Markets Today: Stocks Push Higher on Strength in China and Europe

Rich Asplund - Barchart - Mon Jul 31, 2023

Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.17%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.18% at a 1-week high.

Stock indexes this morning are moderately higher amid another busy week of earnings results, with Apple and Amazon.com among those reporting this week. A rally in WTI crude to a 3-1/2 month high today is lifting energy stocks in pre-market trading and is boosting the overall market.

U.S. stocks have some positive carryover from strength in global bourses. China’s Shanghai Composite rallied to a 2-1/2 month high today after economic news showed China’s manufacturing activity unexpectedly rose this month. Also, the Euro Stoxx 50 climbed to a 15-year high today as recession concerns receded after Eurozone Q2 GDP expanded more than expected.

Upbeat comments from Minneapolis Fed President Kashkari were supportive of stocks when he said the inflation outlook in the U.S. is "quite positive" and that "the base case scenario seems to be that we'll have a slowing economy, but that we would avoid a recession."

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

Global bond yields are mixed. The 10-year T-note yield is up +0.4 bp at 3.955%. The 10-year German bund yield is up +0.9 bp at 2.501%. The 10-year UK Gilt yield is down -0.6 at 4.319%.

Overseas stock markets are higher. The Euro Stoxx 50 is up +0.40%. China’s Shanghai Composite Index today closed up +0.46%. Japan’s Nikkei Stock Index closed up +1.26%.

The Euro Stoxx 50 today climbed to a 15-year high and is moderately higher. Stronger-than-expected growth in the Eurozone last quarter boosted equities after Eurozone Q2 GDP expanded more than forecast. Also, Eurozone Jul consumer prices eased from June, although core consumer prices remained stubbornly high. On the negative side, German June retail sales fell more than expected, and European government bond yields rose after ECB President Lagarde said the ECB could raise interest rates again, even if it pauses at its next meeting in September. Also, Heineken NV tumbled more than -5% after reporting first-half profit slumped 22% on waning consumption after the company boosted pricing by almost 13%.

Eurozone Q2 GDP rose +0.3% q/q and +0.6% y/y, slightly stronger than expectations of +0.2% q/q and +0.5% y/y.

The Eurozone Jul CPI eased to +5.3% y/y from +5.5% y/y in Jun, right on expectations and the slowest pace of increase in 1-1/2 years. However, Jul core CPI rose +5.5% y/y, unchanged from Jun and stronger than expectations of +5.4% y/y.

German Jun retail sales fell -0.8% m/m, weaker than expectations of -0.3% m/m.

China’s Shanghai Composite today rallied to a 2-1/2 month high and closed moderately higher. An unexpected increase in Chinese manufacturing activity this month improved market sentiment and gave stocks a boost. Also, hopes for additional government stimulus pushed stocks higher after China’s National Development and Reform Commission, China’s top economic planning agency, released a wide-ranging policy document today focusing on removing government restrictions on consumption, such as car purchase limits, and improving infrastructure.

Also, Chinese property stocks rallied today after the Securities Times reported that authorities in cities including Beijing and Shenzhen vowed to implement measures to ensure the healthy development of local property markets and support the demand of first-time buyers and those looking to upgrade. Chinese stocks fell back from their best levels on signs of weakness in consumer demand after today’s news that China’s Jul non-manufacturing PMI expanded at the slowest pace in 7 months.

Japan’s Nikkei Stock Index today rallied to a 3-1/2 week high and closed moderately higher. Gains in Japanese exporter stocks led the overall market higher today as the yen tumbled to a 3-week low against the dollar after the BOJ announced an unscheduled bond-purchase operation in an attempt to keep 10-year JGB bond yields from climbing. The BOJ announced that it would buy the equivalent of more than $2 billion of bonds at market rates after the 10-year JGB bond yield climbed to a 9-year high of 0.614%. Bond yields have surged since last Friday when the BOJ tweaked its yield curve control program and effectively raised the upper limit of its 10-year JGB yield target to 1.0% from 0.5%. An increase in consumer confidence was also supportive for stocks after Japan's Jul consumer confidence index rose more than expected to a 19-month high.

Japan Jun industrial production rose +2.0% m/m, the most in 4 months but weaker than expectations of +2.4% m/m.

Japan Jun retail sales fell -0.4% m/m, stronger than expectations of -0.7% m/m.

The Japan Jul consumer confidence index rose +0.9 to a 19-month high of 37.2, stronger than expectations of 36.2.

Pre-Market U.S. Stock Movers

Energy stocks are climbing in pre-market trading, with the price of WTI crude up more than +1% at a 3-1/2 month high. As a result, ConocoPhillips (COP), Devon Energy (DVN), Diamondback Energy (FANG), Exxon Mobil (XOM), Marathon Oil (MRO), Schlumberger (SLB), and Valero Energy (VLO) are up more than +1%.

MetLife (MET) climbed more than +3% in pre-market trading after Bloomberg News reported that Great Eastern Holdings is in talks to buy MetLife’s Malaysian arm.

Palantir Technologies (PLTR) jumped more than +5% in pre-market trading, adding to last Friday’s 10% surge after Wedbush initiated coverage of the stock with an outperform rating, saying the company is set to become “a major player in the AI revolution over the next decade.”

Adobe (ADBE) rose more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

ImmunoGen (IMGN) surged more than +16% in pre-market trading after reporting Q2 net revenue of $83.2 million, well above the consensus of $52.3 million.

Hasbro (HAS) gained more than +1% in pre-market trading after Bank of America upgraded the stock to buy from neutral with a price target of $85.

Wayfair (W) jumped more than +7% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $97.

Sweetgreen (SG) climbed more than +5% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $19.

Johnson & Johnson (JNJ) fell more than -1% in pre-market trading after a judge dismissed the company’s second attempt at using’s its bankruptcy case to press thousands of cancer victims to drop their lawsuits and accept a $8.9 billion settlement.

Ford Motor (F) slid more than -1% in pre-market trading after Jeffries downgraded the stock to hold from buy.

Capri Holdings (CPRI) dropped more than -2% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.

Tractor Supply (TSCO) is down more than -1% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.

Salesforce (CRM) slid more than -1% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight.

CSX Corp (CSX) fell more than -2% in pre-market trading after RBC Capital Markets downgraded the stock to sector perform from outperform.

Today’s U.S. Earnings Reports (7/31/2023)

Arista Networks Inc (ANET), AvalonBay Communities Inc (AVB), Diamondback Energy Inc (FANG), Eversource Energy (ES), Hologic Inc (HOLX), Loews Corp (L), Monolithic Power Systems Inc (MPWR), ON Semiconductor Corp (ON), Republic Services Inc (RSG), SBA Communications Corp (SBAC), Welltower Inc (WELL), Western Digital Corp (WDC).

More Stock Market News from Barchart

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.