Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +1.23% at a 1-3/4 month high, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +1.59% at a 3-1/2 month high.
Stock index futures this morning jumped, and bond yields tumbled, after U.S. Oct consumer prices rose less than expected, reinforcing expectations that the Fed will maintain its pause on interest rate hikes.
U.S. Oct CPI eased to +3.2% y/y from +3.7% y/y in Sep, better than expectations of +3.3% y/y. Oct CPI ex-food and energy eased to +4.0% y/y from +4.1% y/y in Sep, better than expectations of no change at 4.1% y/y and the smallest increase in more than two years.
A possible shutdown of the U.S. government is a negative factor for stocks. U.S. lawmakers have until Friday night to pass a stopgap spending bill before funding runs out and the government shuts down.
On the positive side for stocks, Snap Inc is up more than +5% in pre-market trading after the Information reported that Amazon.com agreed to let Snap users shop for products directly from ads on the Snapchat app. Also, Take-Two Interactive Software is up nearly +2% after Deutsche Bank upgraded the stock to buy. Home Depot is up more than +1% after reporting a smaller-than-expected decline in Q3 comparable sales.
On the negative side, Harrow Inc is down more than -25% after reporting an unexpected Q3 net loss and cutting its full-year revenue forecast. Also, ON Holding is down more than -9% after forecasting Q4 sales growth below consensus. Corteva Inc is down more than -1% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.
The markets are discounting a 19% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 33% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -15.0 bp at 4.490%. The 10-year German bund yield is down -7.0 bp at 2.643%. The 10-year UK gilt yield fell to a 1-3/4 month low of 4.215% and is down -9.6 bp at 4.217%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.98%. China’s Shanghai Composite Index closed up +0.31%. Japan’s Nikkei Stock Index closed up +0.34%.
The Euro Stoxx 50 today rose to a 1-3/4 month high and is moderately higher. Strength in mining stocks and metals producers is leading the overall market higher, with Glencore Plc up more than +4% after agreeing to buy a majority stake in Teck Resources Ltd’s coal business for $6.93 billion. Also, an improvement in German investor expectations gave equities a boost after the German Nov ZEW survey expectations of economic growth rose more than expected to an 8-month high. European stocks extended their gains after U.S. Oct consumer prices rose less than expected, a dovish factor for Fed policy. Weakness in telecom companies limited gains in the overall market after Vodafone Group Plc fell nearly -2% after reporting weaker profits in southern Europe.
The German Nov ZEW survey expectations of economic growth rose +10.9 to an 8-month high of 9.8, stronger than expectations of 5.0.
China’s Shanghai Composite today posted moderate gains. Strength in Chinese electric bus manufacturers gave the overall market a lift after the government identified 15 cities where it aims to use only EVs for public service vehicles. Also, stocks linked to Huawei’s operating system rose amid optimism that the new operating system, HarmonyOS NEXT, might bring about more opportunities. On the negative side, China’s leading fentanyl makers retreated after Bloomberg reported that U.S. President Biden and Chinese President Xi Jinping are set to announce an agreement that would see China crackdown on the manufacture and export of fentanyl.
Japan’s Nikkei Stock Index today closed moderately higher. Better-than-expected corporate earnings results boosted the overall market, led by Mizuho Financial Group, which rose more than +3% after raising its full-year profit forecast. Also, carryover support from a more than +1% jump in South Korea’s Kospi Stock Index lifted Japanese markets as technology and EV battery stocks rallied. A weak yen also supported exporter stocks, with the yen just above Monday’s 1-year low against the dollar. Stock gains were limited ahead of Wednesday's Q3 GDP report, which is expected to show the Japanese economy contracted -0.4% (q/q annualized) in Q3.
Pre-Market U.S. Stock Movers
Snap Inc (SNAP) jumped more than +5% in pre-market trading after the Information reported that Amazon.com agreed to let Snap users shop for products directly from ads on the Snapchat app.
Tesla (TSLA) climbed more than +2% in pre-market trading after Thailand Prime Minister Srettha visited Tesla’s Fremont factory in California and discussed possible collaboration in electric vehicles and clean energy with Tesla executives.
Take-Two Interactive Software (TTWO) rose nearly+2% in pre-market trading after Deutsche Bank upgraded the stock to buy from hold with a price target of $175.
Kraft Heinz (KHC) gained more than +1% in pre-market trading after Bernstein upgraded the stock to outperform from market perform with a price target of $40.
ON Semiconductor (ON) rose more than +1% in pre-market trading after Roth MKM initiated coverage of the stock with a buy recommendation with a price target of $75.
Mosaic (MOS) climbed more than +2% in pre-market trading after Barclays upgraded the stock to overweight from underweight.
Home Depot (HD) rose more than +1% in pre-market trading after reporting Q3 comparable sales fell -3.10%, a smaller decline than expectations of -3.31%.
Aspen Technology (AZPN) gained more than +1% in pre-market trading after Baird upgraded the stock to outperform from neutral with a price target of $202.
Harrow Inc (HROW) plunged more than -25% in pre-market trading after reporting an unexpected Q3 net loss of -$4.4 million versus expectations of a $2.7 million gain and cutting its full-year revenue forecast to $129 million-$136 million for a previous forecast of $135 million-$143 million.
ON Holding (ONON) sank more than -9% after forecasting Q4 sales growth of +21%, well below the consensus of +27%.
Corteva Inc (CTVA) slid more than -1% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.
New York Community Bancorp (NYCB) dropped more than -3% in pre-market trading after Wedbush Securities downgraded the stock to underperform from neutral.
Viper Energy (VNOM) tumbled more than -5% in pre-market trading after a holder offered 9.02 million of the company’s shares via Barclays.
Earnings Reports (11/14/2023)
Aramark (ARMK), Home Depot Inc/The (HD), NCR Atleos Corp (NATL), NU Holdings Ltd/Cayman Islands (NU).
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.
