Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are down -0.20%, and Sep Nasdaq 100 E-Mini futures (NQU23) are down -0.07%.
U.S. stock index futures this morning initially erased overnight losses and turned higher after U.S. Jun nonfarm payrolls rose less than expected, which eases concerns that the Fed will need to ramp up interest rate increases. However, stock indexes gave up their brief advance and turned lower again as signs of wage pressures may keep the Fed hawkish after U.S. Jun average hourly earnings rose more than expected.
U.S. Jun nonfarm payrolls rose +209,000, weaker than expectations of +230,000 and the smallest increase in 2-1/2 years. Also, May nonfarm payrolls were revised lower to +306,000 from the initially reported +339,000. The Jun unemployment rate fell -0.1 to 3.6%, right on expectations.
U.S. Jun average hourly earnings rose +0.4% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y.
The markets are discounting the odds at 89% 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 higher. The 10-year T-note yield is up +2.9 bp to 4.058%. The 10-year German bund yield rose to a 3-3/4 month high of 2.661% and is up +2.9 bp at 2.655%. The 10-year UK Gilt yield climbed to a 14-year high of 4.701% and is up +3.3 bp at 4.693%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.82%. China’s Shanghai Composite Index today closed -0.28%. Japan’s Nikkei Stock Index today closed -1.17%.
The Euro Stoxx 50 today rebounded from a 3-1/4 month low and is moderately higher. A rally in copper and iron ore prices is fueling gains in mining stocks and metals producers. Stock gains accelerated after U.S. stock futures turned positive when Jun nonfarm payrolls rose less than expected. European stocks today initially opened lower on rising bond yields as the 10-year German bund yield climbed to a 3-3/4 month high. Comments from ECB President Lagarde pushed yields higher when she said policymakers still have "work to do" to bring inflation under control. Also, economic concerns weighed on stocks after German May industrial production unexpectedly fell.
German May industrial production fell -0.2% m/m, weaker than expectations of no change.
ECB President Lagarde said policymakers still have "work to do" to bring inflation under control, and the ECB "won't hesitate" to act if officials see a simultaneous uptick in both company margins and wages.
China’s Shanghai Composite closed moderately lower for a third day. Economic growth concerns continue to weigh on Chinese stocks. Also, Chinese stocks face additional pressure as the government needs to back up its reassuring rhetoric on the economy with more substantive action. Bank stocks remained under pressure for a second day after a state-owned Chinese newspaper issued a rare rebuttal of Goldman Sachs research that recommended selling Chinese bank stocks, the latest sign of official attempts to counter negative sentiment as the economy slows. Losses in the overall market were limited as Alibaba Group Holding rallied more than +3% after Reuters reported that authorities are likely to hand down a fine of at least 8 billion yuan ($1.1 billion) on Ant Group, a move that will bring an end to the prolonged regulatory probe of the company.
Japan’s Nikkei Stock Index dropped to a 1-1/2 week low and closed moderately lower. Concerns the Federal Reserve will ramp up its tightening campaign sparked long liquidation in Japanese stocks when the U.S. 10-year T-note yield jumped to a 4-month high Thursday on the stronger-than-expected U.S. Jun ADP employment and Jun ISM services reports. Stocks also fell on signs of weakness in consumer spending after today’s news showed Japan May household spending fell more than expected. The yen climbed to a 2-week high against the dollar today, which also fueled the selling of exporter stocks. The yen rose on better-than-expected Japanese economic news on labor cash earnings, which may push the BOJ to adjust its easy policy stance as soon as this month’s meeting. The strength in earnings pushed the 10-year JGB bond yield to a 1-month high.
The Japan May leading index CI unexpectedly rose +1.4 to a 6-month high of 109.5, stronger than expectations of a decline to 97.6.
Japan May labor cash earnings rose +2.5% y/y, stronger than expectations of +1.2% y/y and the largest increase in 5 months.
Japan's May household spending fell -4.0% y/y, weaker than expectations of -2.5% y/y.
Pre-Market U.S. Stock Movers
Costco Wholesale (COST) fell more than -1% in pre-market trading after reporting Jun comparable same-store sales fell -1.4%, a bigger decline than the consensus of -0.4
Warner Bros Discovery (WBD) dropped more than -2% in pre-market trading after Wolfe Research downgraded the stock to peer perform from outperform.
KLA Corp (KLAC) slid more than -1% in pre-market trading after KeyBanc Capital Markets downgraded the stock to sector weight from overweight.
Levi Strauss (LEVI) tumbled more than -6% in pre-market trading after it cut its full-year adjusted EPS forecast to $1.10-$1.20 from a prior estimate of $1.30-$1.40, weaker than the consensus of $1.29.
Palantir (PLTR) slid more than -1% in pre-market trading on signs of insider selling after ran SEC filing showed director Moore sold $570,170 worth of shares on Monday.
Alibaba Group Holding (BABA) climbed more than +2% in pre-market trading after Reuters reported that authorities are likely to hand down a fine of at least 8 billion yuan ($1.1 billion) on Ant Group, a move that will bring an end to the prolonged regulatory probe of the company.
JPMorgan Chase (JPM) rose more than +1% in pre-market trading after Wolfe Research upgraded the stock to outperform from peer perform.
Newmont Corp (NEM) gained nearly +1% in pre-market trading after Barclays upgraded the stock to overweight from equal weight with a price target of $61.
Applied Digital (APLD) jumped more than +4% in pre-market trading after Needham boosted its price target on the stock to $16 from $8.50, citing the company’s expanding AI opportunity.
Rivian Automotive (RIVN) climbed more than +3% in pre-market trading after Wedbush raised its price target on the stock to $30 from $35, saying the company is “finally making a major turn” toward executing its longer-term business model.
Today’s U.S. Earnings Reports (7/7/2023)
5E Advanced Materials Inc (FEAM), AZZ Inc (AZZ), KalVista Pharmaceuticals Inc (KALV), Nurix Therapeutics Inc (NRIX).
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.
