Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are down -0.55%, and Sep Nasdaq 100 E-Mini futures (NQU23) are down -0.70%.
U.S. stocks are being undercut by today’s weak Eurozone PMI reports, which indicated that the Eurozone economy is struggling even as the ECB plans more rate hikes. The European stock market today is trading lower for the fifth consecutive session, which is negatively impacting U.S. stocks.
U.S. stocks continue to see a gloomy overhang from Fed Chair Powell’s testimony earlier this week in which he warned that higher interest rates are likely. The FOMC, at its meeting last week, left its funds rate target range unchanged at 5.00%/5.25% but raised its dot-plot forecast to indicate FOMC member expectations of a further +50 bp rate hike by the end of this year. The markets are discounting the odds at 72% for a +25 bp rate hike at the next FOMC meeting on July 25-26, and are fully anticipating that +25 bp rate hike by November.
The markets are currently expecting a U.S. economic recession in the second half of this year, with consensus GDP growth expectations of -0.5% (q/q annualized) in Q3 and -0.4% in Q4. Growth is then expected to resume in 2024 but show a paltry annual growth rate of only +0.7% after +1.2% growth in 2023.
Stocks today are not getting much of a lift from lower global bond yields, which fell on the weak Eurozone PMI reports. The 10-year T-note yield is down -6.2 bp at 3.733%. Meanwhile, the German 10-year bund yield is down -13 bp at 2.36%, and the 10-year UK gilt yield is down -6 bp at 4.31%.
Today’s Eurozone PMI report suggested that the Eurozone might be in for another quarter of negative growth in Q2 after Eurozone GDP fell slightly by -0.1% q/q in both Q4-2022 and Q1-2023. The consensus is that Eurozone GDP will show a slight increase of +0.1% q/q in Q2, but today’s weak PMI report called that forecast into question.
The preliminary-June S&P Eurozone composite PMI fell by -2.5 points to a 5-month low of 50.3, which was much weaker than market expectations of 52.5. The preliminary-June S&P Eurozone manufacturing PMI fell by -1.2 points to a very weak 43.6, which was weaker than expectations of unchanged at 44.8. The preliminary-June S&P Eurozone services PMI fell by -2.7 points to 52.4, which was weaker than expectations for a -0.6 point drop to 54.5. The preliminary-June S&P German composite PMI fell by -3.1 points to 50.8, while the French composite PMI fell by -3.9 points to 47.3.
On the more positive side, Eurozone input prices fell to the lowest level since December 2020 and selling prices for goods and services fell to the lowest level since March 2021.
The preliminary-June S&P U.S. manufacturing PMI will be released later this morning at 9:45 am ET and is expected to show a +0.1 point increase to 48.5. The U.S. services PMI is expected to show a -0.9 point decline to 54.0.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.47%. Japan’s Nikkei Stock Index today closed down -1.45%. China’s stock market was closed again today for a public holiday.
Pre-Market U.S. Stock Movers
CarMax (KMX) is up +7.2% in pre-market trading after reporting better-than-expected fiscal Q1 adjusted profit of $1.44 per share, well above the consensus of 80 cents.
Tesla (TSLA) is down -1.0 in pre-market trading on some end-week fatigue after Tesla received three downgrades earlier this week from Morgan Stanley, Barclays, and DZ Bank.
Accenture (ACN) is down -1.1% after TD Cowen cut its rating to market perform from outperform due to warning signs for demand.
Under Armour (UAA) is down -3.4% on a downgrade by Wells Fargo to equal-weight from overweight due to its view that the stock will stagnate during the next 6-12 months.
Virgin Galactic (SPCE) is down by -12.8% after the company announced a plan to sell up to $400 million of its stock over time.
Wayfair (W) is up +1.7% on an upgrade by Moffett Nathanson to market perform from underperform.
Sofi Technologies (SOFI) is down -4.8% after Compass Point started research coverage with a sell rating.
Today’s U.S. Earnings Reports (6/23/2023)
CarMax Inc (KMX).
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.
