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Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.30%, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.04%.
Stock index futures are moving higher this morning as global bond yields fall on speculation the world’s central banks have finished raising interest rates. This week’s better-than-expected U.S. inflation news and weekly jobs data that point to a slowing labor market have fueled a rally in T-note prices and bolstered expectations that the Fed is down tightening monetary policy. Stock index futures fell back from their best levels and T-note yields rose from their lows after U.S. Oct housing starts, and building permits unexpectedly rose, a hawkish factor for Fed policy.
Stocks also have support from some positive corporate news. The Gap surged more than +17% in pre-market trading after reporting Q3 adjusted EPS well above consensus. Also, Ross Stores is up more than +6% after reporting stronger-than-expected Q3 sales. In addition, Warner Music Group is up more than +2% after reporting Q4 revenue above consensus.
U.S. Oct housing starts unexpectedly rose +1.9% m/m to 1.372 million, stronger than expectations for a decline to 1.350 million. Also, Oct building permits, a proxy for future construction, unexpectedly rose +1.1% to 1.487 million, stronger than expectations of a decline to 1.450 million.
According to Bank of America, EPFR Global data showed global stock funds attracted $23.5 billion of inflows in the week through Nov 15, the second-biggest inflows this year.
The markets are discounting a 5% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +34% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and an 86% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield fell to a 1-3/4 month low of 4.377% and is down -0.4 bp at 4.432%. The 10-year German bund yield dropped to a 2-1/2 month low of 2.517% and is down -1.8 bp at 2.571%. The 10-year UK gilt yield fell to a 5-3/4 month low of 4.029% and is down -6.7 bp at 4.083%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.87%. China’s Shanghai Composite Index closed up +0.11%. Japan’s Nikkei Stock Index closed up +0.48%.
The Euro Stoxx 50 today rallied to a 3-month high and is moderately higher. The speculation that global central banks are finished tightening monetary policy has lowered bond yields and sparked a rally in equity markets. The 10-year UK gilt yield dropped to a 5-3/4 month low today at 4.029%, and the 10-year German bund yield fell to a 2-1/2 month low of 2.517%. On the negative side for stocks, Volvo Car AB tumbled more than -10% after holder Zhejiang Geely Holding Group sold a $350 million stake in the company following comments about the company’s free float.
ECB Governing Council member Villeroy de Galhau said the ECB's decision to halt interest rate increases at its October meeting is fully justified by a slowdown in inflation.
ECB Governing Council member Holzmann said it would be "too soon" for the ECB to begin cutting interest rates in Q2 of next year, and market expectations for a rate reduction are premature.
China’s Shanghai Composite today recovered from early losses and closed slightly higher. Chinese smart car component manufacturers jumped today after the government said it would allow pilot road tests for selected self-driving cars in designated areas. Chinese stocks today initially moved lower after Alibaba Group Holding sank -10% after it scrapped a plan to spin off its cloud unit due to U.S. restrictions on the export of chips. Also, Chinese automakers declined after a Reuters report said U.S. lawmakers raised concerns about the collection of sensitive data by the car companies.
Japan’s Nikkei Stock Index today closed moderately higher. Japanese stocks found support today on lower government bond yields on speculation the Fed was finished raising interest rates. The 10-year JGB bond yield fell to a 1-3/4 month low today at 0.718%. Japanese airline stocks rallied today after crude oil prices fell to a 4-month low, which will lower jet fuel costs and boost airlines’ profits. An increase in foreign buying also supported Japanese equities as data showed foreign investors bought the largest amount of Japanese stocks in five months last week. Gains in the overall market were limited after the yen climbed to a 2-week high against the dollar, undercutting exporter stocks.
Dara from Japan Exchange Group showed foreign investors bought 1.1 trillion yen ($7.27 billion) of Japanese cash equities and futures last week, the most in five months.
Pre-Market U.S. Stock Movers
The Gap (GPS) surged more than +17% in pre-market trading after reporting Q3 adjusted EPS of 59 cents, well above the consensus of 19 cents.
Ross Stores (ROST) jumped more than +6% in pre-market trading after reporting Q3 sales of $4.92 billion, stronger than the consensus of $4.84 billion.
Tenet Healthcare Corp (THC) climbed more than +3% in pre-market trading after Novant Health bought three Tenet hospitals and affiliated operations in South Carolina.
Globant SA (GLOB) rallied more than +5% in pre-market trading after forecasting Q3 non-IFRS adjusted EPS of at least $1.60, better than the consensus of $1.58.
Warner Music Group (WMG) rose more than+2% in pre-market trading after reporting Q4 revenue of $1.59 billion, above the consensus of $1.57 billion.
Analog Devices (ADI) gained more than +1% in pre-market trading after Mogan Stanley upgraded the stock to overweight from equal weight with a price target of $225.
Expedia Group (EXPE) climbed more than +2% in pre-market trading after Evercore ISI upgraded the stock to outperform from inline with a price target of $200
Applied Materials (AMAT) tumbled more than -7% in pre-market trading after Reuters reported the company faces a U.S. criminal investigation for allegedly violating export restrictions to China.
Gitlab (GTLB) dropped more than -2% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.
Progressive Corp (PGR) fell more than -1% in pre-market trading after reporting a combined ratio for October of 91.7% versus 95.9% y/y.
Airbnb (ABNB) slid more than -1% in pre-market trading after Evercore ISI downgraded the stock to inline from outperform.
Triumph Financial (TFIN) fell more than -1% in pre-market trading after D.A. Davidson downgraded the stock to neutral from buy.
Earnings Reports (11/17/2023)
Atkore Inc (ATKR), BJ's Wholesale Club Holdings Inc (BJ), Buckle Inc/The (BKE), Destination XL Group Inc (DXLG), Johnson Controls International (JCI), Spectrum Brands Holdings Inc (SPB), Twist Bioscience Corp (TWST), Urban One Inc (UONEK), Veradigm Inc (MDRX).
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.
