Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are up +0.37%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.60%.
Stock indexes this morning are moderately higher, recovering some of last week’s losses. An increase in M&A activity supports stocks after Permian Resources acquired Earthstone Energy in a deal valued at $4.5 billion. Also, cybersecurity stocks are climbing in pre-market trading after Palo Alto Networks forecast stronger-than-expected full-year billings. Higher bond yields this morning are a negative factor for stocks.
Global equity markets have some negative carryover from a fall in China’s Shanghai Composite Stock Index to a 7-1/2 month low today on economic concerns after Chinese banks cut their prime loan rates less than expected.
The markets are discounting the odds at 11% for a +25 bp rate hike at the September 20 FOMC meeting and 41% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields are higher. The 10-year T-note yield is up +4.4 bp to 4.298%. The 10-year German bund yield is up +5.0 bp at 2.672%. The 10-year UK gilt yield is up +1.8 bp at 4.694%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.87%. China’s Shanghai Composite Index today closed down -1.24%. Japan’s Nikkei Stock Index closed up +0.37%.
The Euro Stoxx 50 today is moderately higher. An easing of price pressures in Germany is supportive for stocks after German producer prices in July fell by the most in 13 years. Strength in energy stocks, health care, consumer products, and auto sectors today are leading the overall market higher. European stocks shrugged off weakness in Chinese stocks after Chinese banks kept the 5-year loan prime rate, a key interest rate that guides mortgage rates, on hold when expectations were for a rate cut.
In its monthly report released today, Germany's Bundesbank said, "The German economy continues to be in a weak phase. In the third quarter of 2023, economic output is likely to remain virtually unchanged again."
German Jul PPI fell -6.0% y/y, weaker than expectations of -5.1% y/y and the steepest drop in 13 years.
China’s Shanghai Composite tumbled to a 7-1/2 month low and closed moderately lower. A slump in Chinese property stocks and financial companies led the overall market lower today on disappointment the PBOC did not announce a bigger drop in loan rates. The PBOC announced that Chinese lenders cut the one-year interest rate for corporate loans by -10 bp, less than expectations of -15 bp, and kept the five-year rate used for pricing mortgages unchanged. Speculation is that the PBOC, by making a more modest cut in the one-year lending rate and leaving the five-year rate unchanged, was trying to widen the profit margins for banks who have lent massively in recent years to real estate developers and home buyers, the same groups hardest hit by China’s housing crisis.
The People's Bank of China (PBOC), in consultation with state-owned commercial banks, cut the 1-year loan prime rate by -10 bp to 3.45%, a smaller cut than expectations of 15 bp to 3.40%. Also, the 5-year loan prime rate was left unchanged at 4.20% when expectations were for a -15 bp cut to 4.05%.
Japan’s Nikkei Stock Index today closed moderately higher. Defensive stocks such as utilities and pharmaceutical companies that are less sensitive to economic trends led the overall market higher today on concerns the Federal Reserve may leave interest rates higher and for longer. Japanese exporter stocks also moved higher today as the yen weakened against the dollar, boosting the earnings prospects of exporters. Gains in the Nikkei Stock Index were limited after China’s PBOC announced a reduction in loan rates that was less than expected, raising concerns about the outlook for China’s economy.
Pre-Market U.S. Stock Movers
Cybersecurity stocks are moving higher in pre-market trading after Palo Alto Networks forecast 2024 billing of $10.9 billion-$11.0 billion, stronger than the consensus of $10.77 billion. As a result, Palo Alto Networks (PANW) is up more than +10%. Also, CrowdStrike Holdings (CRWD), Fortinet (FTNT), SentinelOne (S), and Zscaler (ZS) are up +3% or more.
Goldman Sachs (GS) is up more than +1% in pre-market trading after the Financial Times reported the company is exploring the sale of its personal financial management operations unit.
Earthstone Energy (ESTE) rallied more than +9% in pre-market trading after Permian Resources acquired the company in a deal valued at $4.5 billion.
Sculptor Capital Management (SCU) jumped more than +7% in pre-market trading after it said 70 potential buyers had contacted its advisers after it disclosed that it was pursuing strategic options.
Xpeng’s ADRs (XPEV) climbed more than +5% in pre-market trading after Bank of America upgraded the Chinese electric vehicle make to buy from neutral.
VMware (VMW) rose more than +4% in pre-market trading after Broadcom said it expects its acquisition of the company will close Oct 30 after the UK CMA gave its final transaction approval.
Napco Security Technologies (NSSC) plunged more than -30% in pre-market trading after it said it would have to restate three quarters of financial statements.
Extra Space Storage (EXR) slid nearly -1% in pre-market trading after cutting its regular quarterly cash dividend to 61 cents per share from the previous dividend of $1.10 per share.
Today’s U.S. Earnings Reports (8/21/2023)
Fabrinet (FN), Nordson Corp (NDSN), Waldencast plc (WALD), Zoom Video Communications Inc (ZM).
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.
