previously reported -4.6%, stronger than expectations of -4.3%. Q2 unit labor costs were revised downward to +10.2% from +10.8%, weaker than expectations of +10.5%.
The Euro Stoxx 50 today is down -1.10% and fell to a 1-1/2 month low. Fears of an economic slowdown are intensifying and weighing on stocks as European, and U.S. central bankers ramp up restrictive monetary policies to rein in inflation. The markets now fully expect a 75 bp rate hike by the ECB at next Thursday’s policy meeting after Wednesday’s news showed Eurozone Aug CPI rose a record +9.1% y/y. The 10-year German bund yield today to a new 2-month high of 1.634%. European stocks also retreated after a gauge of Eurozone manufacturing activity was revised downward to a 2-year low.
The Eurozone July unemployment rate fell -0.1 to a record low 6.6%, right on expectations.
The Eurozone Aug S&P Global manufacturing PMI was revised lower by -0.1 to 49.6 from the previously reported 49.7, the steepest pace of contraction in 2 years.
German July retail sales unexpectedly rose +1.9% m/m, stronger than expectations of -0.1% m/m.
Asian markets today closed lower. China’s Shanghai Composite index closed down -0.544%, and Japan’s Nikkei index closed down -1.53%.
China’s Shanghai Composite today dropped to a 3-week low and closed moderately lower on fresh Covid lockdowns in China. China today locked down Chengdu, the capital of Sichuan province with 21 million people, to contain a Covid outbreak. The lockdown threatens to disrupt economic activity, exacerbate supply-chains issues, and further curb Chinese growth. Chinese stocks were also undercut after a gauge of Chinese manufacturing activity unexpectedly contracted last month.
The China Caixin Aug manufacturing PMI fell -0.9 to 49.5, weaker than expectations of 50.0.
Japan’s Nikkei Stock Index today tumbled to a 4-week low. Weakness in technology stocks led losers in the Nikkei Stock Index after Seagate Technology, the world’s biggest maker of computer hard drives, cut its outlook citing a worsening economic backdrop. Japanese shipping stocks also retreated today after the Baltic Dry Index, which measures pricing for global shipping rates, fell for a fifth day to a 2-year low. The Nikkei recovered from its worst levels as exporter stocks gained after the yen sank to a new 24-year low against the dollar, which bolsters the earnings prospects of exporters.
Japan Q2 capital spending ex-software rose +3.5% y/y, weaker than expectations of +5.1% y/y.
Japan Q2 company sales rose +7.2% y/y, weaker than expectations of +11.6% y/y.
The Japan Aug Jibun Bank manufacturing PMI was revised upward by +0.6 to 51.5 from the previously reported 51.0.
Pre-Market U.S. Stock Movers
U.S. chipmaking stocks are falling in pre-market trading after Nvidia warned that new U.S. government rules governing the export of artificial intelligence chips to China might affect hundreds of millions of dollars in revenue. Nvidia (NVDA) is down -6%, and Advanced Micro Devices (AMD) is down more than -3%. Also, Micron (MU) is down more than -2%, and Intel (INTC) is down more than -1%.
Okta (OKTA) tumbled nearly -15% in pre-market trading after forecasting 2023 revenue of $1.81 billion-$1.82 billion, the midpoint below the consensus of $1.82 billion. Also, Morgan Stanley downgraded the stock to equal weight from overweight.
C3.ai (AI) tumbled -14% in pre-market trading after reporting Q1 revenue of $65.3 million, below the consensus of $66 million, and cut its 2023 revenue forecast to $255 million-$270 million from a previous forecast of $308 million-$316 million, weaker than the consensus of $310.6 million.
Energy stocks and energy service providers are falling in pre-market trading, with the price of WTI crude down more than -1% to a 1-1/2 week low. Exxon Mobil (XOM), Devon Energy (DVN), Occidental Petroleum (OXY), Marathon Oil (MRO), and Schlumberger (SLB) are down more than -2%.
Hormel Foods (HRL) slid -4% in pre-market trading after reporting Q3 EPS of 40 cents, below the consensus of 41 cents, and cut its full-year EPS forecast to $1.78-$1.85 from a previous estimate of $1.87-$1.97, weaker than the consensus of $1.91.
Veeva (VEEV) dropped more than -10% in pre-market trading after reporting Q2 subscription revenue of $428.6 million, below the consensus of $431.9 million, and cut its 2023 revenue forecast to $2.14 billion-$2.15 billion from a previous forecast of $2.17 billion-$2.18 billion, weaker than the consensus of $2.17 billion.
Meta Platforms (META) rose nearly +1% in pre-market trading after the company said it is forming a team to identify and create “paid features” for its apps, including Facebook, Instagram, and WhatsApp
Pure Storage (PSTG) climbed more than +5% in pre-market trading after reporting Q2 revenue of $646.8 million, above the consensus of $636.1 million, and raising its 2023 revenue forecast to $2.75 billion from a prior forecast of $2.66 billion, stronger than the consensus of $2.67 billion.
SentinelOne (S) rose more than +3% in pre-market trading after reporting Q2 revenue of $102.5 million, better than the consensus of $95.6 million.
Today’s U.S. Earnings Reports (9/1/2022)
Broadcom Inc (AVGO), Campbell Soup Co (CPB), Ciena Corp (CIEN), Hormel Foods Corp (HRL), Lululemon Athletica Inc (LULU), nCino Inc (NCNO), Ollie's Bargain Outlet Holding (OLLI), Science Applications International (SAIC), Smartsheet Inc (SMAR), Toro Co/The (TTC).
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