Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are up +0.06%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.07%.
Stock indexes this morning are modestly higher on strength in technology stocks. Nvidia is up more than +1% in pre-market trading on optimism ahead of its Q2 earnings results later today. Also, a decline in bond yields today is supportive for stocks. Limiting gains in the overall market is weakness in activewear apparel makers after Foot Locker plunged more than -30% in pre-market trading after cutting its 2023 earnings forecast.
The Mortgage Bankers Association reported that weekly U.S. mortgage applications fell -4.2% w/w in the week ended Aug 18 and that home-purchase applications dropped -5.0% w/w to their lowest since 1995. The 30-year fixed mortgage rate jumped +15 bp to 7.31%, the highest since 2000.
The markets are discounting the odds at 12% for a +25 bp rate hike at the September 20 FOMC meeting and 45% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields are lower. The 10-year T-note yield is down -4.6 bp at 4.279%. The 10-year German bund yield fell to a 1-1/2 week low of 2.524% and is down -7.8 bp at 2.567%. The 10-year UK gilt yield fell to a 1-1/2 week low of 4.499% and is down -10.7 bp at 4.537%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.05%. China’s Shanghai Composite Index closed down -1.34%. Japan’s Nikkei Stock Index closed up +0.48%.
The Euro Stoxx 50 today is modestly higher. Stocks are climbing after weaker-than-expected Eurozone economic data today knocked government bond yields lower and bolstered speculation the ECB will pause its interest rate hiking cycle next month. The Eurozone Aug S&P composite PMI fell -1.6 to a 2-3/4 year low of 47.0. That pushed Eurozone government bond prices higher, with the 10-year German bund yield falling to a 1-1/2 week low. The markets are discounting the odds at 36% for a +25 bp rate hike at the September 14 ECB meeting.
The Eurozone Aug S&P manufacturing PMI rose +1.0 to 43.7, stronger than expectations of no change at 42.7. However, the Aug S&P composite PMI fell -1.6 to 47.0, weaker than expectations of -0.1 to a 2-3/4 year low of 48.5.
China’s Shanghai Composite closed moderately lower and is just above Tuesday’s 7-1/2 month low. A sell-off in technology and telecom stocks led the overall market lower. Also, Chinese suppliers to Nike and its U.S. peers retreated as concern over China’s sluggish consumer recovery builds, and elevated inventories continue to weigh on profitability across the activewear industry. On the positive side, shares of Chinese consumer discretionary companies and stocks tied to China’s service sector rose as years of Covid restrictions, and a deepening property crisis, have prompted a pivot in consumption habits from buying products to paying for experiences as consumers boost spending on catering, trips, and movies.
Foreign investors continue to flee Chinese stocks as Bloomberg data shows overseas funds offloaded the equivalent of $10.7 billion of Chinese sticks in a thirteen-day run of withdrawals through today, the longest stretch of withdrawals since Bloomberg began tracking the data in 2016.
Japan’s Nikkei Stock Index today rose to a 1-week high and closed moderately higher. Japanese tech hardware stocks rallied today ahead of Q2 earnings results from U.S. chipmaker Nvidia. Also, domestic defensive stocks that are less susceptible to overseas economic conditions rose, with electric and gas utility stocks gaining. In addition, land transportation stocks rose, led by a +2% rally in Japan Central Railway after it announced a stock split. On the negative side, Japanese seafood companies fell after Hong Kong imposed curbs on seafood to seaweed from Japan in response to the Japanese government’s plan to start releasing treated wastewater from the wrecked Fukushima nuclear plant.
The Japan Aug Jibun Bank manufacturing PMI rose +0.1 to 49.7.
Pre-Market U.S. Stock Movers
Nvidia (NVDA) is up more than +1% in pre-market trading amid optimism about its Q2 earnings results that will be released after today’s close.
Urban Outfitters (URBN) climbed more than +3% in pre-market trading after reporting Q2 net sales of $1.27 billion, above the consensus of $1.25 billion.
Toll Brothers (TOL) rose more than +2% in pre-market trading after reporting Q3 revenue of $2.69 billion, stronger than the consensus of $2.41 billion, and raising its full-year delivery forecast to 9,500-9,600 from a previous estimate of 8,900-9,500, above the consensus of 9,317.
Dycom Industries (DY) jumped more than +7% in pre-market trading after reporting Q2 contract revenue of $1.04 billion, better than the consensus of $1.03 billion.
Brown-Forman (BF/B) rose more than +2% in pre-market trading after Morgan Stanley double-upgraded the stock to overweight from underweight with a price target of $75.
Super Micro Computer (SMCI) gained over +1% in pre-market trading after Wedbush upgraded the stock to neutral from underperform.
Analog Devices (ADI) tumbled more than -7% in pre-market trading after reporting Q3 adjusted EPS of $2.49, weaker than the consensus of $2.52, and forecast Q4 adjusted EPS of $1.90-$2.10, well below the consensus of $2.40.
Activewear apparel makers are falling in pre-market trading after Foot Locker reported Q2 sales of $1.86 billion, below the consensus of $1.88 billion, and lowered its 2024 sales guidance to a decline of -9% to -10% from a prior view of -7.5% to -9%, weaker than the consensus of -8.02%. As a result, Foot Locker (FL) plunged more than -31%, Nike (NKE) is down more than -3%, and Under Armour (UA) is down more than -2%.
Bath and Body Works (BBWI) fell more than -2% in pre-market trading after reporting Q2 net sales of $1.56 billion, weaker than the consensus of $1.58 billion.
La-Z-Boy (LZB) dropped more than -4% in pre-market trading after forecasting Q2 sales of $490 million-$510 million, the midpoint below the consensus of $510.5 million.
Today’s U.S. Earnings Reports (8/23/2023)
Advance Auto Parts Inc (AAP), Analog Devices Inc (ADI), Autodesk Inc (ADSK), Bath & Body Works Inc (BBWI), Kohl's Corp (KSS), NetApp Inc (NTAP), NVIDIA Corp (NVDA), Peloton Interactive Inc (PTON), Snowflake Inc (SNOW), Splunk Inc (SPLK), Williams-Sonoma Inc (WSM).
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.
