Markets Today: Stocks Sharply Higher for a Second Day as Sentiment Improves

Rich Asplund - Barchart - Tue Oct 18, 2022

Morning Markets

December S&P 500 futures (ESZ22) this morning are up by +2.16% at a 1-week high. U.S. stock indexes this morning are extending Monday’s sharp gains on strength in mega-cap technology stocks. Also, better-than-expected quarterly earnings results today from Goldman Sachs and State Street have improved market sentiment and are helping to push stock indexes higher.

Sentiment toward stocks has improved, with most of the Q3 corporate earnings results that have been released have been better than expected. Lower bond yields this morning are also positive for stocks, with the 10-year T-note yield down -3.9 bp to 3.972% on positive carry-over from a rally in European government bonds.

The Euro Stoxx 50 today is up by +1.73% and posted a 4-week high. A rally in European automakers is leading the overall market higher today after Eurozone Sep new car registrations rose by the most in 15 months. Stocks also received a boost after today’s economic news showed the German Oct ZEW survey expectations of economic growth unexpectedly rose. Lower European government bond yields today are another supportive factor for stocks, with the 10-year UK gilt yield down -2.4 bp to 3.953% and the 10-year German bund yield down -1.6 bp to 2.253%.

Eurozone Sep new car registrations rose +9.6% y/y, the largest increase in 15 months.

The German Oct ZEW survey expectations of economic growth unexpectedly rose +2.7 to -59.2, stronger than expectations of a decline to -66.5.

Asian markets today settled mixed. China’s Shanghai Composite closed down -0.13%, and Japan’s Nikkei Stock Index closed up +1.42%.

China’s Shanghai Composite today fell back from a 3-week high and closed slightly lower. Chinese stocks gave up an early advance and moved lower after the government delayed the release of China‘s Q3 GDP report, fueling speculation that the report was weaker than expected and the government did not want to release it during the week-long Communist party congress. Chinese stocks also fell back on concern that economic growth will suffer as the government maintains its strict Covid Zero policy. Chinese stocks today initially moved higher, led by strength in airline stocks, after two of China’s largest carriers announced the resumption of international flights at the end of this month.

Japan’s Nikkei Stock Index today rallied to a 1-1/2 week high and closed moderately higher. Japanese stocks moved higher today on positive carry-over from Monday’s sharp rally in U.S. stocks. Also, strength in exporters was supportive for the overall market today after the yen fell to a new 32-year low against the dollar.

Pre-Market U.S. Stock Movers

Goldman Sachs (GS) is up more than +2% in pre-market trading after reporting Q3 trading revenue of $6.2 billion, better than the consensus of $5.7 billion.

State Street (STT) climbed +3% in pre-market trading after reporting Q3 adjusted EPS of $1.82, stronger than the consensus of $1.78, and said it intends to repurchase $ 1 billion worth of stock in Q4.

Mega-cap technology stocks are moving higher in pre-market trading as they extend Monday’s gains. Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA) are up more than +2%.

Target (TGT) rose more than +2% in pre-market trading after Jeffries upgraded the stock to buy from hold.

Juniper (JNPR) climbed more than +2% in pre-market trading after Piper Sandler upgraded the stock to neutral from underweight.

Antero Resources (AR) rallied more than +4% in pre-market trading after S&P Dow Jones Indices said the stock would join the S&P Midcap 400 before trading begins on October 20.

PDC Energy (PDCE) fell nearly -2% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.

Conn’s Inc (CONN) plunged -22% in pre-market trading after it withdrew its full-year guidance and said it expects Q3 revenue to be down -21% to -23%.

International Paper (IP) and Packaging Corp (PKG) slid -1% in pre-market trading after Deutsche Bank downgraded the stocks to sell from hold.

Mohawk Industries (MHK) fell -1% in pre-market trading after Bank of America Global Research downgraded the stock to underperform from neutral.

Today’s U.S. Earnings Reports (10/18/2022)

Goldman Sachs Group Inc/The (GS), Hasbro Inc (HAS), Intuitive Surgical Inc (ISRG), JB Hunt Transport Services Inc (JBHT), Johnson & Johnson (JNJ), Lockheed Martin Corp (LMT), Netflix Inc (NFLX), Omnicom Group Inc (OMC), Signature Bank/New York NY (SBNY), State Street Corp (STT), Truist Financial Corp (TFC), United Airlines Holdings Inc (UAL).

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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.