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Stocks Modestly Higher on Upbeat Forecast from Cisco and Strong U.S. Economic Data

Barchart - Thu Aug 18, 7:53AM CDT
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Morning Markets

September S&P 500 futures (ESU22) this morning are up +0.06%.  Strength in technology stocks is leading stock indexes higher this morning, with Cisco Systems up nearly +5% in pre-market trading after issuing an upbear sales forecast.  Lower T-note yields are today also supportive for equities as the 10-year T-note yield is down -2.0 bp to 2.875%.  Stock indexes maintained moderate gains after this morning’s better-than-expected U.S. economic data on weekly jobless claims and the Aug Philadelphia Fed manufacturing outlook survey.

U.S. weekly initial unemployment claims unexpectedly fell -2,000 to 250,000, showing a stronger labor market than expectations of an increase to 264,000.

The U.S Aug Philadelphia Fed business outlook survey rose +18.5 to a 4-month high of 6.2, stronger than expectations of -5.0.

The Euro Stoxx 50 today shook off early losses and is up +0.38%.  Stocks rose on relief that the Eurozone July CPI was left unrevised at +8.9% y/y, slightly easing inflation concerns.  European stocks had initially opened lower on weak Eurozone construction data and from rising government bond yields on hawkish comments from a couple of ECB policymakers. The 10-year German bund yield rose to a 3-1/2 week high today at 1.150%, and the 10-year UK Gilt yield rose to a 1-1/2 month high of 2.353%. 

Eurozone June construction output fell -1.3% m/m, the biggest decline in 11 months.

Comments from ECB Executive Board member Schnabel signal she favors at least another 50 bp rate hike by the ECB in September when she said the inflation outlook hasn't improved since the ECB raised interest rates by 50 bp in July.  For September's ECB meeting, "any decision is going to be taken on the basis of incoming data.   If I look at the recent data, I would say that the concerns we had in July have not been alleviated."

ECB Governing Council member Kazaks said, "inflation at the moment is too high, and the ECB will continue to hike rates to slow inflation."

Asian markets today closed lower.  China’s Shanghai Composite index today closed down -0.46%, and Japan’s Nikkei index closed down -0.96%. 

Chinese stocks moved lower today on disappointing corporate earnings results from Country Garden Holdings, China’s largest property developer, which fell more than -5% after it warned that first-half earnings probably dropped by as much as 70% amid the escalating property crisis.  Chinese stocks were also under pressure after Nomura cut its China 2022 GDP forecast to 2.8% from 3.3%, a day after Goldman Sachs cut its China 2022 GDP forecast to 2.0% from 3.3%.  Finally, concern that rising Covid cases may prompt the government to expand pandemic restrictions weighed on stocks after China reported new Covid Infections on Wednesday jumped to 3,424, a 3-month high.

Chinese stocks recovered from their worst levels today on the outlook for additional government stimulus after the state-run China Securities Journal reported that local governments could sell more than 1.55 trillion yuan ($229 billion) of bonds to fund infrastructure investment and plug budget gaps.

Japan’s Nikkei Stock Index fell moderately today, led by losses in semiconductor stocks after Analog Devices on Wednesday warned that the slowing economy has begun to affect new orders.  Stocks also fell back on negative carry-over from Wednesday’s July 26-27 FOMC meeting minutes, where Fed officials saw risks from tightening monetary policy more than necessary. 

Pre-Market U.S. Stock Movers

Cisco Systems (CSCO) climbed nearly +5% in pre-market trading after reporting Q4 revenue of $13.10 billion, above the consensus of $12.73 billion, and forecast 2023 revenue will increase +4% to +6%, stronger than the consensus of +3.3%. 

First Solar (FSLR) rose more than +1% in pre-market trading after Morgan Stanley upgraded the stock to equal-weight from underweight, saying the Inflation Reduction Act in the U.S. is a “big deal” for the clean energy tech sector.

Wolfspeed (WOLF) surged more than +20% in pre-market trading after reporting Q4 net revenue of $228.5 million, better than the consensus of $207.9 million, and forecast Q1 revenue of $232.5 million-$247.5 million, above the consensus of $225.8 million.

Keysight (KEYS) jumped more than +5% in pre-market trading after reporting Q3 adjusted revenue of $1.41 billion, stronger than the consensus of $1.35 billion, and forecast Q4 revenue of $1.38 billion-$1.40 billion, above the consensus of $1.38 billion.

BJ’s Wholesale Club Holdings (BJ) rallied +6% in pre-market trading after reporting Q2 revenue of $5.10 billion, well above the consensus of $4.69 billion.

Mattel (MAT) rose +1% in pre-market trading after it was initiated with a buy rating at Bank of America, who said the company has “successfully” completed its turnaround and is now in growth mode.

Bed Bath & Beyond (BBBY) tumbled -12% in pre-market trading after RC Ventures disclosed in a regulatory filing that it might sell as much as 7.78 million shares of the stock.  RC Ventures is the second-largest holder of Bed Bath & Beyond stock. 

Elanco Animal Health (ELAN) fell more than -1% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight. 

Brinker International (EAT) slid more than -2% in pre-market trading after KeyBanc Capital Markets downgraded the stock to sector-weight from overweight.

Kohl’s (KSS) dropped -7% in pre-market trading after reporting Q2 net sales of $3.86 billion, weaker than the consensus of $3.92 billion, and cut guidance for 2023 net sales to fall -5% to -6% from a prior view of sales flat to up +1%.

Estee Lauder (EL) fell more than -1% in pre-market trading after forecasting 2023 adjusted EPS of $7.39-$7.54, well below the consensus of $7.92. 

Today’s U.S. Earnings Reports (8/18/2022)

Applied Materials Inc (AMAT), Estee Lauder Cos Inc/The (EL), Ross Stores Inc (ROST), Tapestry Inc (TPR).



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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.