Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.58%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.65%.
Stock index futures this morning are trading higher on positive earnings news from McDonald’s and Western Digital, along with M&A activity. McDonald’s is up more than +2% in pre-market trading after reporting stronger-than-expected Q3 comparable sales, and Western Digital jumped more than +13% after reporting better-than-expected Q1 revenue.
Also, M&A activity is supporting equities after Healthpeak Properties acquired Physicians Realty Trust in a deal valued around $2.64 billion. Also, Realty Income acquired Spirit Realty Capital in a deal valued at around $9.3 billion.
Stocks also garnered support today, and crude oil prices dropped more than -1%, as Israel’s military action in Gaza is proceeding at a more cautious pace than expected, easing concerns that the conflict will widen throughout the Middle East. In addition, Iran’s foreign ministry said today that Hamas has pledged to release non-Israeli hostages “in the shortest time possible.”
The markets are discounting a 0% chance that the FOMC will raise the funds rate by +25 bp at this week’s FOMC meeting (Tue/Wed), a 23% chance for that +25 bp rate hike at the following meeting on Dec 12-13, and a 34% 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.
U.S. and European bond yields are higher. The 10-year T-note yield is up +7.0 bp at 4.905%. The 10-year German bund yield rebounded from a 2-week low of 2.762% and is up +1.8 bp at 2.850%. The 10-year UK gilt yield is up +5.4 bp at 4.598%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.61%. China’s Shanghai Composite Index today closed up +0.12%. Japan’s Nikkei 225 today closed down -0.95%.
The Euro Stoxx 50 today is moderately higher. Dovish comments today from ECB Governing Council member Simkus knocked European government bond yields lower and gave stocks a boost. The German 10-year bund yield fell to a 2-week low of 2.762% when Simkus said that “current restrictive levels are sufficient" and the ECB doesn’t have to raise rates at its December policy meeting. A smaller-than-expected decline in today’s report on Eurozone Oct economic confidence was also supportive for equities. On the negative side is weakness in bank stocks after JPMorgan Chase recommended investors short European bank stocks after the sector outperformed over the past six months.
China’s Shanghai Composite Stock Index today closed slightly higher. Strength in technology stocks led the overall market higher on better-than-expected quarterly earnings results and stock buyback announcements by several companies. Weakness in crude prices pressured Chinese energy stocks and limited gains in the overall market. Also, concerns about China’s property market persist after a Hong Kong court today told China Evergrande Group to come up with a concrete restructuring proposal by December 4, or the court is “very likely” to issue a liquidation order. A liquidation of Evergrande Group, with about 2.39 trillion yuan ($327 billion) of liabilities, would be the biggest Chinese developer to ever face such a fate.
Japan’s Nikkei Stock Index today dropped to a 3-1/2 week low and closed moderately lower. Disappointing earnings results from Komatsu pressured Japanese construction and machinery stocks after it forecast weaker-than-expected full-year profits. Also, chemical companies retreated when Sumitomo Chemical dropped more than -5% when it cut its full-year sales guidance for the year. In addition, exporter stocks declined after the yen climbed to a 1-1/2 week high against the dollar on higher Japanese government bond yields. The 10-year JGB bond yield rose to a new 10-year high today at 0.897%.
Pre-Market U.S. Stock Movers
McDonald’s (MCD) rose more than +2% in pre-market trading after reporting Q3 comparable sales rose +8.8%, higher than the consensus of +7.8%.
Western Digital (WDC) surged more than +13% in pre-market trading after reporting Q1 net revenue of $2.75 billion, above the consensus of $2.66 billion, and forecasting Q2 revenue of $2.85 billion-$3.05 billion, the midpoint higher than the consensus of $2.9 1billion.
Physicians Realty Trust (DOC) climbed more than +4% in pre-market trading after Healthpeak Properties acquired the company in a deal valued at around $2.64 billion.
Meta Platforms (META) climbed nearly +2% in pre-market trading on plans to offer people in the EU and Switzerland the option to pay a monthly subscription to use Facebook and Instagram without any ads.
SoFi Technologies (SOFI) jumped more than +6% in pre-market trading after reporting Q3 adjusted net revenue of $530.7 million, better than the consensus of $512.7 million, and forecasting full-year adjusted net revenue of $2.05 billion-$2.07 billion, well above the consensus of $2.03 billion.
AbbVie (ABBV) rose more than +1% in pre-market trading after Barclay’s upgraded the stock to overweight from equal weight with a price target of $170.
L3Harris Technologies (LHX) gained more than +1% in pre-market trading after Raymond James upgraded the stock to outperform from market perform with a price target of $210.
Spirit Realty Capital (SRC) surged more than +12% in pre-market trading after Realty Income acquired the company in a deal valued at around $9.3 billion.
ON Semiconductor (ON) dropped more than -4% in pre-market trading after forecasting Q4-adjusted EPS of $1.13-$1.27, weaker than the consensus of $1.36.
Datadog (DDOG) slid more than -1% in pre-market trading after Baird downgraded the stock to neutral from outperform.
Check Point Software (CHKP) tumbled more than -3% in pre-market trading after reporting Q3 deferred revenue of $1.71 billion, weaker than the consensus of $1.74 billion.
Realty Income (O) fell more than-1% in pre-market trading after acquiring Spirit Realty Capital in a deal valued at around $9.3 billion.
Healthpeak Properties (PEAK) slid more than -1% in pre-market trading after acquiring Physicians Realty Trust in a deal valued at around $2.64 billion.
Earnings Reports (10/30/2023)
Arch Capital Group Ltd (ACGL), Arista Networks Inc (ANET), FMC Corp (FMC), Healthpeak Properties Inc (PEAK), Loews Corp (L), McDonald's Corp (MCD), Monolithic Power Systems Inc (MPWR), ON Semiconductor Corp (ON), Public Storage (PSA), Revvity Inc (RVTY), Simon Property Group Inc (SPG), VF Corp (VFC), Welltower Inc (WELL), Western Digital Corp (WDC).
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.
