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Markets Today: Stocks Surge on a Soft U.S. PPI Report

Barchart - Tue Nov 15, 2022
Wall Street - shutterstock_181756637

Morning Markets

December S&P 500 futures (ESZ22) this morning are up +1.84% at a 2-month high, and December Nasdaq 100 E-Mini futures (NQZ22) are up +2.79% at a 1-3/4 month high.  Stock indexes surged this morning on a softer-than-expected U.S. Oct PPI report.

The 10-year T-note yield this morning fell to a 5-week low of 3.755% after U.S. Oct producer prices rose less than expected.  T-notes also rose on carry-over support from a rally in 10-year German bunds after ECB Council member Villeroy de Galhau said a slower pace of ECB rate hikes is likely after next month’s policy meeting.

Strength in chip stocks in pre-market trading is a bullish factor for the overall market after an SEC filing showed Warren Buffett’s Berkshire Hathaway took a $5 billion stake in Taiwan Semiconductor Manufacturing.  Also, a 7% jump in Walmart in pre-market trading is underpinning stocks after it reported better-than-expected Q3 EPS and raised its full-year net sales forecast.

The U.S. Oct PPI final-demand index rose +8.0% y/y, weaker than expectations of +8.3% y/y and the weakest report in 15 months.  Oct PPI ex-food & energy rose +6.7% y/y, weaker than expectations of +7.2% y/y and the weakest report in 15 months. 

The U.S. Nov Empire manufacturing survey general business conditions index rose +13.6 to a 4-month high of 4.5, stronger than expectations of -6.0.

The Euro Stoxx 50 index today is up by +0.55% and is just below Monday’s 6-1/2 month high.  Strength in technology stocks is leading European stocks higher today.  Also, better-than-expected German wholesale price and investor sentiment reports boosted stock prices.  In addition, dovish comments today from ECB Council member Villeroy de Galhau pushed bond yields lower and gave stocks a lift when he said the ECB might shift to a slower pace of rate hikes next year.  The 10-year German bund yield is down -8.2 bp at 2.066%.

ECB Council member Villeroy de Galhau said the ECB might shift to a slower pace of rate hikes next year after bringing interest rates to a "normalization range" of around 2.0% in December, up from +1.5% currently.

The German ZEW expectations of economic growth rose +22.5 to a 5-month high of -36.7, stronger than expectations of -51.0.

The German Oct wholesale price index eased to +17.4% y/y from the +19.9% y/y pace in Sep, the smallest pace of increase in 8 months.

Asian markets today closed higher.  China’s Shanghai Composite closed up +1.64%, and Japan’s Nikkei Stock Index closed up +0.10%.

China’s Shanghai Composite today rallied to an 8-week high and closed moderately higher.  Strength in Chinese technology stocks led the overall market higher after Berkshire Hathaway took a $5 billion stake in Taiwan Semiconductor Manufacturing.  Also, an easing of U.S.-China tensions has improved market sentiment after Monday’s meeting between U.S. President Biden and Chinese President Xi Jinping.  In addition, Chinese property stocks extended their rally from Monday when Chinese regulators allowed builders to access more money held in pre-sale accounts, the biggest source of funds for cash-strapped developers. 

Today’s Chinese economic news was below expectations and bearish for stocks.  China Oct industrial production rose +5.0% y/y, weaker than expectations of +5.3% y/y.  Also, Oct retail sales unexpectedly fell -0.5% y/y, weaker than expectations of +0.7% y/y and the weakest report in 5 months.

Japan’s Nikkei Stock Index today closed slightly higher on carry-over support from rallies in U.S and Chinese equity markets.  In addition, financial stocks rose after Sumitomo Mitsui Financial Group climbed more than +4% when it raised its profit forecast and announced a new share buyback plan.  However, gains in Japanese equity markets were limited after today’s economic news showed Japan’s economy unexpectedly contracted in Q3.

Japan's Q3 GDP unexpectedly contracted by -1.2% y/y, weaker than expectations of +1.2% y/y.  The Q3 deflator fell -0.5% y/y, the seventh consecutive quarter of contraction.

Pre-Market U.S. Stock Movers

Mega cap technology stocks are climbing in pre-market trading as the 10-year T-note yield fell t a 5-week low.  Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Microsoft (MSFT), and Tesla (TSLA) are up +1% or more. 

Chipmakers advanced in pre-market trading after an SEC filing showed Warren Buffett’s Berkshire Hathaway acquired about 60 million American depository receipts (ADRs), about a $5 billion stake, in Taiwan Semiconductor Manufacturing.  As a result, advanced Micro Devices (AMD), Nvidia (NVDA), Intel (INTC), Marvell Technology (MRVL), Microchip Technology (MCHP), and NXP Semiconductors (NXPI) are up +1% or more. 

Cryptocurrency-exposed stocks are moving higher in pre-market trading, with Bitcoin up more than +2%.  Coinbase Global (COIN), Marathon Digital (MARA), Riot Blockchain (RIOT), and MicroStrategy (MSTR) are all up at least +2%.

Walmart (WMT) jumped more than +7% in pre-market trading after reporting Q3 adjusted EPS of $1.50, well above the consensus of $1.32 and then raising its full-year net sales forecast to +5.5% from a previous estimate of +4.5%. 

U.S.-listed casino stocks that operate in Macau are moving higher in pre-market trading amid growing optimism about China’s economic reopening.  Las Vegas Sands (LVS), MGM Resorts International (MGM), and Wynn Resorts (WYNN) are up more than +2%. 

Jeffries Financial Group (JEF) rose more than +4% in pre-market trading after an SEC filing showed Berkshire Hathaway held more than 433,000 shares of the stock as of Sep 30. 

Home Depot (HD) fell more than -2% in pre-market trading after reporting Q3 merchandise inventories climbed +25% y/y, and Q3 customer transactions fell -4.3% y/y. 

Harley Davidson (HOG) slid more than -1% in pre-market trading after Jeffries initiated coverage of the stock with an underperform rating, saying the recent strength in the stock is overdone.

Today’s U.S. Earnings Reports (11/15/2022)

Advance Auto Parts Inc (AAP), Aramark (ARMK), Berry Global Group Inc (BERY), Home Depot Inc/The (HD), Valvoline Inc (VVV), Walmart Inc (WMT).



More Stock Market News from BarchartOn 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.

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