Markets Today: Stock Index Futures Jump on Friendly U.S. Inflation News

Rich Asplund - Barchart - Wed Apr 12, 2023

Morning Markets

June S&P 500 futures (ESM23) this morning are up +0.80% at a 1-3/4 month high, and June Nasdaq 100 E-Mini futures (NQM23) are up +1.02% at a 1-week high.

U.S. stock index futures this morning are moving higher on better-than-expected inflation news. The U.S. March CPI fell more than expected, although the March core CPI ticked higher. Bond yields fell on the news and gave stocks a boost. The markets have now priced in a 70% chance of a 25 bp rate hike at the May 2-3 FOMC meeting.

U.S. Mar CPI rose +0.1% m/m and +5.0% y/y, a smaller increase than expectations of +0.2% m/m and +5.1% y/y. However, Mar CPI ex-food and energy rose to +5.6% y/y from +5.5% y/y in Feb, right on expectations.

Stocks are awaiting Q1 earnings reporting season, which kicks off Friday with earnings results from big U.S. banks, including Citigroup, JPMorgan Chase, and Wells Fargo.

The weekly report from the Mortgage Bankers Association showed mortgage applications for home purchases climbed +7.8% w/w to a 2-month high. Also, the U.S. 30-year fixed mortgage contract rate dropped -10 bp to a 2-month low of 6.3% in the week ended April 7, the fifth straight week the mortgage rate has declined.

An increase in M&A activity is supporting the overall market, with Triton International surging more than +30% in pre-market trading after Brookfield Infrastructure acquired the company for $4.7 billion. Also, National Instruments jumped more than +6% after Bloomberg reported that Emerson Electric was in advanced talks to acquire the company.

On the negative side, airline stocks are under pressure after American Airlines Group dropped more than -2% in pre-market trading when it reported preliminary Q1 adjusted EPS that was below consensus. Also, PG&E is down more than -3% after a block of 50 million shares of the company’s stock was offered via Morgan Stanley.

Global bond yields are lower. The 10-year T-note yield is down -7.5 bp at 3.351%. The 10-year German bund yield is down -4.2 bp at 2.269%, and the 10-year UK gilt yield is down -7.5 bp at 3.468%.

Overseas stock markets are higher. The Euro Stoxx 50 is up +0.83%. China’s Shanghai Composite closed up +0.41%, and Japan’s Nikkei Stock Index closed up +0.57%.

The Euro Stoxx 50 index today rose to a 15-month high and is moderately higher. Automakers are rallying and leading the overall market higher, with Volvo Group, the world’s second-largest truck maker, up more than +9% after reporting Q1 sales of 131.4 billion Swedish kroner ($12.5 billion), better than the consensus of 118.44 billion kroner. European stocks extended their gains on the friendly U.S. consumer price report. On the negative side, pharmaceutical stocks are weaker, led by a -6% fall in Merck KGaA after it halted enrollment of patients in the U.S. for a trial of the multiple sclerosis drug evobrutinib amid concerns about the drug’s safety.

China’s Shanghai Composite Stock Index today closed moderately higher. Chinese real estate developers moved higher after Jeffries said it sees a better year ahead for China’s property market. Also, Chinese electronics suppliers rose today after Innovative Eyewear surged 200% in the U.S. market on Tuesday, spurring speculation over the applications of AI generative technology in hardware.

However, weakness in Chinese technology stocks limited gains in the overall market, with Tencent Holdings falling more than -5% amid speculation its largest shareholder Prosus NV may speed up the selling of its Tencent shares on news the company plans to deposit an additional 96 million shares into Hong Kong Central Clearing and Settlement System this week to enable on-market trading of such shares. The move is typically a precursor to selling stock.

Japan’s Nikkei Stock Index today closed moderately higher. Japanese stocks pushed higher today on carryover support from Tuesday when the Nikkei reported that billionaire investor Warren Buffet wants to increase his exposure to Japanese stocks, which may encourage other foreign investors to invest in Japanese stocks. Also, Japan’s defense-related stocks rose after the government signed four missile development and procurement contracts with Mitsubishi Heavy Industries. In addition, Japanese exporter stocks gained after the yen fell to a 3-1/2 week low against the dollar, boosting the earnings prospects of exporters.

Today’s Japanese economic news was supportive of stocks. Japan's Mar PPI eased to +7.2% y/y from +8.3% y/y in Feb, the slowest pace of increase in 1-1/2 years. Also, Feb core machine orders fell -4.5% m/m, a smaller decline than expectations of -6.3% m/m.

Pre-Market U.S. Stock Movers

National Instruments (NATI) jumped more than +6% in pre-market trading after Bloomberg reported that Emerson Electric was in advanced talks to acquire the company.

Becton Dickson (BDX) gained more than +1% in pre-market trading after KeyBanc Capital Markets upgraded the stock to overweight from sector weight.

Global Payments (GPN) rose more than +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral.

Evercore (EVR) gained more than +1% in pre-market trading after UBS double-upgraded the stock to buy from sell.

Triton International (TRTN) surged more than +30% in pre-market trading after Brookfield Infrastructure acquired the company for $4.7 billion.

MongoDB (MDB) climbed more than +3% in pre-market trading, and Confluent (CFLT) jumped more than +4% after Morgan Stanley upgraded both stocks to overweight from equal weight.

American Airlines Group (AAL) fell more than -2% in pre-market trading after reporting preliminary Q1 adjusted EPS of 1 cent to 5 cents, the midpoint below the consensus of 4.6 cents. Shares of peers Delta Air Lines (DAL), United Airlines Holdings (UAL), and Southwest Airlines (LUV) also fell more than -1% on the news.

PG&E (PCG) dropped more than -3% in pre-market trading after a block of 50 million shares of the company’s stock was offered via Morgan Stanley.

Southern Copper (SCCO) fell more than -1% in pre-market trading after Peru Feb copper production fell -3.2% m/m to 192,334 MT.

Today’s U.S. Earnings Reports (4/12/2023)

Apogee Enterprises Inc (APOG), Argan Inc (AGX), F45 Training Holdings Inc (FXLV), Pure Cycle Corp (PCYO), Rent the Runway Inc (RENT), Sportsman's Warehouse Holdings (SPWH).

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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. For more information please view the Barchart Disclosure Policy here.