Morning Markets
The S&P 500 Index ($SPX) (SPY) today is up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.75%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down - 0.69%.
U.S. stock indexes are mixed on higher bond yields after the action by OPEC+ to cut its crude production by 1 million bpd sent crude prices soaring and elevated inflation concerns. Technology stocks were also under pressure, with Tesla down more than -5% after its Q1 vehicle deliveries disappointed.
May WTI crude oil is up by more than +6% at a 2-1/4 month high today after OPEC+ on Sunday announced a surprise oil production cut of more than 1 million bpd starting May 1. Saudi Arabia said the cuts were a "precautionary measure aimed at supporting the stability of the oil market."
Morgan Stanley warns that this year's rally in technology stocks isn't sustainable and that the sector will return to new lows. Also, JPMorgan Chase said the technology sector would stop strongly outperforming due to earnings risks, unattractive valuations, and very high price relatives in the long-term context.
On the positive side today, energy stocks are climbing in pre-market trading, with the price of crude up more than +6% at a 2-1/4 month high. Also, increased M&A activity is supportive for stocks, with Life Storage up more than +5% after Extra Space Storage agreed to acquire the company for $12.4 billion, and Apellis Pharmaceuticals up more than +16% after Bloomberg News reported that several larger drugmakers had expressed interest in acquiring the company.
Global bond yields this morning are higher on concern a surge in oil prices will elevate inflation pressures. The 10-year T-note yield is up +4.3 bp at 3.511%. The 10-year German bund yield is up +2.9 bp at 2.321%. The 10-year UK gilt yield is up +3.1 bp to 3.521%.
Overseas stock markets are higher. The Euro Stoxx 50 today is up +0.09%. China’s Shanghai Composite stock index closed up +0.72%, and Japan’s Nikkei Stock Index closed up +0.52%.
The Euro Stoxx 50 index today rallied to a 14-1/2 month high and is modestly higher. Strength in energy stocks is boosting the overall market, with crude prices up more than +5% following a surprise cut in production by OPEC+. European stocks also found support on today’s economic news that showed the Eurozone Mar S&P manufacturing PMI was revised higher. On the negative side, UBS Group AB fell more than -3% after Switzerland’s top prosecutor opened a probe into the company’s takeover of Credit Suisse Group AG, while a Swiss newspaper reported that the deal might result in up to 30% of Credit Suisse Group’s workforce being cut.
ECB Vice President Guindos said, "we believe headline inflation is likely to decline considerably this year while underlying inflation dynamics will remain strong."
The Eurozone Mar S&P manufacturing PMI was revised upward by +0.2 to 47.3 from the initially reported 47.1.
China’s Shanghai Composite today climbed to a 3-1/2 week high and closed moderately higher. Chinese chip-related stocks climbed after the government launched a cybersecurity review of imports from Micron technology. Also, Macau casino stocks rallied after the sector’s gaming revenue jumped to a 3-year high in March as Chinese tourists returned to Macau after the end of Covid Zero sparked a travel boom. On the negative side were signs of weaker-than-expected manufacturing activity after the China Mar Caixin manufacturing PMI fell more than expected. Also, internet stocks declined after Bilibili dropped more than -5% when Chinese media reported that content creators have complained of falling income on the video platform.
The China Mar Caixin manufacturing PMI fell -1.6 to 50.0, weaker than expectations of 51.4.
Japan’s Nikkei Stock Index today climbed to a 3-week high and closed moderately higher. Japanese exporter stocks moved higher today after the Japanese yen fell to a 2-week low against the dollar, improving the earnings prospects of exporters. Also, Japanese stocks tied to tourism rallied after TBS reported the Japanese government would end its current border control measures against Covid-19 on May 8. Furthermore, signs of stronger-than-expected Japanese manufacturing activity supported stocks after the Mar Jibun Bank manufacturing PMI was revised upward to a 5-month high. On the negative side was a larger-than-expected decline in the Q1 Tankan large manufacturing business conditions to a 2-year low.
The Japan Q1 Tankan large manufacturing business conditions fell -6 to a 2-year low of 1, weaker than expectations of 3.
The Japan Mar Jibun Bank manufacturing PMI was revised upward by +0.6 to a 5-month high of 49.2 from the initially reported 48.6.
Pre-Market U.S. Stock Movers
Tesla (TSLA) dropped more than -2% in pre-market trading after reporting Q1 vehicle deliveries of 422,875, just above the consensus of 421,164, disappointing some analysts who had been expecting a bigger beat, especially after the company cut vehicle prices in January.
Micron Technology (MU) fell more than -1% in pre-market trading, adding to last Friday’s -4% slide after China launched a cybersecurity review of imports from the company.
ArcelorMittal (MT) dropped more than -2% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.
Wolfspeed (WOLF) fell more than -3% in pre-market trading after Citigroup downgraded the stock to neutral from buy.
FormFactor (FORM) slid more than -2% in pre-market trading after Citigroup downgraded the stock to neutral from buy.
Energy stocks and energy service providers are moving higher in pre-market trading as the price of crude soared more than +6% to a 2-1/4 month high after OPEC+ announced it would cut its oil production by 1 million bpd. Chevron (CVX), Diamondback Energy (FANG), Devon Energy (DVN), Exxon Mobil (XOM), ConocoPhillips (COP), Marathon Oil (MRO), Occidental Petroleum (OXY), and Halliburton (HAL) were up +3% or more.
Apellis Pharmaceuticals (APLS) surged more than +16% in pre-market trading after Bloomberg News reported that several larger drugmakers had expressed interest in acquiring the company.
Life Storage (LSI) climbed more than +5% in pre-market trading after Extra Space Storage agreed to acquire the company for $12.4 billion.
U.S.-listed casino operators exposed to Macau are moving higher in pre-market trading after data showed the city’s gaming revenue surged +247% in March as tourists returned following the ending of Covid restrictions. Las Vegas Sands (LVS), Wynn Resorts (WYNN), MGM Resorts International (MGM), and Melco Resorts & Entertainment (MLCO) are up +3% or more.
Today’s U.S. Earnings Reports (4/3/2023)
Arcellx Inc (ACLX), National Energy Services Reuni (NESR), Science Applications Internati (SAIC), SWK Holdings Corp (SWKH).
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