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Markets Today: Stocks Fall Back on Signs of Strength in the U.S. Labor Market

Barchart - Wed Oct 5, 2022

Morning Markets

December S&P 500 futures (ESZ22) this morning are down by -0.85% as the market pauses after the S&P 500 rallied more than +5% over the past two sessions. Optimism that the Fed will pivot to a more dovish policy took a hit today after T-note yields climbed when this morning’s economic news showed September ADP employment rose more than expected and August was revised higher.  The 10-year T-note yield is up +7.0 bp today at 3.703%.

Stocks were also under pressure today after Citigroup sent a note to clients late Tuesday saying, "we are still in the early stage of positioning for recession," and there's "more downside risk for the market and the earnings season." Stock indexes recovered from their worst levels after this morning’s news showed the U.S. Aug trade deficit narrowed more than expected, a positive factor for GDP.

The U.S. Sep ADP employment change rose +208,000, stronger than expectations of +200,000.  Also, the Aug ADP employment change was revised higher to +185,000 from the previous reported +132,000.

The U.S. Aug trade deficit shrank to -$67.4 billion from a revised -$70.5 billion in July, narrower than expectations of -$67.7 billion and the smallest deficit in 15 months.

The Euro Stoxx 50 today is down by -0.89%, giving back some of Tuesday’s sharp gain of +4.26%.  Weakness in automakers, real estate, and retail sectors is leading the overall market lower.  Also, today’s economic news weighed on stocks after the Eurozone Sep S&P Global composite PMI was revised downward to the steepest pace of contraction in 20 months.  Higher European government bond yields are also bearish for stocks, with the 10-year German bund yield up +6.0 bp to 1.931%.

The Eurozone Sep S&P Global composite PMI was revised downward by -0.1 to 48.1 from the originally reported 48.2, the steepest pace of contraction in 20 months.

Asian markets today closed higher.  Chinese markets are closed this week for the Golden Week holidays. Hong Kong’s Hang Seng Index closed up +5.90%, and Japan’s Nikkei Stock Index closed up +0.48%. 

Hong Kong’s Hang Seng Index rallied to a 1-1/2 week high and closed sharply higher as it reopened from Tuesday’s holiday.  A strong rally in Asian chipmakers led the overall market higher after Morgan Stanley projected a return to growth for the semiconductor industry for the second half of 2023.  Taiwan Semiconductor Manufacturing climbed nearly +4%, leading Asian chip stocks higher after Morgan Stanley called the stock its top pick and “an enabler of future technology.”

Japan’s Nikkei Stock Index today climbed to a 1-1/2 week high and settled moderately higher.  Japanese stock moved higher on carry-over support from Tuesday's sharp rally in U.S. stocks.  Strength in Japanese chipmakers was supportive of the overall market after Morgan Stanley projected a return to growth for the semiconductor industry for the second half of 2023.  Also, shares of Fast Retailing and other Japanese clothing retailers climbed after they reported strong sales for September. 

The Japan Sep Jibun Bank services PMI was revised upward by +0.3 to 52.2 from the previously reported 51.9.

Pre-Market U.S. Stock Movers

Helen of Troy Ltd (HELE) tumbled nearly -12% in pre-market trading after the company cut its full-year adjusted EPS forecast to $9.00-$9.40 from a previous estimate of $9.85-$10.35, weaker than the consensus of $10.06. 

PG&E (PCG) fell -3.0% in pre-market trading after a 35 million share block trade of the company’s common stock was said to be offered via Morgan Stanley. 

Lumen Technologies (LUMN) dropped more than -4% in pre-market trading after the company’s long-term credit rating was downgraded by S&P to BB- from BB.

Church & Dwight (CHD) gained almost +1% in pre-market trading after Deutsche Bank upgraded the stock to buy from hold. 

Ford Motor (F) is up nearly +2% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

Emerson Electric (EMR) climbed nearly +3% in pre-market trading after the company was said to be in talks with buyout firm Blackstone to sell some of its commercial and residential solutions assets.

Avantor (AVTR) rose +0.5% in pre-market trading after Citigroup raised its recommendation on the stock to buy from neutral.

Today’s U.S. Earnings Reports (10/5/2022)

Helen of Troy Ltd (HELE), Lamb Weston Holdings Inc (LW), Resources Connection Inc (RGP), RPM International Inc (RPM), Vinco Ventures Inc (BBIG).

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Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.