Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.17%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.06%.
Stock index futures this morning are slightly higher on some better-than-expected corporate earnings results. Arista Networks is up more than +9% in pre-market trading after reporting stronger than expected Q3 revenue, and Eaton Corp is up more than +5% after reporting Q3 adjusted EPS above the consensus. Also, Amgen is up more than +2% after forecasting full-year revenue above consensus, and Stellantis NV is up more than +3% after reporting better-than-expected Q3 net revenue.
Stock indexes fell back from their best levels after the U.S. Q3 employment index rose more than expected. Also, Caterpillar is down more than -5% in pre-market trading after reporting its Q3 order backlog decreased -$2.5 billion from Q2. VF Corp is down more than -5% after it reported weaker-than-expected Q2 adjusted EPS from continuing operations and withdrew guidance for the fiscal year.
Iran’s foreign minister today called for the “last political opportunities” to be used to halt the Israeli-Hamas war. The United Nations warned the situation in Syria, which borders Israel and where many Iran-backed militias operate, is “at its most dangerous for a long time” as Israel increases airstrikes on the country.
The U.S. Q3 employment cost index rose +1.1%, stronger than expectations of +1.0%.
The markets are discounting a zero percent chance that the FOMC will raise the funds rate by +25 bp at this week’s FOMC meeting (Tue/Wed), a 27% chance for that +25 bp rate hike at the following meeting on Dec 12-13, and a 38% chance for that +25 bp rate hike at the FOMC meeting after that 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.
Bond yields fell after the Treasury late Monday cut its net borrowing estimate for the October through December quarter to $776 billion, below its July prediction of $852 billion. Despite the reduction in the estimate, the new projection still marks a record borrowing amount for the calendar fourth quarter.
U.S. and European bond yields are lower. The 10-year T-note yield is down -4.7 bp at 4.848%. The 10-year German bund yield fell to a 2-week low of 2.755% and is down -4.9 bp at 2.773%. The 10-year UK gilt yield fell to a 2-week low of 4.453% and is down -8.6 bp at 4.475%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +1.07%. China’s Shanghai Composite Index today closed down -0.09%. Japan’s Nikkei 225 today closed up +0.53%.
The Euro Stoxx 50 today is moderately higher. Better-than-expected quarterly earnings results from Anheuser-Busch InBev NV and Stellantis NV are boosting the overall market. Also, easing price pressures in the Eurozone knocked government bond yields lower and supported equities after Eurozone Oct CPI rose less than expected at the slowest pace in more than two years. On the negative side, Eurozone Q3 GDP was weaker than expected, and German Sep retail sales unexpectedly declined.
Eurozone Oct CPI eased to +2.9% y/y from +4.3% y/y in Sep, weaker than expectations of +3.1% y/y and the smallest increase in 2-1/4 years. Oct core CPI eased to +4.2% y/y from +4.5% y/y in Sep, right on expectations and the smallest increase in 1-1/4 years.
The Eurozone Q3 GDP report of -0.1% q/q and +0.1% y/y was weaker than expectations of unchanged q/q and +0.2% y/y.
German Sep retail sales unexpectedly fell -0.8% m/m, weaker than expectations of +0.5% m/m.
China’s Shanghai Composite Stock Index today closed slightly lower. Disappointing Chinese economic news today weighed on market sentiment and stock prices after Oct manufacturing activity unexpectedly contracted and Oct non-manufacturing activity fell more than expected. Chinese electric vehicle stocks were under pressure today on negative carryover from Monday’s slump in Tesla. Chinese property stocks may be under pressure on Wednesday when the China Real Estate Information Corp reported after the close today that China’s top 100 property developers saw their combined contract sales plunge -27.5% y/y in October.
The China Oct manufacturing PMI fell -0.7 to 49.5, weaker than expectations of no change at 50.2. Also, the Oct non-manufacturing PMI fell -1.1 to 50.6, weaker than expectations of an increase to 52.0.
Japan’s Nikkei Stock Index today shook off early losses and posted moderate gains. The action by the BOJ today to maintain record-low interest rates and keep its bond-buying program in place gave stocks a lift. The yen also remained under pressure, which gave exporter stocks a boost. On the negative side, the 10-year JGB bond yield jumped to a 10-year high of 0.963% after the BOJ tweaked its yield curve control and said 1% is now a reference and not a cap on 10-year bond yields. Also, today’s news showed that Japanese Sep industrial production and Sep retail sales were weaker than expected. In addition, Japanese auto-chip-related stocks fell after ON Semiconductor plunged more than -20% Monday on a disappointing Q4 forecast.
The BOJ, as expected, kept its policy balance rate at -0.1% and maintained its 10-year JGB yield target at about 0% but tweaked its yield curve control and defined 1% as a "reference" and not a cap on 10-year yields.
The BOJ raised its 2023 Japan GDP forecast to +2.0% from a previous forecast of +1.3% and its 2023 core CPI forecast to +2.8% from a previous forecast of +2.5%.
The Japan Oct consumer confidence index unexpectedly rose +0.5 to 35.7, stronger than expectations of a decline to 35.0.
Japan Sep industrial production rose +0.2% m/m, weaker than expectations of +2.5% m/m.
Japan Sep retail sales unexpectedly fell -0.1% m/m, weaker than expectations of +0.2% m/m.
Pre-Market U.S. Stock Movers
Arista Networks (ANET) jumped more than +9% in pre-market trading after reporting Q3 revenue of $1.51 billion, better than the consensus of $148 billion, and forecasting Q4 revenue of $1.50 billion-$1.55 billion, stronger than the consensus of $1.47 billion.
Eaton Corp (ETN) jumped more than +5% in pre-market trading after reporting Q3 adjusted EPS of $2.47, stronger than the consensus of $2.34, and forecast Q4 adjusted EPS of $2.39-$2.49, well above the consensus of $2.37.
Amgen (AMGN) rose more than +2% in pre-market trading after forecasting full-year revenue of $28 billion-$28.4 billion, better than the consensus of $27.55 billion.
Xylem (XYL) climbed more than +3% in pre-market trading after reporting Q3 revenue of $2.08 billion, stronger than the consensus of $1.99 billion, and raising its full-year revenue forecast to $7.3 billion from a prior forecast of $7.2 billion.
Pinterest (PINS) surged more than +16% in pre-market trading after reporting 482 million active users, well above expectations of 473.46 million.
Stellantis NV (STLA) climbed more than +3% in pre-market trading after reporting Q3 net revenue of 45.14 billion euros, above the consensus of 43.30 billion euros.
Ametek Inc (AME) rose more than +2% in pre-market trading after reporting Q3 adjusted EPS of $1.64, better than the consensus of $1.57 and forecasting Q3 adjusted EPS of $1.61-$1.63, above the consensus of $1.61.
Wolfspeed (WOLF) jumped more than +14% in pre-market trading after reporting Q1 adjusted net loss per share of -53 cents, a smaller loss than consensus of -67 cents, and forecasting a Q2 adjusted loss per share from continuing operations of -56 cents to -70 cents, the midpoint above the consensus of -68 cents.
Chewy (CHWY) climbed more than +3% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $28.
Catalent (CTLT) sank more than -18% in pre-market trading after Sarepta Therapeutics said a late-stage trial of its drug Elevidys in patients with Duchenne muscular dystrophy between the ages of 4 through 7 did not meet its primary endpoint. Catalent entered into a commercial supply agreement with Sarepta to manufacture the drug.
Caterpillar (CAT) tumbled more than -5% in pre-market trading after reporting its Q3 order backlog decreased -$2.5 billion from Q2.
Amkor Technology (AMKR) dropped more than -12% in pre-market trading after forecasting Q4 net sales of $1.63 billion-$1.73 billion, well below the consensus of $1.84 billion.
VF Corp (VFC) fell more than -5% in pre-market trading after it reported Q2 adjusted EPS from continuing operations of 63 cents, below the consensus of 64 cents, and withdrew guidance for the fiscal year.
Lattice Semiconductor (LSCC) sank more than -17% in pre-market trading after forecasting Q4 revenue of $166 million-$185 million, well below the consensus of $195.8 million.
Lyft (LYFT) dropped more than -4% in pre-market trading after MoffettNathanson downgraded the stock to sell from neutral with a price target of $7.
Earnings Reports (10/31/2023)
Advanced Micro Devices Inc (AMD), Allegion plc (ALLE), Amcor PLC (AMCR), AMETEK Inc (AME), Amgen Inc (AMGN), Assurant Inc (AIZ), Bio-Techne Corp (TECH), Caesars Entertainment Inc (CZR), Caterpillar Inc (CAT), Eaton Corp PLC (ETN), Ecolab Inc (ECL), Equity Residential (EQR), First Solar Inc (FSLR), Franklin Resources Inc (BEN), GE HealthCare Technologies Inc (GEHC), Global Payments Inc (GPN), Hubbell Inc (HUBB), Incyte Corp (INCY), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), Match Group Inc (MTCH), MSCI Inc (MSCI), ONEOK Inc (OKE), Paycom Software Inc (PAYC), Pfizer Inc (PFE), Public Service Enterprise Group (PEG), Sysco Corp (SYY), WEC Energy Group Inc (WEC), Xylem Inc/NY (XYL), Zebra Technologies Corp (ZBRA).
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.
