Markets Today: Mixed After Weak Earnings Results and Higher Bond Yields

Rich Asplund - Barchart - Tue Jan 17, 2023

Morning Markets

The S&P 500 Index ($SPX) (SPY) today is up +0.31%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.45%.

U.S. stock indices are mixed today on weaker-than-expected quarterly corporate earnings results and concerns that global central banks will have to continue to tighten monetary policy to subdue inflation. Also, higher bond yields this morning are undercutting stock index futures, with the 10-year T-note yield up +5.3 bp at 3.557%.

Negative corporate news this morning is weighing on stocks. Goldman Sachs is down more than -2% in pre-market trading after reporting weaker-than-expected Q4 net revenue. Also, Travelers is down more than -1% after reporting weaker-than-expected Q4 core EPS. In addition, Wells Fargo, Bank of America, Pfizer, and AutoNation are all moving lower after being downgraded.

On the positive side for stocks, Morgan Stanley is up more than +1% in pre-market trading after reporting better-than-expected Q4 revenue. Also, Kroger, Global Payments, and Vertex Pharmaceuticals are moving higher after being upgraded.

Today’s U.S. economic news is negative for stocks after the Jan Empire manufacturing survey general business conditions unexpectedly fell -21.7 to a 2-1/2 year low of -32.9, weaker than expectations of an increase to -8.6.

Overseas markets today are mixed. The Euro Stoxx 50 index is down -0.05%. The Shanghai Composite Stock index closed down by -0.10%, and Japan’s Nikkei Stock index closed up by +1.23%.

The Euro Stoxx 50 today is slightly lower on weakness in real estate and retailer stocks. Also, hawkish ECB comments pushed European bond yields higher and weighed on stocks today. The 10-year German bund yield is up +2.6 bp at 2.201%. Losses in the overall market were limited after today’s economic news showed the German Jan ZEW expectations of economic growth rose more than expected to an 11-month high.

ECB Chief Economist Lane said the ECB would have to "raise interest rates more into restrictive territory" to bring inflation back to target.

ECB Governing Council member Centeno said the Eurozone economy is performing better than expected in the face of record inflation and the energy crisis that erupted after Russia attacked Ukraine.

The German Jan ZEW expectations of economic growth index rose +40.2 to an 11-month high of 16.9, stronger than expectations of -15.0.

The Shanghai Composite Stock index today posted modest losses. Weakness in Chinese electric vehicle makers was negative for the overall market after Xpeng slashed vehicle prices on its models in China, spurring demand concerns. Losses in the overall market were limited after today’s Chinese economic reports were all better than expected.

Today’s Chinese economic news was better than expected and supportive of stocks. China Q4 GDP was unchanged q/q and +2.9% y/y, stronger than expectations of -1.1% q/q and +1.6% y/y. Also, China Dec industrial production rose +1.3% y/y, stronger than expectations of +0.1% y/y. In addition, China Dec retail sales fell -1.8% y/y, stronger than expectations of -9.0% y/y.

Japan’s Nikkei Stock Index closed moderately higher ahead of Wednesday’s BOJ policy decision. Although expectations are for no change to the BOJ’ ultra-easy monetary policy, the markets will be on guard for any tweaks in policy, such as a widening of the 10-year JGB yield target range. The 10-year JGB bond yield is currently trading at 0.524%, above the BOJ’s upper limit of 0.50%.

Today’s Japanese economic news was bearish for stocks after the Japan Nov tertiary index unexpectedly fell -0.2% m/m, weaker than expectations of +0.1% m/m and the biggest decline in 4 months.

Pre-Market U.S. Stock Movers

Goldman Sachs (GS) tumbled more than -2% in pre-market trading after reporting Q4 net revenue of $10.59 billion, below the consensus of $10.70 billion.

Wells Fargo (WFC) is down more than -1% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight

Bank of America (BAC) slid more than -1% in pre-market trading after Piper Sandler downgraded the stock to underweight from neutral.

Travelers Cos (TRV) dropped more than -1% in pre-market trading after reporting Q4 core EPS of $3.40, weaker than the consensus of $4.06.

Pfizer (PFE) dropped more than -1% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Mining stocks are falling in pre-market trading on global copper demand concerns after Bloomberg Intelligence said falling copper premiums point to easing demand. Southern Copper (SCCO) and Freeport-McMoRan (FCX) are down more than -2%, and Newmont (NEM) is down more than -1%.

AutoNation (AN) fell more than -2% in pre-market trading after Morgan Stanley downgraded the stock to underweight from equal weight.

Snap (SNAP) slid more than -2% in pre-market trading after JMP Securities downgraded the stock to market perform from market outperform.

Morgan Stanley (MS) is up more than +1% in pre-market trading after reporting Q4 net revenue of $12.70 billion, above the consensus of $12.43 billion.

Kroger (KR) rose more than +1% in pre-market trading after Morgan Stanley upgraded the stock to equal weight from underweight.

Global Payments (GPN) climbed more than +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

Vertex Pharmaceuticals (VRTX) rose more than +1% in pre-market trading after SVB Securities upgraded the stock to outperform from market perform.

Today’s U.S. Earnings Reports (1/17/2023)

Citizens Financial Group Inc (CFG), Goldman Sachs Group Inc/The (GS), Morgan Stanley (MS), Signature Bank/New York NY (SBNY), United Airlines Holdings Inc (UAL).

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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.