Morning Markets
June S&P 500 futures (ESM23) this morning are down -0.12%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.37%.
U.S. stock index futures this morning are modestly lower after today’s weekly jobless claims showed the U.S. labor market continues to soften. Continuing claims, which include people who have received unemployment benefits for a week or more and are a good indicator of how hard it is for the unemployed to find a new job, rose to a 15-month high of 1.823 million in the latest week.
U.S. weekly initial unemployment claims fell -18,000 to 228,000, showing a weaker labor market than expectations of 200,000. Also, weekly continuing claims rose +6,000 to a 15-month high of 1.823 million, showing a weaker labor market than expectations of 1.700 million.
On the negative side for equities, Costco Wholesale is down more than -2% after it reported March comparable sales ex-fuel dropped -11.6%. Also, chip stocks were mostly lower in pre-market trading, with Applied Materials, KLA Corp, and Super Micro Computer down more than -1% after being downgraded. Conversely, FedEx, Pure Storage, and Fifth Third Bancorp were up +1% or more after being upgraded.
Weakness in quarterly earnings is bearish for stocks as Goldman Sachs said Q1 S&P 500 EPS are expected to fall -7% y/y, making it the sharpest decline since Q3 of 2020.
Global bond yields this morning are moving lower after today’s weekly jobless claims were higher than expected, adding to evidence that the U.S. labor market was slowing. The 10-year T-note yield dropped to a 6-3/4 month low of 3.248%. Also, the 10-year German bund yield fell to a 1-1/2 week low of 2.120%, and the 10-year UK gilt yield fell to a 1-1/2 week low of 3.374%.
Overseas stock markets are mixed. The Euro Stoxx 50 today is up +0.20%. China’s Shanghai Composite closed unchanged, and Japan’s Nikkei Stock Index closed down -1.22%.
The Euro Stoxx 50 index today is moderately higher. Bank stocks climbed after ECB Chief Economist Lane said the Eurozone banking system "is in good shape.” Also, energy stocks moved higher, led by a more than +2% gain in Shell Plc, after it reported Q1 preliminary results that showed profits remained strong despite the slump in nat-gas prices. In addition, signs of strength in the Eurozone economy gave stocks a lift after today’s news showed German Feb industrial production unexpectedly increased.
ECB Chief Economist Lane said, "If the baseline we developed before the banking stress holds up, it will be appropriate to raise interest rates again in May." He added that the Eurozone banking system "is in good shape and that "the European economy is performing relatively well and is expected to grow by around 1% this year."
German Feb industrial production unexpectedly rose +2.0% m/m, stronger than expectations of a decline of -0.1% m/m.
China’s Shanghai Composite Stock Index rose to a 4-week high but fell back and closed unchanged. Chinese stocks found early support today on signs of strength in the service sector after economic news showed the China Mar Caixin services PMI rose more than expected at the fastest pace in more than 2 years. Also, shares of Alibaba and its suppliers rose after the Zhejiang Daily Press Group reported that the company plans to launch its own version of ChatGPT-like artificial intelligence tool this month. Stocks gave up their early advance and settled little changed amid signs of rising geopolitical tensions after China urged the World Trade Organization to probe practices of Japan, the U.S., and the Netherlands over their export curbs of chipmaking gear to China.
The China Mar Caixin services PMI rose +2.8 to 57.8, stronger than expectations of no change at 55.0 and the fastest pace of expansion in more than 2 years.
Japan’s Nikkei Stock Index fell to a 1-1/2 week low and closed moderately lower. Japanese chip-sector stocks fell amid heightened concerns over the U.S.-China technology spat. Japanese total units of chip shipments to China in the first two months of 2023 plummeted -46% y/y to the lowest level since 2009. Also, Japanese regional bank stocks retreated after Daiwa Securities said it sees a shift in BOJ policy and as markets price a decline in U.S. longer-term interest rates. Shares of Japan’s conveyor-belt sushi companies were under pressure today after monthly sales data for March showed demand is still below pre-pandemic levels.
Pre-Market U.S. Stock Movers
Costco Wholesale (COST) dropped more than -2% in pre-market trading after it reported March comparable sales ex-fuel dropped -11.6%.
Mosaic (MOS) fell more than -2% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.
Comerica (CMA) slid more than -1% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.
Levi Strauss (LEVI) dropped more than -5% in pre-market trading after reporting a Q1 gross margin of 55.8%, below the consensus of 56.9%.
Lumentum (LITE) tumbled more than -12% in pre-market trading after reporting preliminary Q3 net revenue of $380 million-$384 million, well below the consensus of $444.1 million.
Applied Materials (AMAT) and KLA Corp (KLAC) slid more than -1% in pre-market trading after BNP Paribas Exane downgraded both stocks to neutral from outperform.
Super Micro Computer (SMCI) tumbled more than -4% in pre-market trading after Wedbush downgraded the stock to underperform from neutral.
FedEx (FDX) is up more than +1% in pre-market trading after Raymond James upgraded the stock to outperform from market perform.
Hercules Capital (HTGC) climbed more than +2% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral.
Pure Storage (PSTG) climbed more than +2% in pre-market trading after Wedbush upgraded the stock to outperform from neutral.
Fifth Third Bancorp (FITB) gained nearly +2% in pre-market trading after Keefe, Bruyette & Woods upgraded the stock to outperform from market perform.
Alibaba Group Holding (BABA) rose more than +1% in pre-market trading on a report the company was planning to launch its own version of ChatGPT-like AI tool this month.
Today’s U.S. Earnings Reports (4/6/2023)
Constellation Brands Inc (STZ), Lamb Weston Holdings Inc (LW), RPM International Inc (RPM).
