Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Barchart
Barchart
Rich Asplund

Markets Today: Stocks Slip as Bond Yields Jump after U.S. Retail Sales Tops Forecasts

Morning Markets

December E-Mini S&P 500 futures (ESZ23) are down -0.42%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.60%.

Stock index futures this morning are moderately lower as the markets track diplomatic efforts to contain the Israel-Hamas conflict.  Stock index futures extended their losses as bond yields jumped on this morning’s stronger-than-expected U.S. Sep retail sales report and an upward revision to Aug retail sales, a hawkish factor for Fed policy.

Some better-than-expected Q3 corporate earnings results limit losses in the overall market, with Bank of America and Johnson & Johnson moving higher in pre-market trading after reporting stronger-than-expected Q3 earnings. 

The U.S. and its allies are ramping up diplomatic efforts to contain the conflict between Israel and Hamas. German Chancellor Scholz is expected to arrive in Israel today, and U.S. President Biden will travel to Israel on Wednesday.  President Biden will also travel to Jordan to meet with Arab leaders, including Jordan King Abdullah II, Egyptian President Abdel Fatah El-Sisi, and Palestinian Authority President Mahmoud Abbas. 

M&A activity is supporting stocks after Choice Hotels International offered to buy Wyndham Hotels for $90/share in a deal valued at $9.8 billion, and Thermo Fisher acquired Olink for about $26/share in a deal valued at about $3.1 billion. 

U.S. Sep retail sales rose +0.7% m/m and +0.6% m/m ex-autos, stronger than expectations of +0.3% m/m and +0.2% m/m ex-autos.  Also, Aug retail sales were revised higher to +0.8% m/m and +0.9% m/m ex-autos from the initially reported +0.6% m/m and +0.6% m/m ex-autos.

The markets are discounting an 8% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 38% chance for that +25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields are higher.  The 10-year T-note yield rose to a 1-week high of 4.81% and is up +9.9 bp at 4.805%. The 10-year German bund yield rose to a 1-week high of 2.860% and is up +6.9 bp at 2.854%.  The 10-year UK gilt yield is up +4.1 bp at 4.521%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.40%.  China’s Shanghai Composite Index closed up +0.32%.  Japan’s Nikkei 225 today closed up +1.20%.

The Euro Stoxx 50 today is moderately lower on weakness in telecommunication stocks, led by a -9% plunge in Ericsson AB to a 6-year low after the company warned that weakness in sales would persist into next year.  The company had previously forecast that the mobile networks market would recover toward the end of this year.  Higher government bond yields are also negative for stocks as the 10-year German bund yield rose to a 1-week high.  On the positive side, the German Oct ZEW survey expectations of economic growth rose more than expected to a 6-month high.  Also, Rolls Royce Holdings Plc climbed more than +1% after announcing plans to cut jobs and streamline its business.

The German Oct ZEW survey expectations of economic growth rose +10.3 to a 6-month high of -1.1, stronger than expectations of -9.0.

China’s Shanghai Composite Stock Index today closed moderately higher, recovering slightly from Monday’s 7-week low.  Easing geopolitical concerns in the Middle East improved market sentiment due to diplomatic efforts to contain the Israeli-Hamas conflict.  Chinese stocks also garnered support as the government tightened rules on short-selling equities.  China’s Securities Regulatory Commission said that as of October 30, hedge funds wishing to short-sell a stock must hold 100% of the value of the transaction in their account, while other investors need to have at least 80%. Other rules include restricting the lending of shares by strategic investors and senior management and increased supervision of “various arbitrage activities.”  Chinese state-owned enterprise stocks (SOEs) rallied today after the Securities Times reported that about ten SOEs unveiled new plans by their parent companies to increase stakes and buybacks in their companies.

Japan’s Nikkei Stock Index today posted moderate gains as easing concerns over a wider conflict in the Middle East sparked gains in technology stocks. Video game makers moved higher, led by a +5% jump in Bandai Namco after UBS upgraded the stock to buy from neutral. Also, Japanese medical device makers rose, led by a +5% gain in Terumo after Jeffries raised its recommendation on the stock to buy from hold.  The yen strengthened today on a Bloomberg report that said the BOJ is likely to discuss raising its inflation projection for fiscal 2023 and 2024 at its policy meeting later this month, extending the period in which it sees prices hitting or exceeding its 2% goal.

The Japan Aug tertiary industry index unexpectedly fell -0.1% m/m, weaker than expectations of a +0.3% m/m increase.

Pre-Market U.S. Stock Movers

NetScout (NTCT) plunged more than -20% in pre-market trading after cutting its 2023 adjusted EPS forecast to $2.00-$2.20 from a prior forecast of $2.20-$2.32, weaker than the consensus of $2.27. 

Choice Hotels International (CHH) fell more than -2% in pre-market trading after offering to buy Wyndham Hotels for $90/share in a deal valued at $9.8 billion. 

Lockheed Martin (LMT) slid more than -1% in pre-market trading after reporting Q3 operating profit of $2.04 billion, below the consensus of $2.09 billion. 

VMware (VMW) fell more than -1% in pre-market trading on signs of inside selling after an SEC filing showed EVP of sales Brulard sold $879,479 of shares last Friday.

Johnson & Johnson (JNJ) climbed more than +2% in pre-market trading after reporting Q3 sales of $21.35 billion, better than the consensus of $21.05 billion, and raised its full-year sales forecast to $83.6 billion-$84.0 billion from a prior estimate of $83.2 billion-$84.0 billion. 

Bank of America (BAC) rose more than +1% in pre-market trading after reporting Q3 trading revenue excluding DVA of $4.42 billion, stronger than the consensus of $4.16 billion. 

Wyndham Hotels & Resorts (WH) surged more than +19% in pre-market trading after Choice Hotels International proposed to buy the company for $90 a share in a deal valued at $9.8 billion. 

Dollar Tree (DLTR) climbed more than +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $137. 

Viasat (VSAT) rallied more than +6% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30.

Fidelity National Information Services (FIS) rose more than +1% in pre-market trading after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $65. 

Air Products & Chemicals (APD) gained more than +1% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from neutral with a price target of $345.   

Earnings Reports (10/17/2023)

Bank of America Corp (BAC), Bank of New York Mellon Corp/T (BK), Goldman Sachs Group Inc/The (GS), JB Hunt Transport Services Inc (JBHT), Johnson & Johnson (JNJ), Lockheed Martin Corp (LMT), Omnicom Group Inc (OMC), Prologis Inc (PLD), United Airlines Holdings Inc (UAL).

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.
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.