Morning Markets

December E-Mini S&P 500 futures (ESZ23) are up +0.26%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.22%.

Stock index futures this morning are edging higher ahead of the conclusion of the 2-day FOMC meeting and comments from Fed Chair Powell later this afternoon.  U.S. stocks have some carryover support today from gains in European stocks on signs of slowing price pressures in Europe and the UK after German producer prices in August posted a record decline and UK consumer prices last month unexpectedly eased. 

Stocks are awaiting the conclusion of the 2-day FOMC meeting later today.  The markets are fully expecting the FOMC this week to leave its funds rate target unchanged at 5.25/5.50%.  However, the markets are expecting the FOMC to maintain a hawkish bias and keep in play the possibility of one more rate hike later this year.

Specifically, the markets are discounting a 30% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 45% chance for that 25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields today are lower.  The 10-year T-note yield is down -1.4 bp at 4.345%.  The 10-year German bund yield is down -1.3 bp at 2.725%.  The 10-year UK gilt yield fell to a 2-3/4 month low of 4.238% and is down -0.4 bp at 4.266%.  

The Mortgage Bankers Association reported that the MBA mortgage applications index rose +5.4% w/w for the week ended September 15, the largest increase in 3 months. The home purchase sub-index rose +2.3% w/w and the refinancing sub-index rose +13.2% w/w. 

Bank of America today raised its year-end price target for the S&P 500 to 4,600 from a previous target of 4,300, saying that indicators on the macrocycle, including valuations and positioning, are flashing bullish signals.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is up +0.55%.  China’s Shanghai Composite Index closed -0.52%.  Japan’s Nikkei 225 today closed -0.66%.

The Euro Stoxx 50 today is moderately higher on signs of easing price pressures.  Inflation in the UK unexpectedly eased in August, and German producer prices in August posted their steepest decline on record. A fall in Eurozone government bond yields today is boosting homebuilders and other interest-rate-sensitive stocks. Also, automakers are moving higher after today’s economic news showed Eurozone Aug new car registrations rose by the most in five months.

UK July CPI eased to +6.7% y/y, weaker than expectations of an increase to +7.0% y/y and the smallest increase in 1-1/2 years.  Also, UK July core CPI eased to +6.2% y/y from +6.9% y/y in July, weaker than expectations of +6.8% y/y.

Eurozone Aug new car registrations rose +21.0% y/y to 788,000 units, the biggest increase in 5 months.

Eurozone Jul construction output rose +0.8% m/m, the biggest increase in 5 months.

German Aug PPI fell -12.6% y/y, weaker than expectations of -12.5% y/y and the largest decline since the data series began in 1977.

China’s Shanghai Composite Stock Index today closed moderately lower.  Chinese stocks came under pressure today from a lack of new stimulus after banks kept their benchmark lending rates unchanged, following the PBOC’s move last week to hold policy rates steady as officials assess the economic impact of existing stimulus.  Chinese property stocks fell to lead the overall market lower as home sales in major cities declined significantly after an initial surge when government officials eased mortgage restrictions.

Japan’s Nikkei Stock Index posted moderate losses on long liquidation ahead of today’s conclusion to the 2-day FOMC meeting when the Fed is expected to signal a hawkish pause in its rate hike campaign.

Also, soaring bond yields weighed on stocks after the 10-year Japan JGB bond yield climbed to a 9-1/2 year high today of 0.730%.  On the positive side, Japanese shipping stocks rose after the Baltic Dry Index, a measure of commodity shipping costs, increased for a 10th day. Also, travel and stocks related to the tourist sector rallied after the number of foreign visitors to Japan edged up to pre-pandemic levels.  The Japan National Tourism Organization reported 2.2 million visitors to Japan in August, close to the 2.52 million in August 2019.

Japanese trade news was better than expected and supportive for stocks.  Japan Aug exports fell -0.8% y/y, a smaller decline than expectations of -2.1% y/y.  Also, Aug imports fell -17.8% y/y, the biggest decline in three years but a smaller decline than expectations of -20.0% y/y.

Pre-Market U.S. Stock Movers

Pinterest (PINS) climbed more than +3% in pre-market trading after several analysts said they were impressed by the company’s investor day Tuesday and that the company was upbeat and its long-term targets look achievable.

On Holding (ONON) rose more than +1% in pre-market trading after Needham & Co. initiated coverage of the stock with a recommendation of buy and a price target of $40. 

Kimco Realty (KIM) rose more than +2% in pre-market trading after Wells Fargo Securities upgraded the stock to equal weight from underweight. 

Western Digital (WDC) moved up more than +2% in pre-market trading after BNP Paribas Exane upgraded the stock to outperform from neutral with a price target of $58.

Hudson Pacific Properties Inc (HPP) climbed more than +3% in pre-market trading after BMO Capital Markets upgraded the stock to outperform from market perform.

Air Transport Services Group (ATSG) gained nearly +1% in pre-market trading after Oppenheimer initiated coverage on the stock with a recommendation of outperform and a price target of $27. 

Dollar General (DG) dropped more than -2% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral. 

Skyworks Solutions (SWKS) fell more than -1% in pre-market trading after BNP Paribas Exane downgraded the stock to neutral from outperform.

NCino (NCNO) tumbled more than -5% in pre-market trading after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $24.

Cboe Global Markets (CBOE) fell more than -1% in pre-market trading after CEO Tilly resigned following an investigation that determined he didn’t disclose personal relationships with colleagues.

Chewy (CHWY) slid more than -1% in pre-market trading after Oppenheimer downgraded the stock to market perform from outperform.

 (9/20/2023)

FedEx Corp (FDX), General Mills Inc (GIS), KB Home (KBH).

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