Markets Today: Stock Index Futures Lower as Bond Yields Climb on Global Inflation Concerns

Rich Asplund - Barchart - Wed Apr 19, 2023

Morning Markets

June S&P 500 futures (ESM23) this morning are down -0.57%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.78%.

U.S. stock index futures this morning are moderately lower. Concern that stubborn inflation pressures will force central banks to keep raising interest rates is undercutting stock prices today after UK Mar CPI rose more than expected. Also, technology stocks are weighed down by losses in chip makers in pre-market trading after ASML Holding NV’s earnings report raised concerns about its demand outlook.

Global bond yields are higher and are bearish for stocks. The 10-year T-note yield rose to a 4-week high of 3.635% and is up +4.8 bp at 3.623%. Also, the 10-year German bund yield climbed to a 1-1/4 month high of 2.540% and is up +2.5 bp at 2.502%. The 10-year UK gilt yield rose to a 6-week high of 3.870% and is up +10.7 bp at 3.844%.

On the bearish side for stocks, Morgan Stanley is down more than -3% in pre-market trading after reporting Q1 equity sales and trading revenue that was below consensus. Also, Tesla is down more than -2% after cutting prices again on its Model 3 and Model Y vehicles, the second price cut this month. In addition, chip stocks are under pressure on demand concerns after ASML NV reported its Q1 order intake was the lowest since 2020.

On the positive side, Intuitive Surgical is up more than +7% in pre-market trading after reporting stronger-than-expected Q1 revenue. Also, Western Alliance Bancorp is up more than +18% after reporting Q1 net interest income above consensus and said Q2 deposits to date are up +$2 billion through April 14.

Overseas stock markets are lower. The Euro Stoxx 50 is down -0.21%. China’s Shanghai Composite closed down -0.68%, and Japan’s Nikkei Stock Index closed down -0.18%.

The Euro Stoxx 50 index today is moderately lower on concern that persistent inflation will pressure central banks into further rate hikes. Mar UK CPI rose at a +10.1% y/y pace, stronger than expectations of +9.8% y/y. European government bond yields jumped on the news, with the UK 10-year gilt yield climbing to a 6-week high of 3.858% and the 10-year German bund yield rising to a 1-1/4 month high of 2.540%.

European technology stocks also retreated today, led by a -4% drop in ASML Holding NV after it reported Q1 bookings fell -46% y/y, raising concerns about its long-term outlook. On the positive side, European automakers and their suppliers rose after Eurozone Mar new car registrations rose by the most since 2021.

Eurozone Mar new car registrations rose +28.8% y/y to 1.088 million units, the most in 1-3/4 years.

China’s Shanghai Composite Stock Index today fell moderately. Signs of an uneven recovery in China sparked long liquidation in stocks today. Even though China’s Q1 GDP on Tuesday exceeded expectations, China Mar industrial production rose less than expected. Shares of Hong Kong property developers moved lower today after the city’s leader rebuffed calls to scrap property-cooling measures. Also, telecom companies slid, led by a -2.5% decline in China Unicom after it reported Q1 revenue that was below consensus. On the positive side, travel-related and tourism stocks rallied today after the Shanghai Security News reported that reservations for domestic air tickets, hotels, scenic spot tickets, and group tours during the five-day May Day holiday had exceeded the same period in 2019 before the pandemic.

Japan’s Nikkei Stock Index today posted modest losses. Concerns that economic growth will weaken from ever-tighter Fed policy weighed on Japanese stocks today after comments Tuesday from Atlanta Fed President Bostic and St. Louis Fed President Bullard showed they favored additional Fed rate hikes. However, losses in the overall market were limited today as Japanese exporter stocks gained after the yen tumbled to a 1-1/4 month low against the dollar. The yen retreated on speculation the BOJ will maintain its ultra-easy monetary policy after Bloomberg reported that BOJ officials are wary of tweaking or scrapping their yield curve controls at next week’s policy meeting, citing the recent banking turmoil in the U.S. and Europe.

Japan Feb industrial production was revised upward by +0.1 to 4.6% m/m from the initially reported 4.5% m/m, the biggest increase in 8 months.

Pre-Market U.S. Stock Movers

Morgan Stanley (MS) fell more than -3% in pre-market trading after reporting Q1 equity sales and trading revenue of $2.73 billion, weaker than the consensus of $2.86 billion.

Tesla (TSLA) dropped more than -2% in pre-market trading after cutting prices again on its Model 3 and Model Y vehicles, the second price cut on the vehicles this month.

Netflix (NFLX) slid more than -1% in pre-market trading after reporting Q1 streaming paid memberships of 232.5 million, below the consensus of 233 million. Other video streaming companies fell on the news, with FubuTV (FUBO) down more than -3% and Roku (ROKU) down more than -1%.

Chip stocks are falling today on demand concerns after ASML NV reported its Q1 order intake was the lowest since 2020. As a result, Applied Materials (AMAT), Advanced Micro Devices (AMD), Microchip Technology (MCHP), Micron Technology (MU), KLA Corp (KLAC), and Marvell Technology (MRVL) are down more than -1%.

CDW Corp (CDW) slumped more than -10% in pre-market trading after reporting Q1 preliminary net sales of about $5.10 billion, well below the consensus of $5.57 billion.

Interactive Brokers Group (IBKR) tumbled more than -3% in pre-market trading after reporting Q1 adjusted EPS of $1.35, weaker than the consensus of $1.40.

Elevance Health (ELV) fell more than -1% in pre-market trading after forecasting full-year adjusted EPS above $32.70, below the consensus of $32.79.

Citizens Financial Group (CFG) sank more than -7% in pre-market trading after reporting Q1 total deposits of $172.19 billion, below the consensus of $180.68 billion.

Intuitive Surgical (ISRG) jumped more than +7% in pre-market trading after reporting Q1 revenue of $1.70 billion, stronger than the consensus of $1.60 billion.

Western Alliance Bancorp (WAL) soared more than +18% in pre-market trading after reporting Q1 net interest income of $609.9 million, above the consensus of $592.8 million, and said Q2 deposits to date are up +$2 billion through April 14.

Azek (AZEK) rose more than +2% in pre-market trading after Bank of America upgraded the stock to buy from neutral with a price target of $31.

Intuitive Machines (LUNR) surged more than +22% in pre-market trading after announcing that NASA awarded it a contract to work on the Joint Polar Satellite System in a joint venture led by Intuitive with KBR.

United Airlines Holdings (UAL) gained more than +1% in pre-market trading after reporting a Q1 adjusted loss per share of -63 cents, narrower than the consensus of -73 cents.

Today’s U.S. Earnings Reports (4/19/2023)

Abbott Laboratories (ABT), Baker Hughes Co (BKR), Citizens Financial Group Inc (CFG), Crown Castle Inc (CCI), Discover Financial Services (DFS), Elevance Health Inc (ELV), Equifax Inc (EFX), F5 Inc (FFIV), International Business Machine (IBM), Kinder Morgan Inc (KMI), Lam Research Corp (LRCX), Las Vegas Sands Corp (LVS), Morgan Stanley (MS), Nasdaq Inc (NDAQ), Steel Dynamics Inc (STLD), Synchrony Financial (SYF), Tesla Inc (TSLA), Travelers Cos Inc/The (TRV), US Bancorp (USB), Zions Bancorp NA (ZION).

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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.