Markets Today: Stocks Moderately Higher Ahead of FOMC Decision
Morning Markets
December S&P 500 futures (ESZ22) this morning are up by +0.50%. Stocks are moderately higher today on short-covering ahead of the results of the 2-day FOMC meeting later this afternoon. The markets will also scour post-meeting comments from Fed Chair Powell for clues into how long the Fed plans to aggressively tighten monetary policy. Market expectations are for the FOMC to raise the fed funds target range today by +75 bp for the third consecutive meeting.
U.S. defense stocks are climbing in pre-market trading after Russian President Putin vowed to step up his war against Ukraine. Also, energy stocks are climbing today in pre-market trading, with WTI crude up more than +2% and nat-gas prices up more than +4%.
Today’s -2.7 bp drop in the 10-year T-note yield to 3.536% is another supportive factor for stocks. The dollar index rose to a new 20-year high today on safe-haven buying from the escalation of the war in Ukraine.
The Euro Stoxx 50 today is down -0.13% and posted a 2-month low. European stocks came under pressure today on Russia’s escalation of the war in Ukraine after Russian President Putin ordered a “partial mobilization” of 300,000 Russian reservists. Putin also pledged to annex the territories his forces have already occupied and vowed to use all means necessary to defend Russia. European stocks also took a hit today after Deutsche Bank said the Eurozone will face a deeper recession then previously forecast.
ECB Vice President Guindos said despite data pointing to a "substantial" slowdown in growth across the Eurozone, risks to prices remain skewed to the upside.
Deutsche Bank said the Eurozone will face a deeper recession then previously forecast after Russia halted nat-gas deliveries through the Nord Stream 1 pipeline. Eurozone 2023 GDP will contract -2.2% annualized, compared with a July projection of -0.3%.
Asian markets today closed lower. China’s Shanghai Composite Index closed down -0.17%, and Japan’s Nikkei Stock Index closed down -1.36%.
China’s Shanghai Composite Index today fell to a 3-3/4 month low. Chinese stocks fell back today on economic concerns after the Asian Development Bank cut its 2022 China GDP forecast to 4.3% from a 4.6% projection in July, citing rising global interest rates, a prolonged war in Ukraine, and China’s Covid Zero policy. Also, Chinese stocks in which Tencent Holdings has stakes retreated even after Tencent denied a Wall Street Journal report that it is looking to sell down some of its investments. However, Chinese stocks bounced from their worst levels today as Chinese exporters rallied when the yuan dropped to a new 2-year low against the dollar, which boosts the earnings prospects of exporters.
Japan’s Nikkei Stock Index fell to a 2-week low today ahead of today’s FOMC meeting results and comments from Fed Chair Powell. Long liquidation in Japanese stocks ahead of tomorrow’s BOJ meeting also weighed on the overall market. In an attempt to keep the 10-year JGB bond yield from moving above its 0.25% upper target, the BOJ today announced unscheduled bond purchases and said it plans to buy 150 billion yen of 5-10 year bonds and 100 billion yen of 10-25 year bonds.
Pre-Market U.S. Stock Movers
U.S. defense stocks are climbing in pre-market trading after Russian President Putin declared a “partial mobilization” of 300,000 Russian reservists in an escalation of the war in Ukraine. Northrop Grumman (NOC), Lockheed Martin (LMT), and Raytheon (RTX) are all up more than +2%.
Oil and gas stocks are moving higher in pre-market trading with WTI crude up more than +2% and nat-gas prices up more than +4% after Russian President Putin ordered a partial mobilization of Russian reservists in an escalation of the war in Ukraine. Devon Energy (DVN), Exxon Mobil (XOM), Marathon Oil (MRO), Occidental Petroleum (OXY), Diamondback Energy (FANG), and Schlumberger (SLB) are all up more than +1%.
General Mills (GIS) climbed more than +2% in pre-market trading after it boosted its 2023 organic net sales forecast to up 6%-7% from a previous estimate of up 4%-5%, stronger than the consensus of up 5.68%.
PayPal Holdings (PYPL) rose more than +1% in pre-market trading after Bank of America added the stock to its U.S. 1 list of best investment ideas.
Coty (COTY) jumped more than +4% in pre-market trading after boosting its Q1 like-for-like sales growth forecast to up 8%-9% from an earlier forecast of up 6%-8%.
Stitch Fix (SFIX) tumbled -10% in pre-market trading after reporting Q4 net revenue of $481.9 million, weaker than the consensus of $489.4 million, and forecast 2023 net revenue of $1.76 billion-$1.86 billion, below the consensus of $2.1 billion.
Micron (MU) slid more than -2% in pre-market trading after Mizuho Securities downgraded the stock to neutral from buy.
Cisco Systems (CSCO) dropped nearly -2% in pre-market trading after Barclays downgraded the stock to equal weight.
Western Digital (WDC) fell more than -2% in pre-market trading after Mizuho Securities downgraded the stock to neutral from buy.
Autoliv (ALV) dropped more than -4% in pre-market trading after SEB said the economic backdrop has “undoubtedly deteriorated,” with markets representing more than 50% of global auto consumers facing high inflation and/or higher financing costs.
Today’s U.S. Earnings Reports (9/21/2022)
General Mills Inc (GIS), HB Fuller Co (FUL), KB Home (KBH), Lennar Corp (LEN), Steelcase Inc (SCS),
Vinco Ventures Inc (BBIG).
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