December E-Mini S&P 500 futures (ESZ23) are up +0.05%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.06%.
Stock index futures this morning recovered from overnight losses and are slightly higher after the Oct ADP employment change rose less than expected, a dovish factor for Fed policy. Stocks also found support on a decline in T-note yields after the Treasury said it would sell $112 billion of T-notes and T-bonds in next week’s quarterly refunding, below expectations of $114 billion.
Stock index futures initially moved lower in overnight trade on some weaker-than-expected corporate earnings results. Advanced Micro Devices is down more than -2% in pre-market trading after forecasting weaker-than-expected Q4 revenue. Also, Estee Lauder is down more than -15% after reporting Q1 adjusted net sales below consensus and forecasting Q2 EPS below consensus. Paycom Software is down more than -30% after cutting its full-year revenue forecast, and Wayfair is down more than -12% after reporting Q3 net revenue below consensus.
The FOMC later today is expected to keep the fed funds target rate range unchanged at 5.25%-5.50% for a second meeting. The Fed is also expected to maintain its tightening bias, and the markets will look to Fed Chair Powell’s post-meeting comments for clues to future Fed policy.
The U.S. Oct ADP employment change rose +113,000, weaker than expectations of +150,000.
The markets are discounting a zero percent chance that the FOMC will raise the funds rate by +25 bp at today’s FOMC meeting, a 26% 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.
U.S. and European bond yields are mixed. The 10-year T-note yield is down -6.8 bp at 4.863%. The 10-year German bund yield is up +0.7 bp at 2.813%. The 10-year UK gilt is up +1.4 bp at 4.526%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.297%. China’s Shanghai Composite Index today closed up +0.14%. Japan’s Nikkei 225 today closed up +2.41%.
The Euro Stoxx 50 today climbed to a 1-1/2 week high and is moderately higher. Pharmaceutical companies are climbing, led by a +3% gain in GSL Plc after it raised its guidance for the second time this year on strong demand for its breakthrough Arexvy vaccine to prevent a common respiratory virus in adults. Also, retailer stocks are moving higher, with Next Plc up more than +3% after it raised profit guidance for the fourth time in recent months after Q3 sales rose more than expected. European stocks added to their gains after the U.S. Oct ADP employment report rose less than expected, a dovish factor for Fed policy. On the negative side, Orsted A/S plunged more than -20% to lead utility stocks lower after the company abandoned two U.S. wind projects and wrote down 28.4 billion kroner ($4 billion) of impairments. Higher European government bond yields are also weighing on stocks.
China’s Shanghai Composite Stock Index today climbed to a 1-1/2 week high and closed slightly higher. Chinese stocks related to border trade in Eastern China soared after China’s State Council issued an overall plan to set up a free-trade pilot zone in Xinjiang to support the Belt and Road Initiative. Gains in the overall market were limited by economic concerns after a gauge of manufacturing activity unexpectedly contracted last month. Also, property stocks declined after the China Real Estate Information Corp reported late Tuesday that China’s top 100 property developers saw their combined contract sales plunge -27.5% y/y in October.
The China Oct Caixin manufacturing PMI unexpectedly fell -1.1 to 49.5, weaker than expectations of an increase to 50.8.
Japan’s Nikkei Stock Index today rose to a 1-1/2 week high and closed sharply higher. Japanese stocks rallied today on positive carryover from Tuesday when the BOJ only slightly tweaked its policy and maintained record low interest rates and its bond-buying program. An upward revision to the Oct Jibun Bank manufacturing PMI was also supportive for stocks. Japanese automakers rallied, led by a +6% jump in Toyota Motor after it raised its full-year operating profit forecast and announced a 100-billion-yen stock buyback plan. Japanese electricity companies rallied on strong Q2 earnings results. On the negative side, the 10-year JGB bond yield climbed to a new 10-year high of 0.974% after the BOJ tweaked its yield curve control on Tuesday and said 1% is now a reference rate and not a cap on 10-year bond yields.
In an attempt to slow the rise in long-term bond yields, the BOJ today announced an unscheduled bond-buying operation. The BOJ will buy 300 billion yen of 5 to 10-year debt and 100 billion yen of 3 to 5-year securities.
The yen also recovered from a 1-year low against the dollar today after Masato Kanda, Japan’s top currency official, said, “We are on standby” and are ready to take necessary actions in the forex market if needed.
The Japan Oct Jibun Bank manufacturing PMI was revised upward by -0.2 to 48.7 from the previously reported 48.5.
Pre-Market U.S. Stock Movers
Advanced Micro Devices (AMD) dropped more than -2% in pre-market trading after forecasting Q4 revenue of $5.8 billion-$6.4 billion, weaker than the consensus of $6.4 billion.
Estee Lauder (EL) sank more than -15% in pre-market trading after reporting Q1 adjusted net sales of $3.52 billion, weaker than the consensus of $3.54 billion, and forecasting Q2 adjusted EPS of 48 cents-58 cents, well below the consensus of $1.25.
Paycom Software (PAYC) plunged more than -30% in pre-market trading after reporting Q3 revenue of $406.3 million, below the consensus of $411.1 million, and cut its full-year revenue forecast to $1.68 billion from a previous forecast of $1.72 billion, weaker than the consensus of $1.72 billion.
Match Group (MTCH) tumbled more than -6% in pre-market trading after forecasting Q4 revenue of $855 million-$865 million, well below the consensus of $893.6 million.
Yum China Holdings (YUMC) dropped more than -12% in pre-market trading after reporting Q3 comparable sales rose +4.00%, weaker than the consensus of +4.92%.
Wayfair (W) sank more than -12% in pre-market trading after reporting Q3 net revenue of $2.94 billion, weaker than the consensus of $2.98 billion.
Verisk Analytics (VRSK) fell more than -5% in pre-market trading after forecasting full-year consolidated revenue of $2.63 billion-$2.66 billion, below the consensus of $2.67 billion.
Humana (HUM) slid more than -2% in pre-market trading after forecasting full-year adjusted EPS of $28.25, below the consensus of $28.30.
Generac Holdings (GNRC) rose more than +4% in pre-market trading after reporting Q3 adjusted EPS of $1.64, stronger than the consensus of $1.51.
Caesars Entertainment (CZR) climbed more than +5% in pre-market trading after reporting same-store net revenue of $2.99 billion, above the consensus of $2.93 billion.
General Motors (GM) and Ford Motor (F) are up more than +1% in pre-market trading after Barclays upgraded the stocks to overweight from equal weight.
Kraft Heinz (KHC) rose more than +1% in pre-market trading after reporting Q3 adjusted EPS of 72 cents, better than the consensus of 66 cents, and raising its full-year adjusted EPS forecast to $2.91-$2.99 from a prior forecast of $2.83-$2.91, stronger than the consensus of$2.89.
Apollo Global Management (APO) climbed more than +3% in pre-market trading after reporting Q3 total revenue of $2.60 billion, well above the consensus of $2.23 billion.
Garmin Ltd (GRMN) rose more than +2% in pre-market trading after reporting Q3 revenue of $1.28 billion, above the consensus of $1.20 billion, and raising its full-year revenue forecast to $5.15 billion from a prior forecast of $5.05 billion.
Earnings Reports (11/1/2023)
Aflac Inc (AFL), Airbnb Inc (ABNB), Albemarle Corp (ALB), Allstate Corp/The (ALL), American International Group Inc (AIG), American Water Works Co Inc (AWK), ANSYS Inc (ANSS), APA Corp (APA), Boston Properties Inc (BXP), CDW Corp/DE (CDW), Ceridian HCM Holding Inc (CDAY), CF Industries Holdings Inc (CF), CH Robinson Worldwide Inc (CHRW), Clorox Co/The (CLX), Cognizant Technology Solutions (CTSH), CVS Health Corp (CVS), DTE Energy Co (DTE), DuPont de Nemours Inc (DD), Edison International (EIX), Electronic Arts Inc (EA), Entergy Corp (ETR), Estee Lauder Cos Inc/The (EL), Etsy Inc (ETSY), Garmin Ltd (GRMN), Generac Holdings Inc (GNRC), Henry Schein Inc (HSIC), Host Hotels & Resorts Inc (HST), Humana Inc (HUM), IDEXX Laboratories Inc (IDXX), Ingersoll Rand Inc (IR), IQVIA Holdings Inc (IQV),
Kraft Heinz Co/The (KHC), Marathon Oil Corp (MRO), Martin Marietta Materials Inc (MLM), McKesson Corp (MCK), MetLife Inc (MET), Mondelez International Inc (MDLZ), NiSource Inc (NI), Norwegian Cruise Line Holdings (NCLH), PayPal Holdings Inc (PYPL), Prudential Financial Inc (PRU), PTC Inc (PTC), Qorvo Inc (QRVO), QUALCOMM Inc (QCOM), SolarEdge Technologies Inc (SEDG), TE Connectivity Ltd (TEL), Trane Technologies PLC (TT), Tyler Technologies Inc (TYL), Verisk Analytics Inc (VRSK), Williams Cos Inc/The (WMB), Yum! Brands Inc (YUM).
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.
