Morning Markets

December E-Mini S&P 500 futures (ESZ23) are up +0.37%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.64%.

Stock index futures this morning are mildly higher, recovering from some of the significant sell-off seen over this past week.  Today's decline in bond yields prompted some short covering in stocks as the 10-year T-note yield fell back from a 16-year high of 4.506% posted in overnight trade. 

Bank of America said investors are fleeing stocks on the prospects of higher interest rates for longer as EPFR Global data show global equity funds had outflows of $16.9 billion in the week through September 20, the fastest pace in 9 months.

The markets are discounting a 25% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 50% chance for that +25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in Q3 of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields today are mixed.  The 10-year T-note yield fell back from a 16-year high of 4.506% and is down -2.6 bp at 4.468%.  The 10-year German bund yield is up +0.7 bp at 2.743%.  The 10-year UK gilt yield is down -3.8 bp at 4.267%.  

Overseas stock markets are mixed today.  The Euro Stoxx 50 is down -0.11%.  China’s Shanghai Composite Index closed +1.55%.  Japan’s Nikkei 225 today closed -0.52%.

The Euro Stoxx 50 today fell to a 5-week low on fresh signs of weakness in the Eurozone economy after the Eurozone’s monthly manufacturing PMI report unexpectedly weakened. Also, concern that interest rates will remain higher for longer weighed on equity markets.  Dutch bank stocks retreated after a majority of the Dutch parliament’s second chamber approved a proposal to increase bank taxes.  Stocks recovered from their worst levels on a rally in European mining stocks after iron ore prices rose on speculation China may boost stimulus measures to support its crisis-ridden property market.

The Eurozone Sep S&P manufacturing PMI unexpectedly fell -0.1 to 43.4, weaker than expectations of an increase to 44.0.  However, the Sep S&P composite PMI rose +0.4 to 47.1, stronger than expectations of a decline to 46.5.

China’s Shanghai Composite Stock Index today rebounded from a 4-week low and closed moderately higher.  A sharp short-covering rally emerged in Chinese stocks in afternoon trading to push the overall market higher on speculation the Chinese government may boost some stimulus measures over the weekend.  The Chinese government has proposed additional stimulus measures every weekend this month.  NetEase jumped more than 6% after JPMorgan Chase put the stock on positive catalyst watch, citing strong momentum from the company’s new online video games. 

Japan’s Nikkei Stock Index today dropped to a 3-1/2 week low and closed moderately lower. Japanese stocks retreated on the heels of Thursday’s slump in U.S. equity markets on interest rate concerns after the 10-year T-note yield soared to a 16-year high and Japan’s 10-year JGB bond yields rose to a 10-year high.  Also, signs of contraction in Japanese manufacturing activity undercut stocks after today’s report showed the Sep Jibun Bank manufacturing PMI contracted by the most in seven months.  Stocks recovered from their worst levels as exporter stocks gained after the yen weakened when the BOJ held monetary policy steady, and BOJ Governor Ueda said the distance from being able to adjust the negative rate hasn't changed much.

Japan Aug national CPI eased to +3.2% y/y from +3.3% y/y in July, stronger than expectations of +3.0% y/y.  Aug national CPI ex-fresh food and energy was unchanged from July at +4.3% y/y, right on expectations.

The Japan Sep Jibun Bank manufacturing PMI fell -1.0 to 48.6, the steepest pace of contraction in 7 months.

The BOJ, as expected, voted 9-0 to keep the policy balance rate unchanged at -0.1% and to maintain the 10-year JGB yield target at about 0%.

BOJ Governor Ueda said the distance from being able to adjust the negative rate hasn't changed much, and if the BOJ's inflation goal is in sight, we will mull ending yield curve control and an interest rate shift. 

Pre-Market U.S. Stock Movers

Activision Blizzard (ATVI) rose more than +2% in pre-market trading on signs that Microsoft’s $69 billion acquisition of the company is set to move forward after the UK competition authorities said they would accept Microsoft’s latest concessions. 

Charter Communications (CHTR) is up more than +1% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $550.

Palantir Technologies (PLTR) gained more than +1% in pre-market trading after Cathie Wood’s Ark Investment Management said it bought more than 1 million shares of Palantir for its funds.

Wayfair (W) climbed more than +2% in pre-market trading after Bernstein upgraded the stock to market perform from underperform. 

Ralph Lauren (RL) rose more than +1% in pre-market trading after Raymond James initiated coverage on the stock with an outperform rating and a $135 price target. 

Roku (ROKU) gained more than +1% in pre-market trading after CFRA upgraded the stock to hold from sell.

Scholastic (SCHL) plunged more than -17% in pre-market trading after reporting a Q1 adjusted loss per share of -$2.20 versus a loss of -$1.33 y/y.

Deere & Co (DE) slid more than -1% in pre-market trading after Canaccord Genuity downgraded the stock to hold from buy. 

Intercontinental Exchange (ICE) fell more than -1% in pre-market trading after Goldman Sachs initiated coverage on the stock to neutral.

Earnings Reports (9/22/2023)

5E Advanced Materials Inc (FEAM).

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