Morning Markets

December E-Mini S&P 500 futures (ESZ23) are down -0.61%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.76%.

Stock index futures this morning are moderately lower, weighed down by rising bond yields. Comments late Monday from Cleveland Fed President Mester pushed bond yields higher and undercut stocks when she said, "I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time.”  That pushed the 10-year T-note yield up to a new 16-year high of 4.747%.  The markets are awaiting the U.S. Aug JOLTS job openings report later this morning for market direction. 

JPMorgan Asset Management warned that there’s a risk of further stock market declines due to rising interest rates, saying, “We have not anticipated such an increase in rates. This is something which will at least slow down, or even reverse the progress of equity markets.”

The markets are discounting a 28% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 51% 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 the second half of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields today are moving higher.  The 10-year T-note yield climbed to a 16-year high of 4.747% and is up +4.4 bp at 4.722%. The 10-year German bund yield is up +2.1 bp at 2.944%.  The 10-year UK gilt yield rose to a 1-1/4 month high of 4.583% and is unchanged at 4.564%.  

Overseas stock markets are lower.  The Euro Stoxx 50 is down -0.80%.  China’s Shanghai Composite Index was closed for the Golden Week holidays.  Japan’s Nikkei 225 today closed -1.641%.

The Euro Stoxx 50 today dropped to a 6-1/4 month low and is moderately lower. Weakness in utility stocks is weighing on the overall market as European government bond yields rise.  Also, retail stocks are under pressure after online retailer Boohoo Group Plc sank more than -10% after it lowered its earnings and revenue forecasts as it cut prices to attract shoppers.   In addition, hawkish comments today from ECB Governing Council members Simkus and Lane bolstered the outlook that the ECB will keep interest rates higher for longer.

ECB Governing Council member Simkus said inflation still faces many "lines of resistance" and that "maintaining interest rates sufficiently high is very important and critically important on the path to returning inflation to the target."

ECB Chief Economist Lane said, "Price increases are still well above 2%, we are not at the inflation target yet, and therefore, there is still work to be done in terms of bringing inflation down." He added that ECB borrowing costs have now "reached a level that will make a substantial contribution to get inflation to target" and that the "base case is to maintain this level for as long as needed."

China’s Shanghai Composite Stock Index today was closed for the week-long Golden Week holidays. 

Japan’s Nikkei Stock Index today tumbled to a 4-month low and closed moderately lower.  Concerns that the Federal Reserve will keep interest rates higher for longer sparked liquidation in stocks today as the 10-year T-note yield rose to a 16-year high after Cleveland Fed President Mester said Monday night that "I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time.”  The increase in T-note yields also helped push Japanese government bond yields higher, which undercut stocks, as the 10-year JGB bond yield jumped to a 10-year high of 0.785%.  In addition, a -3% plunge in the Hang Seng Index today provided a negative carryover to other Asian bourses and weighed on Japanese stocks.   

The yen fell to an 11-1/2 month low against the dollar today after Japanese Finance Minister Suzuki said he won’t judge the possibility of forex intervention on currency levels but through market volatility. 

Pre-Market U.S. Stock Movers

McCormick (MCK) dropped more than -3% in pre-market trading after reporting Q3 net sales of $1.68 billion, weaker than the consensus of $1.70 billion. 

Biohaven Ltd (BHVN) tumbled more than -4% in pre-market trading after offering $200 million in shares via JP Morgan Securities.   

Airbnb (ABNB) fell more than -1% in pre-market trading after KeyBanc Capital Markets downgraded the stock to sector weight from overweight.

WK Kellog (KLG) dropped more than -6% in pre-market trading after Goldman Sans initiated coverage of the stock with a recommendation of sell and a price target of $11.

HP Inc (HPQ) rose more than +2% in pre-market trading after Bank of America double-upgraded the stock to buy from underperform with a price target of $33. 

Dow Inc (DOW) and LyondellBasell Industries NV (LYB) climbed more than +1% in pre-market trading after KeyBanc Capital Markets upgraded both stocks to sector weight from underweight.

Fiverr International Ltd (FVRR) rose more than +2% in pre-market trading after Roth MKM upgraded the stock to buy from neutral with a $33 price target. 

Dycom Industries (DY) gained nearly +1% in pre-market trading after Bank of America Global Research initiated coverage of the stock with a recommendation of buy and a price target of $120.

Point Biopharma Global (PNT) surged +85% in pre-market trading after Eli Lilly agreed to buy the company for $12.50 per share in a deal valued at $1.4 billion.

Earnings Reports (10/3/2023)

Cal-Maine Foods Inc (CALM), McCormick & Co Inc/MD (MKC), Novagold Resources Inc (NG).

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