Morning Markets

The S&P 500 Index ($SPX) (SPY) is up +0.47%, the Dow Jones Industrials Index ($DOWI) (DIA) is up $0.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.37%.

U.S. stock index futures this morning are higher after yesterday's Fed decision to hold interest rates steady. 

U.S. weekly initial unemployment claims were unchanged at 262,000, showing a weaker labor market than expectations of a decline to 245,000.

U.S. May retail sales unexpectedly rose +0.3% m/m, stronger than expectations of a -0.2% m/m decline.

The U.S. May import price index ex-petroleum fell -0.2% m/m, a weaker report than expectations of -0.1% m/m.

The U.S. Jun Philadelphia Fed business outlook survey fell -3.3 to -13.7, slightly stronger than expectations of -14.0.

The U.S. Jun Empire manufacturing survey general business conditions index rose +38.4 to 6.6, stronger than expectations of -15.1.

Market odds for the Fed to raise the fed funds target range by +25 bp at the July 25-26 FOMC meeting stand at 67%. 

Global bond yields are higher.  The 10-year T-note yield is up +0.8 bp at 3.794%.  The 10-year German bund yield rose to a 2-1/2 week high of 2.547% and is up +8.2 bp at 2.533%, and the UK 10-year gilt yield climbed to an 8-month high of 4.454% and is up +1.3 bp at 4.405%.

On the bearish side for stocks, chip stocks are falling in pre-market trading on concerns about higher interest rates after the Fed on Wednesday projected two more 25 bp rate hikes this year.   Also, Tesla is down more than -3% after Wednesday’s hawkish pause by the Fed sparked profit-taking in the stock that had rallied for thirteen consecutive sessions by more than +40%.  In addition, Arista Networks is down more than -5% on signs of inside selling after an SEC filing showed CTO Duda sold $6.58 million of shares on June 12.

On the bullish side, Coherent jumped more than +4% in pre-market trading to extend Wednesday’s +14% surge after it unveiled new laser processing heads aimed at electric vehicle manufacturing.  Also, Lennar is up more than +2% after reporting Q2 revenue well above consensus.  In addition, Aldeyra Therapeutics is up more than +7% after announcing topline results from a late-stage study of its treatment for patients with allergic conjunctivitis that met its main goal.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.86%.  China’s Shanghai Composite closed up +0.74%, and Japan’s Nikkei Stock Index closed down -0.05%. 

The Euro Stoxx 50 index today is moderately lower.  Higher interest rates are weighing on stocks as the 10-year German bund yield climbed to a 2-1/2 week high today after the ECB raised its main refinancing rate by +25 bp to 4.00% as expected, but signaled its monetary tightening campaign isn’t over.   Also, concerns that the Federal Reserve may raise interest rates higher and for longer are undercutting stocks after the Fed on Wednesday signaled another +50 bp of rate increases this year.  Weakness in European consumer stocks, led by declines in luxury goods makers, is leading the overall market lower after Chinese economic news today showed economic activity weakened in May.  On the positive side, retailers moved higher, with Hennes & Mauritz AB up more than +5% after reporting better-than-expected Q2 revenue and e-commerce retailer Asos Plc jumping over +10% after returning to a profit.

The ECB, as expected, raised its main refinancing rate by +25 bp to 4.00% and said, "Future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary." The ECB also said it will halt reinvestment in its 3.2 trillion-euro Asset Purchase Program from next month, which means that the ECB will be draining liquidity as securities mature and its balance sheet declines.

The ECB cut its 2023 Eurozone GDP forecast to +0.9% from +1.0% and raised its 2023 inflation forecast to +5.4% from a prior forecast of +5.3%.

China’s Shanghai Composite Stock Index today climbed to a 3-week high and closed moderately higher. Chinese stocks rallied today after the People’s Bank of China (PBOC) on Tuesday cut the 1-year medium-term lending facility rate by -10 bp to 2.65% from 2.75%.  The markets are anticipating additional stimulus measures after today's news showed a slowdown in China’s industrial production and retail sales. 

Chinese property stocks and interest rate-sensitive stocks moved higher after today’s PBOC rate cut. Chinese battery makers and their suppliers also rallied today after Citigroup said a report of the Biden administration’s approval for Gotion’s construction of its first U.S. factory is “incrementally positive” for the battery supply chain.  Chinese sportswear companies jumped today following a notice on the Chinese Football Association calling for better management of teenage football games and more active participation. 

China May industrial production eased to +3.5% y/y from +5.6% y/y in Apr, right on expectations.

China May retail sales eased to +12.7% y/y from +18.4% y/y in Apr, weaker than expectations of +13.7% y/y.

Japan’s Nikkei Stock Index today fell back from a new 33-year high and closed slightly lower.  Japanese stocks gave up an early advance and posted modest losses on concern U.S. interest rates will remain higher for longer after the Fed’s hawkish pause in its rate hike campaign and its new dot-plot that projected two more 25 bp rate hikes this year.  Japanese stocks today initially moved higher as the Nikkei Stock Index posted a fresh 33-year high on a rally in technology stocks related to AI chain after U.S. chipmakers Nvidia and Advanced Micro Devices extended their rallies on Wednesday. Japanese shipping companies also moved higher today after Nomura Securities forecasted a fiscal 2023/24 vessel rate of exchange (ROE) for shipping companies of about 10%. Better-than-expected Japanese economic on trade and Apr core machine orders were supportive for stocks. Exporters strengthened today after the yen tumbled to a 7-1/2 month low against the dollar.

 Japan Apr core machine orders rose +5.5% m/m, stronger than expectations of +3.0% m/m.

The Japan Apr tertiary industry index rose +1.2% m/m, stronger than expectations of +0.4% m/m.

Japanese trade data was better than expected after May exports unexpectedly rose +0.6% y/y, stronger than expectations of a -1.2% y/y decline.  Also, May imports fell -9.9% y/y, the biggest decline in 2-1/4 years but a smaller decline than expectations of -10.3% y/y.

Pre-Market U.S. Stock Movers

Tesla (TSLA) is down more than -3% in pre-market trading after Wednesday’s hawkish pause by the Fed sparked profit-taking in the stock that had rallied for thirteen consecutive sessions by more than +40%.   

Chip stocks are falling in pre-market trading on concerns about higher interest rates after the Fed on Wednesday projected two more +25 bp rate hikes this year.  Nvidia (NVDA), Advanced Micro Devices (AMD), Microchip Technology (MCHP), Marvell Technology (MRVL), and Intel (INTC) are down -1% or more. 

Arista Networks (ANET) dropped more than -5% in pre-market trading on signs of inside selling after an SEC filing showed CTO Duda sold $6.58 million of shares on June 12. 

Editas Medicine (EDIT) dropped more than -8% in pre-market trading after announcing a $125 million public stock offering via JP Morgan Securities, Cowen, and Evercore Group.   

Sofi Technologies (SOFI) tumbled more than -3% in pre-market trading after Oppenheimer downgraded the stock to perform from outperform.

Coherent (COHR) jumped more than +4% in pre-market trading to extend Wednesday’s +14% surge after it unveiled new laser processing heads aimed at electric vehicle manufacturing.

Lennar (LEN) rose more than +2% in pre-market trading after reporting Q2 revenue of $8.0 billion, well above the consensus of $7.29 billion. 

Aldeyra Therapeutics (ALDX) rallied more than +7% in pre-market trading after announcing topline results from a late-stage study of its treatment for patients with allergic conjunctivitis that met its main goal.

Domino’s Pizza (DPZ) is up more than +2% in pre-market trading after Stifel upgraded the stock to buy from hold with a price target of $350. 

Corning (GLW) gained more than +1% in pre-market trading after Citigroup upgraded the stock to buy from neutral with a price target of $40. 

Verastem Inc (VSTM) surged more than +15% in pre-market trading after Mizuho Securities upgraded the stock to buy from neutral, saying more trial data for its ovarian cancer treatment “supports plan to secure accelerated approval.”

Today’s U.S. Earnings Reports (6/15/2023)

Adobe Inc (ADBE), Jabil Inc (JBL), John Wiley & Sons Inc (WLY), Kroger Co/The (KR), TuSimple Holdings Inc (TSP).

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