Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are up +0.07%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.03%.
Stock index futures this morning recovered from overnight losses and are slightly higher as a decline in bond yields sparked short covering. Negative carryover from a slide in European and Asian stock markets today initially weighed on U.S. stock indexes. Technology stocks were under pressure on concern China’s ban on Apple’s iPhones could impact other technology companies that rely on sales and production in China.
A draft from the leaders of G-20 countries meeting in India this weekend warns that “cascading crises” have posed challenges to long-term economic growth and call for coordinated macroeconomic policies to support the world economy. Also, global economic growth is uneven and below the long-term average as uncertainty on the economic outlook remains high, and the balance of risks is tilted to the downside.
Lower T-note yields today are supportive for stocks as expectations improved for a pause in Fed rate hikes on comments late Thursday night from Dallas Fed President Logan, who said, "Another skip in raising interest rates could be appropriate when the FOMC meets later this month.”
The markets are discounting the odds at 7% for a +25 bp rate hike at the September 20 FOMC meeting and 46% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields are mixed. The 10-year T-note yield is down -1.2 bp at 4.232%. The 10-year German bund yield is down -1.2 bp at 2.602%. The 10-year UK gilt yield is down -2.2 bp at 4.432%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.05%. China’s Shanghai Composite Index closed down -0.18%. Japan’s Nikkei Stock Index closed down -1.16%.
The Euro Stoxx 50 today tumbled to a 3-week low and is moderately lower. Concerns about stagflation in the Eurozone are undercutting stocks with slowing economic growth and inflation exceeding 5%. Technical selling is also weighing on European stocks as the Euro Stoxx 50 closed below its 200-day moving average Thursday for the first time since early 2022. With inflation still elevated, the markets are looking toward next week’s ECB meeting to see if the central bank will tighten policy further. The markets are discounting the odds at only 34% for a +25 bp rate hike at the September 14 ECB meeting.
French economic news was better than expected and supportive of European stocks. France Jul manufacturing production rose +0.7% m/m, stronger than expectations of +0.4% m/m. Also, Jul industrial production rose +0.8% m/m, stronger than expectations of +0.1% m/m.
China’s Shanghai Composite Index fell to a 1-1/2 week low and closed slightly lower. Chinese energy firms retreated today as extended supply cuts by Saudi Arabia and Russia will push import costs higher for the Chinese firms. Also, rising U.S.-China tensions over technology hurt market sentiment on news the U.S. government has begun an official probe into an advanced made-in-China chip within Huawei Technologies’ latest smartphone. However, Chinese semiconductor equipment makers rallied and limited losses in the overall market on speculation the U.S. investigation into chips used for Huawei’s new smartphone will boost government support for the sector. Also, suppliers of Huawei rallied after Huawei started taking subscriptions for its “Mate60 Pro,” a more advanced version of the phone it launched last week that comes with chips made in China.
Japan’s Nikkei Stock Index today posted moderate losses. Weaker-than-expected Japanese economic news weighed on stocks, including a larger-than-expected downward revision to Japan's Q2 GDP. Also, Japanese suppliers to Apple retreated for a second day today on worries over China’s curbs on iPhone use in government-backed agencies and state companies. In addition, Japanese technology stocks retreated on concern China’s ban on Apple’s iPhones could impact other technology companies that rely on sales and production in China. Finally, profit-taking in Japanese stocks emerged amid speculation the Japanese government may step up its effort to stop the yen’s weakening after Japanese Finance Minister Suzuki said he would appropriately address excessive moves in the foreign exchange market.
The Japan Aug eco watchers outlook survey fell -2.7 to a 6-month low of 51.4, weaker than expectations of 53.4.
Japan Q2 GDP was revised lower to +4.8% (q/q annualized) from the previously reported +6.0%, weaker than expectations of +5.6%.
Japan Jul labor cash earnings rose +1.3% y/y, weaker than expectations of +2.4% y/y.
Pre-Market U.S. Stock Movers
Kroger (KR) is down more than -2% in pre-market trading after reporting Q2 sales of $33.90 billion, weaker than the consensus of $34.17 billion.
DigitalOcean Holdings (DOCN) tumbled more than -5% in pre-market trading after Bank of America downgraded eh stock two notches to underperform from buy.
Stellantis NV (STLA) slid more than -1% in pre-market trading after saying it may reduce investments in Germany and elsewhere in Europe if electricity costs don’t come down.
Hudson Pacific Properties (HPP) dropped more than -10% in pre-market trading after it suspended its quarterly dividend on its common stock citing current market conditions.
Adobe (ADBE) rose almost +2% in pre-market trading after Mizuho Securities upgraded the stock to buy from neutral with a price target of $630.
Smith & Wesson Brands (SWBI) jumped more than +11% in pre-market trading after reporting Q1 net sales of $114.2 million, stronger than the consensus of $100.8 million.
Snowflake (SNOW) climbed nearly +2% in pre-market trading after D.A. Davidson initiated coverage of the stock with a recommendation of buy with a price target of $200.
Smartsheet (SMAR) rose more than +6% in pre-market trading after reporting Q2 adjusted EPS of 16 cents, double the consensus of 8 cents, and raising its 2024 EPS forecast to 53 cents-57 cents from a prior estimate of 37 cents-44 cents, stronger than the consensus of 42 cents.
DocuSign (DOCU) climbed more than +2% in pre-market trading after reporting Q2 revenue of $687.7 million, better than the consensus of $677.1 million, and raising its 2024 revenue estimate to $2.73 billion-$2.74 billion from a previous forecast of $2.71 billion-$2.73 billion, above the consensus of $2.72 billion.
Earnings Reports (9/8/2023)
5E Advanced Materials Inc (FEAM), Dakota Gold Corp (DC), Hooker Furnishings Corp (HOFT), Kroger Co/The (KR), National Beverage Corp (FIZZ), Rent the Runway Inc (RENT).
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.
