Markets Today: Stock Indexes Extend Monday’s Gains on Strength in Tech Stocks

Rich Asplund - Barchart - Tue Aug 22, 2023

Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.60%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.85%.

Stock indexes this morning are moderately higher, led by strength in technology stocks. Nvidia is up more than +2% in pre-market trading, adding to Monday’s +8% surge, on optimism about its Q2 earnings results set to be released Wednesday. Also, Zoom Technologies is up more than +4% after reporting better-than-expected Q2 revenue and raising its full-year revenue forecast. In addition, a decline in bond yields today is supportive of stocks.

Global equity markets have some positive carryover from a late surge in Chinese stocks after the Shanghai Composite Stock Index recovered from a 7-1/2 month low in the last hour of trade today and settled higher, which boosted market sentiment.

The markets are discounting the odds at 13% for a +25 bp rate hike at the September 20 FOMC meeting and 47% for that +25 bp rate hike at the November 1 FOMC meeting.

Global bond yields are lower. The 10-year T-note yield fell back from a nearly 16-year high of 4.362% and is down -2.6 bp at 4.312%. The 10-year German bund yield is down -4.7 bp at 2.656%. The 10-year UK gilt yield is down -7.3 bp at 4.656%.

Overseas stock markets are higher. The Euro Stoxx 50 is up +1.53%. China’s Shanghai Composite Index today closed up +0.88%. Japan’s Nikkei Stock Index closed up +0.92%.

The Euro Stoxx 50 today is moderately higher. A rally in European technology stocks is leading the overall market higher, following sharp gains in U.S technology stocks on Monday. Also, a rebound in Chinese stocks from a 7-1/2 month low provided some carryover support to European equities. Ubisoft Entertainment SA jumped more than +7% after signing a cloud streaming deal for Activision Blizzard games released in the next 15 years in order to placate UK regulators after Microsoft’s deal for Activision Blizzard is completed. In addition, a decline in European government bond yields supports stocks.

French Jul retail sales volume fell -2.1% y/y, the fourteenth consecutive month sales volume has declined.

China’s Shanghai Composite rebounded from a 7-1/2 month low and closed moderately higher. Short covering emerged in late trading today to push the Shanghai Composite higher on reports that China state-backed funds were purchasing stocks. Also, Chinese brokerage stocks advanced after Morgan Stanley said it sees upside for brokerages on potentially relaxed capital requirements. The market initially opened lower today, led by losses in Chinese vaccine makers, after the Securities Times reported that many type 2 Covid vaccines, which are taken at the consumer’s discretion and cost, may be converted to type 1 vaccines, which are mandatory and offered free of charge by the government.

Japan’s Nikkei Stock Index today posted moderate gains. Strength in Japanese technology stocks led the overall market higher today, following gains in U.S. technology stocks on Monday. Japanese bank stocks also moved higher today after the 10-year JGB government bond yield jumped to a 9-year high of 0.670%, boosting optimism that banks’ profitability will improve. SoftBank Group climbed more than +3% today after its Arm Holdings unit filed for a U.S. initial public offering (IPO). The deal will be the biggest U.S. IPO this year. Stock gains were limited as the jump in Japanese bond yields lifted the yen today and weighed on exporter stocks.

Pre-Market U.S. Stock Movers

Nvidia (NVDA) rose more than +2% in pre-market trading on top of Monday’s +8% gain amid optimism about its Q2 earnings results to be released Wednesday.

Zoom Technologies (ZM) climbed more than +4% in pre-market trading after reporting Q2 revenue of $1.14 billion, better than the consensus of $1.11 billion, and raising its 2024 revenue forecast to $4.49 billion-$4.50 billion from a previous forecast of $4.47 billion-$4.49 billion, stronger than the consensus of $4.48 billion.

Tesla (TSLA) is up more than +3% in pre-market trading amid optimism around the company’s Cybertruck and an upgraded Model 3 vehicle in China.

Lowe’s (LOW) is up more than +2% in pre-market trading after reporting Q2 comparable sales fell -1.6%, a smaller decline than the consensus of -2.57%.

AppLovin (APP) climbed more than +4% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $50.

Aramark (ARMK) rose more than +2% in pre-market trading after UBS upgraded the stock to buy from neutral.

Iron Mountain (IRM) gained more than +1% in pre-market trading after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $68.

Dick’s Sporting Goods (DKS) plunged more than -18% in pre-market trading after reporting Q2 adjusted EPS of $2.82, weaker than the consensus of $3.81, and lowered its 2024 adjusted EPS forecast to $11.50-$12.30 from a prior forecast of $12.90-$13.80, well below the consensus of $13.47.

BJ’s Wholesale Club Holdings (BJ) fell more than -2% in pre-market trading after reporting Q2 comparable club sales excluding gasoline rose +1.1%, weaker than the consensus of +2.17%, and cutting its 2024 comparable club sales forecast excluding gasoline to +2% from a prior view of +4% to +5%, below the consensus of +3.51%.

Nordson (NDSN) tumbled more than -3% after reporting Q3 sales of $648.7 million, weaker than the consensus of $666.4 million.

Macy’s (M) slid more than -1% in pre-market trading after forecasting Q3 adjusted EPS of a loss of -2 cents to a gain of +3 cents per share, well below the consensus of +27 cents per share.

Evercore (EVR) fell more than -1% in pre-market trading after Goldman Sachs downgraded the stock to neutral from buy.

Comerica (CMA) and KeyCorp (KEY) fell more than -1% in pre-market trading after S&P Global Ratings lowered the regional banks’ long-term ratings to BBB from BBB+, saying a "decline in deposits has squeezed liquidity."

Today’s U.S. Earnings Reports (8/22/2023)

BJ's Wholesale Club Holdings I (BJ), Coty Inc (COTY), Dick's Sporting Goods Inc (DKS), Lowe's Cos Inc (LOW), Macy's Inc (M), Medtronic PLC (MDT), Premier Inc (PINC), Toll Brothers Inc (TOL).

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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.