Markets Today: Stock Index Futures Climb on Strength in Tech Stocks and Positive China News

Rich Asplund - Barchart - Mon Sep 11, 2023

Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.47%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.74%.

Stock index futures this morning are moderately higher on strength in technology stocks. Tesla climbed more than +5% in pre-market trading after Mogan Stanley upgraded the stock. Also, Qualcomm is up more than +5% after Apple extended its contract with the company to provide it with modem semiconductor chips for three more years. In addition, M&A activity is supporting stocks after JM Smucker agreed to acquire Hostess Brands for $5.6 billion.

Comments on Sunday from U.S. Treasury Secretary Yellen were bullish for stocks when she said she's "feeling very good" about the case for a soft landing in the U.S. as "every measure of inflation is on the road down," and she's increasingly confident that the U.S. will be able to contain inflation without major damage to the job market.

U.S. and European stocks garnered carryover support today from a +0.84% rally in China’s Shanghai Composite on positive Chinese credit and inflation news.

The markets are discounting the odds at 7% for a +25 bp rate hike at the September 20 FOMC meeting and 44% for that +25 bp rate hike at the November 1 FOMC meeting.

Global bond yields are higher. The 10-year T-note yield is up +2.2 bp at 4.286%. The 10-year German bund yield is up +2.4 bp at 2.634%. The 10-year UK gilt yield is up +4.9 bp at 4.472%.

Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.42%. China’s Shanghai Composite Index closed up +0.84%. Japan’s Nikkei Stock Index closed down -0.43%.

The Euro Stoxx 50 today is moderately higher. A rally in Italian bank stocks is leading the overall market higher on a report from the Corriere della Sera newspaper that the Italian government is weighing changes to the controversial tax on bank windfall profits unveiled last month.

Stocks also found support after the European Commission cut its Eurozone inflation forecast for this year. However, stock gains were limited after the European Commission also cut its Eurozone 2023 GDP forecast. The European Commission cut its 2023 Eurozone GDP forecast to +0.8% from an earlier projection of +1.1%. It also cut its 2023 Eurozone inflation forecast to +5.6% from a previous forecast of +5.8%.

Italy's July industrial production fell -0.7% m/m, weaker than expectations of -0.3% m/m.

China’s Shanghai Composite Index posted moderate gains. Chinese stocks rallied today on positive credit and inflation news. Today’s news that showed China’s credit demand improved last month shows recent steps to bolster the real estate market may be starting to lift household demand for mortgages, while corporate loans also picked up. Also, Chinese consumer prices last month turned positive, and producer prices narrowed their decline, easing deflation concerns. Chinese suppliers of Huawei rallied today after Morgan Stanley said it expects the company to garner 10% of China’s 5G smartphone market next year.

The yuan rallied +0.6% against the dollar today after the People’s Bank of China (PBOC) said it will take action to correct one-sided moves in the market whenever it’s needed. The PBOC said, “Participants of the foreign exchange market should voluntarily maintain a stable market and should resolutely avoid behaviors that disturb market orders, such as conducting speculative trades.”

China Aug CPI rose +0.1% y/y after a -0.3% y/y decline in July, right on expectations. Aug PPI eased to -3.0% y/y from -4.4% y/y in July, weaker than expectations of -2.9% y/y.

China Aug new yuan loans were 1.36 trillion yuan, above expectations of +1.25 trillion yuan. Aug aggregate financing, the broadest measure of credit growth, rose +3.12 trillion yuan, stronger than expectations of +2.69 trillion yuan.

Japan’s Nikkei Stock Index fell to a 1-week low today and closed moderately lower. A jump in Japanese government bond yields today boosted the yen to a 1-week high against the dollar and undercut exporter stocks, which led the overall market lower. The 10-year JGB bond yield jumped to a 9-1/2 year high of 0.711% today after BOJ Governor Ueda said an end to negative interest rates is possible by year-end. Ueda told the Yomiuri newspaper that the BOJ will have enough information and data by the year-end to judge if wages will continue to rise, a condition for adjusting stimulus. Negative economic news also weighed down stocks after Japan Aug machine tool orders fell for the eighth consecutive month. Strength in financial stocks limited losses in the overall market on the expectation that rising interest rates would boost profits on lending for financial firms.

BOJ Governor Ueda said an end to negative interest rates in Japan is possible if policymakers become confident that prices and wages will keep going up sustainably.

Japan Aug machine tool orders fell -17.6% y/y, the eighth consecutive month orders have declined.

Pre-Market U.S. Stock Movers

Tesla (TSLA) jumped more than +5% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight and said Tesla’s Dojo supercomputer may add as much as $500 billion to the company’s market value through faster adoption of robotaxis and network services.

Qualcomm (QCOM) climbed more than +5% in pre-market trading after Apple extended its modem chip contract with the company for three more years.

Microsoft (MSFT) is up nearly +1% in pre-market trading after Citigroup opened a positive catalysts watch on the stock, seeing “a rich catalyst path ahead” for the company.

Hostess Brands (TWNK) surged more than +14% in pre-market trading after JM Smucker agreed to acquire the company for $5.6 billion.

Block Inc (SQ) gained more than +1% in pre-market trading after Baird said last week’s slump in the stock has pushed the stock to oversold and named it as a bullish fresh pick.

Crinetics Pharmaceuticals (CRNX) soared more than +30% in pre-market trading after it said its oral, once-daily Paltusotine achieved positive results and met the primary endpoint and all secondary goals to treat people living with acromegaly and neuroendocrine tumors.

Kenvue (KVUE) climbed more than +3% in pre-market trading after Deutsche Bank raised its recommendation on the stock to buy with a price target of $27.

Tenable Holdings (TENB) rose more than +3% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $56.

RTX Corp (RTX) dropped more than -4% in pre-market trading after cutting its full-year sales forecast to $67.5 billion-$68.5 billion from a previous estimate of $73 billion-$74 billion, weaker than the consensus of $73.64 billion.

Ovintiv Inc (OVV) fell more than -2% in pre-market trading after announcing a sale of 15 million shares of the company’s common stock by a holder.

Brunswick Corp (BC) slid more than -2% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.

Evergy Inc (EVRG) fell nearly -1% in pre-market trading after Wolfe Research downgraded the stock to peer perform from outperform.

Earnings Reports (9/11/2023)

Bowlero Corp (BOWL), Casey's General Stores Inc (CASY), FuelCell Energy Inc (FCEL), Mission Produce Inc (AVO), Oracle Corp (ORCL), Skillsoft Corp (SKIL), Waldencast plc (WALD).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.