Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are up +0.02%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.18%.
Stock indexes this morning are slightly higher on a decline in global bond yields. An easing of inflation pressures in the UK sparked a rally in European government bonds, as the 10-year UK Gilt yield fell to a 6-week low, which sparked rallies in German and U.S. bond markets. UK June CPI eased to +7.9% y/y from +8.7% y/y in May, better than expectations of +8.2% y/y. Stock indexes kept modest gains and bond yields remained lower on this morning’s weaker-than-expected U.S. June housing starts and building permits.
U.S. June housing starts fell -8.0% m/m to 1.434 million, weaker than expectations of 1.480 million. Jun building permits, a proxy for future construction, unexpectedly fell -3.7% m/m to 1.440 million, weaker than expectations of an increase to 1.500 million.
The markets are discounting the odds at 96% for a +25 bp rate hike at the next FOMC meeting on July 25-26. The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.
Global bond yields are lower. The 10-year T-note yield dropped to a 2-1/2 week low of 3.725% and is down -5.3 bp at 3.733%. The 10-year German bund yield fell to a 3-week low of 2.317% and is down -3.4 bp at 2.355%. The 10-year UK Gilt yield fell to a 6-week low of 4.145% and is down -16.6 bp at 4.165%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.05%. China’s Shanghai Composite Index today closed up +0.03%. Japan’s Nikkei Stock Index closed up +1.24%.
The Euro Stoxx 50 today is slightly lower. Rio Tinto Group is down -0.6% to lead mining stocks lower after it said Q2 shipments of iron ore fell -1% from a year earlier. Losses in the overall market are limited after government bond yields fell on slowing UK inflation. The UK Jun CPI eased to +7.9% y/y from 8.7% y/y in May, better than expectations of +8.2% y/y. The easing inflation pressures fueled a rally in government bonds as the 10-year UK gilt yields fell to a 6-week low, and the 10-year German bund yield dropped to a 3-week low. The decline in bond yields boosted consumer and real estate stocks. ASML Holding NV moved higher to lead gains in technology stocks after it reported stronger-than-expected orders in Q2, prompting it to raise guidance for the year.
Eurozone May construction output rose +0.2% m/m, the first increase in 3 months.
Eurozone Jun new car registrations rose +17.8% y/y to 1.045 million, the eleventh consecutive monthly increase.
Eurozone Jun core CPI was revised upward by 0.1 to 5.5% from the initially reported 5.4%.
China’s Shanghai Composite today recovered from a 2-1/2 week low and closed slightly higher. Short covering emerged in Chinese stocks in late trading today after a report from JPMorgan Chase said the likelihood of a nationwide property easing is rising given weaker-than-expected sales and a home price correction, saying down-payment ratios might be lowered as a first step. China’s property market has been under pressure this week after a key unit of Dalian Wanda Group warned creditors of a funding shortfall for a bond that comes due July 23 and after Evergrande Group reported combined losses of more than $81 billion over two years. China’s property debt crisis has widened to include mounting stress among local government financing vehicles and is complicating efforts to avert the economy from slowing further.
On the positive side, Chinese stocks related to environmental protection rallied after President Xi Jinping said the resolve to achieve a carbon peak by 2030 and carbon neutrality by 2060 is unwavering. Also, office software developers in China rose after Microsoft gave pricing details for its corporate AI products.
Japan’s Nikkei Stock Index today climbed to a 1-1/2 week high and settled moderately higher. Japanese media stocks rallied today to lead the overall market higher after SMBC Nikko raised price targets for Fuji Media, Nippon Television, and TBS Holdings, reflecting the value of their strategic holdings. Also, the yen weakened, and exporter stocks rose, after BOJ Governor Ueda indicated a continuation of easy monetary policy until there is a shift in its assessment for achieving its inflation target. In addition, Japanese financial stocks rose after results from Bank of America and Morgan Stanley bolstered U.S. bank stocks. Japanese semiconductor production equipment makers extended gains in late trading today after ASML Holding NV posted better-than-expected Q2 orders and raised its full-year guidance.
Pre-Market U.S. Stock Movers
Interactive Brokers (IBKR) tumbled more than -4% in pre-market trading after reporting Q2 adjusted EPS of $1.32, weaker than the consensus of $1.40.
Omnicom Group (OMC) dropped more than -6% in pre-market trading after reporting Q1 revenue of $3.61 billion, weaker than the consensus of $3.66 billion.
U.S. Bancorp (USB) fell more than -1% in pre-market trading after reporting Q2 total average deposits of $497.27 billion, below the consensus of $503.19 billion.
Halliburton (HAL) slid more than -2% in pre-market trading after reporting Q2 revenue of $5.80 billion, weaker than the consensus of $5.85 billion.
Western Alliance Bancorp (WAL) dropped more than -2% in pre-market trading after reporting Q2 net interest income of $550.3 million, below the consensus of $579.1 million.
Carvana (CVNA) surged more than +19% in pre-market trading after reporting Q2 revenue of $2.97 billion, stronger than the consensus of $2.56 billion, and said it reached a deal with bondholders to reduce debt and announced plans to sell 35 million Class A shares.
AT&T (T) climbed more than +3% in pre-market trading after it said less than 10% of its nationwide copper-wire telecom network had lead-clad cables.
Elevance Health (ELV) rose more than +3% in pre-market trading after reporting Q2 adjusted EPS of $9.04, better than the consensus of $8.78.
Cisco Systems (CSCO) rose more than +2% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral.
Constellation Brands (STZ) climbed more than +3% in pre-market trading after appointing two new independent directors as it reached a cooperation agreement with activist investor Elliot Investment Management.
Microsoft (MSFT) gained nearly +1% in pre-market trading after Cowen raised its price target on the stock to $390 from $330.
Today’s U.S. Earnings Reports (7/19/2023)
Baker Hughes Co (BKR), Citizens Financial Group Inc (CFG), Crown Castle Inc (CCI), Discover Financial Services (DFS), Elevance Health Inc (ELV), Equifax Inc (EFX), Goldman Sachs Group Inc/The (GS), Halliburton Co (HAL), International Business Machine (IBM), Kinder Morgan Inc (KMI), Las Vegas Sands Corp (LVS), M&T Bank Corp (MTB), Nasdaq Inc (NDAQ), Netflix Inc (NFLX), Northern Trust Corp (NTRS), Steel Dynamics Inc (STLD), Tesla Inc (TSLA), United Airlines Holdings Inc (UAL), US Bancorp (USB), Zions Bancorp NA (ZION).
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.
