Pre-Market Brief: Stocks Plunge As Recession Worries Outweigh Earnings

Oleksandr Pylypenko - Barchart - Fri Oct 21, 2022

Morning Markets

December S&P 500 futures (ESZ22) are trending down -0.65% this morning after three major US benchmark indices closed in the red for the second consecutive day as market participants digested the bulk of corporate earnings results, while long-term bond yields shot up to fresh 14-year highs after comments from a U.S. Federal Reserve official. Three major U.S. stock indexes were weighted down primarily by losses in the Consumer Goods, Utilities, and Industrials sectors.

All three U.S. stock indexes rose early in the session, driven by gains in IBM and AT&T Inc, but reversed after Federal Reserve Bank of Philadelphia President Patrick Harker bolstered concerns about the Fed's aggressive monetary policy. Harker suggested the central bank will "keep raising rates for a while amid disappointing lack of progress on curtailing inflation." The remarks came as fewer-than-anticipated weekly jobless claims indicated strength in the labor market, fueling concerns about current wage growth.

"We’ve seen wild U-turns so far this October, so the move is par for the course. Harper’s comments provided further confirmation that the Fed is all in on continued aggressive policy and future (interest) rate increases," said Ryan Detrick, a chief market strategist at Carson Group in Omaha.

Meanwhile, U.S. rate futures have priced in a 96.5% chance of a 75 basis point rate increase and a 3.5% chance of a super-sized 100 basis point hike at November's monetary policy meeting.

Today, all eyes are focused on Canada Core Retail Sales data in a couple of hours. Economists, on average, foresee that August Core Retail Sales will stand at +0.4% m/m compared to the previous value of -3.1% m/m.

Canada's New Housing Price Index will be reported today. Economists foresee this figure to come in at +0.2% m/m, compared to the August number of +0.1% m/m.

Also, investors are likely to focus on a speech from FOMC Member Williams.

U.S. Federal Budget Balance data will come in today as well. Economists expect this figure to be -173.5B, compared to the previous value of -220.0B.

In the bond markets, United States 10-Year rates are at 4.274%, up +1.13%.

The Euro Stoxx 50 futures are down -1.52% this morning as rising bond yields enhanced expectations of an economic downturn while U.K. political turmoil continued. European stocks have received a negative handover from Wall Street and Asia after major indices closed lower as recession worries weighed on sentiment. European bond yields have also jumped on Friday as the political turmoil in the U.K. continued with the resignation of Prime Minister Liz Truss after six weeks of policy shocks.

U.K. Retail Sales and U.K. Core Retail Sales data were released today.

U.K. September Retail Sales stood at -1.4% m/m and -6.9% y/y, weaker than expectations of -0.5% m/m and -5.0% y/y.

U.K. Core Retail Sales came in at -1.5% m/m and -6.2% y/y in September, weaker than expectations of -0.3% m/m and -4.1% y/y.

Asian stock markets today settled mixed as hawkish signals from Federal Reserve officials drove up recession fears. China’s Shanghai Composite Index (SHCOMP) closed up +0.13%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.43%.

China’s Shanghai Composite today closed higher as positive signals on COVID restrictions and hopes of stimulus measures helped limit weekly losses. The sentiment was also boosted by the People’s Bank interest rate decision and promises of more stimulus spending by the government.

At the same time, Japan Nikkei 225 Stock Index dropped today after data showed CPI hit an eight-year high in September. The index's downward momentum was driven by losses in the Precision Instruments, Non-Metal Minerals, and Power sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.57% to 22.79.

The Japanese National Core CPI has been reported at +3.0% y/y in September, in line with expectations.

Pre-Market U.S. Stock Movers

Immunic Inc (IMUX) plunged more than -70% in pre-market trading after the company announced the outcome of a pre-planned interim group-level data analysis of its phase 1b clinical trial of IMU-935 in patients with moderate-to-severe psoriasis.

Snap Inc (SNAP) slid over -25% in pre-market trading after the company reported mixed Q3 results, with revenues missing estimates, and the company declined to offer guidance for Q4.

Pinterest Inc (PINS) slid about -7% in pre-market trading, and Meta Platforms Inc (META) dropped over -3% in pre-market trading following Snap's results.

SVB Financial Group (SIVB) plunged over -15% in pre-market trading after the company reported mixed Q3 results and issued a lower outlook.

CSX Corporation (CSX) climbed more than +3% in pre-market trading after the company delivered an upbeat Q3 earnings report.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Friday - October 21st

Verizon (VZ), American Express (AXP), Essilor International SA (ESLOY), Schlumberger (SLB), HCA (HCA), London Stock Exchange ADR (LNSTY), Sika ADR (SXYAY), SBA Communications (SBAC), Huntington Bancshares (HBAN), Regions Financial (RF), Telia ADR (TLSNY), Seagate (STX), IPG (IPG), Stora Enso Oyj PK (SEOAY), Sasol ADR (SSL), InterContinental ADR (IHG), Autoliv (ALV), Tomra Systems ADR (TMRAY), Luckin Coffee (LKNCY), Euronet (EEFT), Simply Good Foods (SMPL), WSFS (WSFS), Sensient Technologies (SXT), Arcelik ADR (ACKAY), Altra (AIMC), Adams Diversified Equity Closed (ADX), Eaton Vance Tax Advantaged Glb Div (ETG), Tompkins (TMP), Republic Bancorp (RBCAA), HarborOne Banc (HONE), Central Pacific Financial (CPF), Foreign Trade Bank of Latin America (BLX), Corus Entertainment (CJREF), Blue Foundry Bancorp (BLFY), Ames (ATLO), Penns Woods (PWOD), Eagle Financial Services (EFSI), Acme United (ACU), First Capital (FCAP), WCF Bancorp (WCFB), Omid Holdings Inc (OMID), Prism Tech (PRZM), Port Tauranga ADR (PTAUY).

More Stock Market News from Barchart

On the date of publication, Oleksandr Pylypenko 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.