Markets Today: Stocks Move Lower after Wednesday’s Rout
Morning Markets
December S&P 500 futures (ESZ22) this morning are up by +0.15%. Stocks recovered from overnight losses and are modestly higher, with the Dec S&P futures rebounding from a 2-1/4 month low as the indexes stabilize following Wednesday’s selloff. The December Nasdaq 100 is slightly lower by -0.05% as higher interest rates weigh on technology stocks, with the 10-year T-note yield up +3.2 bp today at 3.561%, holding below Wednesday’s 11-year high of 3.600%.
Other global central banks raised interest rates today as the Swiss National Bank (SNB) raised rates by 75 bp and the Bank of England (BOE) and Bank of Norway raised rates by 50 bp. The Bank of Japan (BOJ), however, maintained record low-interest rates after its policy meeting.
Stocks slumped Wednesday after the FOMC raised interest rates by 75 bp for the third consecutive session and suggested another such increase was likely in November. Also, comments from Fed Chair Powell dashed hopes the Fed would soften its approach to monetary policy.
U.S. weekly initial unemployment claims rose +5,000 to 213,000, showing a stronger labor market than expectations of 217,000.
The Euro Stoxx 50 today is down -0.75% but remains above Wednesday’s 2-1/4 month low. European stocks fell back on concern that aggressive rate hikes by the Fed, ECB, and other global central banks will push the Eurozone economy into recession. The Swiss National Bank (SNB) today raised interest rates by 75 bp, and the Bank of England (BOE) and Norway’s central bank raised rates by 50 bp. Hawkish comments today from ECB Executive Board member Schnabel weighed on stocks when she said inflation in the Eurozone may not have peaked and that the ECB must push on with interest rate increases despite the souring outlook for the Eurozone economy.
Asian markets today closed lower. China’s Shanghai Composite Index closed down -0.27%, and Japan’s Nikkei Stock Index closed down -0.58%.
China’s Shanghai Composite Index today posted moderate losses. Weakness in Chinese technology stocks weighed on the overall market after the Fed Wednesday delivered a third straight 75 bp interest rate increase and signaled more rate hikes were coming. Chinese stocks were also under pressure today after Goldman Sachs cut its 2023 China GDP forecast to 4.5% from a previous estimate of 5.3%, citing repeated lockdowns to contain Covid outbreaks, a persistent property crisis, and slowing exports. Chinese stocks bounced from their worst levels today as Chinese exporters rallied when the yuan dropped to a new 2-year low against the dollar, boosting exporters' earnings prospects.
Japan’s Nikkei Stock Index tumbled to a 2-month low today on negative carry-over from Wednesday’s slide in U.S. stocks. However, Japanese stocks recovered from their worst levels when the BOJ maintained QE and record low-interest rates following today’s policy meeting. Also, post-meeting comments from BOJ Governor Kuroda were supportive of stocks when he said there's no need for the BOJ to change forward guidance for 2 or 3 years, and there's no prospect for a near-term rate hike. The Japanese yen rebounded from a new 24-year low today and jumped to a 2-week high after BOJ intervened in the forex market to support the yen for the first time since 1998.
As expected, the BOJ, in a 9-0 decision, kept the policy balance rate at -0.1% and maintained its 10-year JGB yield target at about 0%.
BOJ Governor Kuroda said there's no need for the BOJ to change forward guidance for 2 or 3 years, and there's no prospect for a near-term rate hike.
The BOJ intervened in the forex market to support the yen for the first time since 1998, with Masato Kanda, Japan's top currency official, saying "the government is concerned about excessive moves in the foreign exchange markets."
Pre-Market U.S. Stock Movers
Darden Restaurants (DRI) fell more than -2% in pre-market trading after reporting Q1 comparable same-store sales rose +4.2%, weaker than the consensus of +5.16%, and forecast 2023 EPS from continuing operation of $7.40 to $8.00, the midpoint below the consensus of $7.73.
KB Home (KBH) dropped more than -2% in pre-market trading after reporting Q3 deliveries of 3,615, below the consensus of 3,763, citing ongoing supply chain issues that could extend into Q4.
Steelcase (SCS) fell -3% in pre-market trading after reporting Q2 revenue of $863.3 million, below the consensus of $885.5 million, and forecasting Q3 revenue of $825 million-$850 million, weaker than the consensus of $862 million.
Block (SQ) slid more than -2% in pre-market trading after Mizuho Securities downgraded the stock to neutral from outperform, noting the company’s growth is being hampered by “user fatigue” and plateauing inflows.
Salesforce (CRM) rose more than +1% in pre-market trading after setting out its fiscal year 2026 adjusted operating margin target of more than 25%, alleviating concerns about the company’s growth trajectory.
HB Fuller (FUL) climbed more than +2% in pre-market trading after raising the lower end of its full-year adjusted Ebitda forecast to $540 million-$550 million from an earlier forecast of $530-million-$550 million.
Eli Lilly (LLY) rose nearly +2% in pre-market trading after the FDA approved its Retevmo drug for adult patients with locally advanced metastatic solid tumors.
Stem (STEM) climbed more than +2% in pre-market trading after Cowen initiated coverage on the stock with an outperform rating and named it a top pick.
Today’s U.S. Earnings Reports (9/22/2022)
Accenture PLC (ACN), Costco Wholesale Corp (COST), Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX).
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