Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.33%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.47%.

Stock indexes this morning are modestly higher, as an +8% jump in Amazon.com in pre-market trading is lifting technology stocks.  However, gains are muted, with Apple down more than -2% after delivering a lackluster outlook for its fourth quarter.  A mixed U.S. unemployment report this morning was neutral for stocks as July nonfarm payrolls rose less than expected, but July average hourly earnings rose more than expected, sparking concerns about wage pressures. 

U.S. Jul nonfarm payrolls rose +187,000, below expectations of +200,000, which was slightly dovish for Fed policy.  The Jul unemployment rate unexpectedly fell -0.1 to 3.5%, showing a stronger labor market than expectations of 3.6%.

U.S. Jul average hourly earnings rose +0.4% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y, which was hawkish for Fed policy.

The markets are discounting the odds at 19% for a +25 bp rate hike at the September 20 FOMC meeting. 

Global bond yields are mixed.  The 10-year T-note yield fell back from an 8-3/4 month high of 4.204% and is down -2.0 bp at 4.155%.  The 10-year German bund yield rose to a 3-week high of 2.651% and is up +1.4 bp at 2.619%.  The 10-year UK gilt yield fell back from a 2-1/2 week high of 4.499% and is down -1.3 bp at 4.457%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.15%.  China’s Shanghai Composite Index today closed up +0.23%.  Japan’s Nikkei Stock Index closed up +0.10%.

The Euro Stoxx 50 today is slightly lower.  A jump in European government bond yields is weighing on stocks after the 10-year German bund yield rose to a 3-week high.  Another bearish factor was an unexpected decline in Eurozone Jun retail sales.  In addition, European stocks exposed to Apple are under pressure after Apple reported its third consecutive quarter of declining sales and predicted a similar performance for the current quarter.  Strength in bank stocks is limiting losses in the overall market, with Credit Agricole SA up more than +4% after reporting better-than-expected Q2 earnings. Travel stocks are also climbing after Booking Holdings reported stronger-than-expected Q2 revenue, reflecting strong travel demand despite higher flights and hotel prices.  In addition, German factory orders jumped by the most in 3 years in June, a positive sign for the Eurozone’s largest economy. 

Eurozone Jun retail sales unexpectedly fell -0.3% m/m, weaker than expectations of +0.2% m/m.

German Jun factory orders unexpectedly rose +7.0% m/m, stronger than expectations of -2.0% m/m and the biggest increase in 3 years.

The German Jul S&P construction PMI fell -0.4 to 41.0, the weakest level in 2-1/2 years.

China’s Shanghai Composite today closed moderately higher.  Chinese brokerage stocks rallied for a second day after the Securities Depository and Clearing Corp cut the reserve payment ratio for stock trading to an average of 13% from 16%, a bigger cut than expectations of 15%.  Chinese property and building stocks rallied today after PBOC Governor Gongsheng met with representatives from eight developers and said the PBOC would increase funding support for the private sector.  On the negative side, Chinese superconductor stocks plunged after several companies dispelled rumors that they had made a breakthrough in the technology.

The outlook for more PBOC stimulus also gave stocks a boost after Zou Lan, head of the monetary policy department of the PBOC, told reporters in Beijing that the central bank will step up “counter-cyclical adjustment” to support the economy and will coordinate the use of tools at its disposal, including reducing the reserve requirement ratio and injecting liquidity into the financial system. 

Japan’s Nikkei Stock Index today recovered from a 3-week low and closed slightly higher.  Japanese brokerage stocks moved higher today after the five largest firms all reported better-than-expected Q1 income estimates this week.  Warren Buffet’s Berkshire Hathaway raised its stake in the five largest Japanese brokerages to an average of more than 8.5% in June.  Several of the brokerages, including Mitsubishi and Mitsui, said they would consider additional shareholder returns depending on future earnings, and Itochu said it would buy back up to 0.4% of shares for 25 billion yen.  Exporter stocks also moved higher today after the 10-year JGB bond yield fell back from a 9-year high, which pressured the yen.  Bond yields retreated after the BOJ on Thursday announced an unscheduled debt-purchase operation for the second time this week to push bond yields lower.

Pre-Market U.S. Stock Movers

Amazon.com (AMZN) jumped more than +8% in pre-market trading after reporting Q2 net sales of $134.38 billion, stronger than the consensus of $131.63 billion, and forecasting Q3 net sales of $128 billion-$143 billion, above the consensus of $138.3 billion. 

Cloudflare (NET) rallied more than +8% in pre-market trading after reporting Q2 adjusted EPS of 10 cents, better than the consensus of 7.5 cents, and raised its full-year EPS forecast to 37 cents from 34 cents to 35 cents, stronger than the consensus of 34 cents. 

Atlassian (TEAM) surged more than +20% in pre-market trading after reporting Q4 revenue of $939.1 million, better than the consensus of $915.7 million, and forecast Q1 revenue of $950 million-$970 million, above the consensus of $955.7 million.

DraftKings (DKNG) rallied more than +10% in pre-market trading after reporting Q2 revenue of $874.9 million, stronger than the consensus of $757.7 million, and raising its full-year revenue forecast to $3.46 billion-$3.54 billion from a previous estimate of $3.14 billion-$.24 billion, well above the consensus of $3.27 billion. 

Datadog (DDOG) jumped more than +6% in pre-market trading after Stifel raised its price target on the stock to $115 from $101. 

BWX Technologies (BWXT) climbed more than +5% in pre-market trading after Baird upgraded the stock to outperform from neutral with a price target of $85. 

Apple (AAPL) dropped more than -2% in pre-market trading after reporting Q3 iPhone revenue of $39.67 billion, below the consensus of $39.80 billion, and said Q4 year-over-year performance to be similar to Q3. 

Microchip Technology (MCHP) tumbled more than -5% in pre-market trading after forecasting Q2 net sales of $2.22 billion-$2.31 billion, the midpoint below the consensus of $2.28 billion.

Moderna (MRNA) fell more than -1% in pre-market trading after TD Cowen downgraded the stock to market perform from outperform.

Fortinet (FTNT) sank more than -18% in pre-market trading after reporting Q2 billings of $1.54 billion, below the consensus of $1.59 billion, and cut its full-year billings forecast to $6.49 billion-$6.59 billion from a previous estimate of $6.75 billion-$6.81 billion, well below the consensus of $6.79 billion.

ResMed (RMD) dropped more than -7% in pre-market trading after reporting Q4 adjusted EPS of $1.60, weaker than the consensus of $1.70. 

Redfin (RDFN) tumbled more than -9% in pre-market trading after reporting a Q2 Ebitda loss of -$6.93 million, a larger loss than the consensus of -$3.23 million, and forecast Q3 adjusted Ebitda of $4 million-$14 million, weaker than the consensus of $21.8 million. 

Today’s U.S. Earnings Reports (8/4/2023)

AES Corp/The (AES), Cboe Global Markets Inc (CBOE), Dominion Energy Inc (D), Evergy Inc (EVRG), LyondellBasell Industries NV (LYB), PPL Corp (PPL).

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