Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are down -0.68%, and Sep Nasdaq 100 E-Mini futures (NQU23) are down -0.65%.
Stock indexes this morning are moderately lower. Concern that China’s faltering economy will drag down global growth is weighing on stocks after China reported disappointing news on industrial production and retail sales. Stocks declined even after the People’s Bank of China (PBOC) unexpectedly cut interest rates today, which only deepened anxiety about China’s economy. Stock indexes extended their losses as the 10-year T-note yield jumped to a 9-1/2 month high after U.S. July retail sales rose more than expected.
U.S. Jul retail sales rose +0.7% m/m, stronger than expectations of +0.4% m/m. Also, Jul retail sales ex-autos rose +1.0% m/m, stronger than expectations of +0.4% m/m and the biggest increase in 6 months.
The U.S. Aug Empire manufacturing survey general business conditions fell -20.1 to -19.0, weaker than expectations of -1.0.
The U.S. Jul import price index ex-petroleum was unchanged m/m, stronger than expectations of -0.2% m/m.
The markets are discounting the odds at 12% for a +25 bp rate hike at the September 20 FOMC meeting and 44% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields are higher. The 10-year T-note yield rose to a 9-1/2 month high of 4.268% and is up +4.7 bp at 4.239%. The 10-year German bund yield climbed to a 5-1/2 month high of 2.737% and is up +7.9 bp at 2.716%. The 10-year UK gilt yield rose to a 1-month high of 4.666% and is up +7.3 bp at 4.639%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -1.10%. China’s Shanghai Composite Index today closed down -0.07%. Japan’s Nikkei Stock Index closed up +0.56%.
The Euro Stoxx 50 is moderately lower on global economic concerns as a surprise cut in interest rates by China’s central bank failed to reassure markets about China’s economic outlook. European consumer and luxury goods makers led decliners in the overall market on concern weakness in China’s economy will crimp spending for European goods. Higher European government bond yields are also undercutting stock prices after the 10-year German bund yield rose to a 5-1/4 month high, and the 10-year UK gilt yield rose to a 1-month high. On the positive side, the German Aug Zew expectations of economic growth unexpectedly rose. Also, Marks & Spencer Group Plc and Pandora A/S moved higher after boosting their full-year outlooks.
The German Aug Zew expectations of economic growth unexpectedly rose +2.4 to -12.3, stronger than expectations of a decline to -14.9.
China’s Shanghai Composite today closed slightly lower. Weaker-than-expected economic news on industrial production and retail sales weighed on Chinese stocks today. Losses in stocks were limited, and the yuan tumbled to a 9-1/4 month low against the dollar after the PBOC unexpectedly cut interest rates. Pressure is building across Chinese financial markets, with a credit crunch for property developers worsening, while a liquidity crisis is building in China’s shadow banking system. A late rally in Chinese brokerage stocks lifted the overall market from its worst levels after Bloomberg reported that authorities are considering cutting the stamp duty on stock trades for the first time since 2008.
The PBOC unexpectedly cut the rate on its one-year loans, or the medium-term lending facility, by -15 bp to 2.50% versus expectations of no change at 2.65%.
China Jul industrial production rose +3.7% y/y, weaker than expectations +4.3% y/y.
China Jul retail sales rose +2.5% y/y, weaker than expectations of +4.0% y/y and the slowest pace of increase in five months.
Japan’s Nikkei Stock Index closed moderately higher. Signs of strength in Japan’s economy gave stocks a boost after Japan's Q2 GDP grew more than expected by the most since 2020 as a surge in exports more than offset weaker-than-expected results for business investment and private consumption. Japanese chip-related stocks rallied today, following Monday’s rally in U.S. chip stocks. Also, exporter stocks moved higher today after the yen fell to a 9-month low against the dollar. On the negative side, Japanese consumer stocks underperformed on demand concerns after Japan’s Q2 GDP data showed Q2 private consumption unexpectedly fell -0.5% q/q, weaker than expectations of no change.
Japan Q2 GDP grew +6.0% (q/q annualized), stronger than expectations of +2.9% and the strongest pace of expansion since Q4 2020. The Q2 deflator rose +3.4% y/y, the highest since the data series began in 1995.
Japan Jun industrial production was revised upward by +0.4 to +2.4% m/m from the initially reported +2.0% m/m, the largest increase in 4 months.
Pre-Market U.S. Stock Movers
Discover Financial Services (DFS) tumbled more than -5% in pre-market trading after CEO Hochschild resigned effective immediately.
Tesla (TSLA) is down more than -1% in pre-market trading on concern about profitability after it added lower-price versions of its Model S sedan and Model X utility vehicles that cost $10,000 less than their previous base prices.
Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero Energy (VLO) are down -2% or more in pre-market trading after Bank of America Global Research downgraded the refiners to neutral from buy.
Mining stocks are falling in pre-market trading, with the price of COMEX copper down more than -1% to a 1-1/2 month low. As a result, ArcelorMittal (MT), Newmont (NEM), Freeport-McMoRan (FCX), and Southern Copper (SCCO) are down -1% or more.
Bank of America (BAC) and JPMorgan Chase (JPM) are down more than -1% in pre-market trading after CNBC said their ratings would probably be cut to A+ from AA- if Fitch Ratings has to downgrade the outlook for U.S. banks again.
Nvidia (NVDA) is up more than +1% in pre-market trading after UBS raised its price target on the stock to $540 from $475.
DR Horton (DHI) and Lennar (LEN) are up +2% or more in pre-market trading after the most recent 13F filings show Berkshire Hathaway bought positions in the companies in Q2.
Cardinal Health (CAH) gained nearly +1% in pre-market trading after reporting Q4 adjusted EPS of $1.55, better than the consensus of $1.49, and forecast 2024 adjusted EPS of $6.50-$6.75, the midpoint stronger than the consensus of $6.56.
Hexcel (HXL) rose more than +1% in pre-market trading after RBC Capital Markets upgraded the stock to outperform from sector perform.
Navitas Semiconductor (NVTS) jumped more than +5% after reporting Q2 revenue of $18.1 million, stronger than the consensus of $16.5 million.
Redfin (RDFN) gained nearly +1% in pre-market trading after Oppenheimer upgraded the stock to market perform from underperform.
Paysafe Ltd (PSFE) climbed more than +5% in pre-market trading after reporting Q2 revenue of $402.3 million, above the consensus of $394.3 million.
Today’s U.S. Earnings Reports (8/15/2023)
Agilent Technologies Inc (A), Cardinal Health Inc (CAH), Coherent Corp (COHR), H&R Block Inc (HRB), Home Depot Inc/The (HD), Jack Henry & Associates Inc (JKHY), Mercury Systems Inc (MRCY), NU Holdings Ltd/Cayman Islands (NU).
