Markets Today: Stocks Push Higher on Earnings Optimism

Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.28%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.41%.

Stock indexes this morning are moderately higher on optimism that Q2 corporate earnings results will continue to outperform.  M&A activity also boosted stocks after Campbell Soup agreed to acquire Sovos Brands in a deal valued at $2.7 billion.  Hawkish Fed comments from Fed Governor Bowman and NY Fed President Williams pushed bond yields higher and limited gains in stock index futures.

NY Fed President Williams said, "I expect that Fed policy will need to be kept restrictive for some time" and that the need for more rate hikes is "an open question." 

Fed Governor Bowman said that "additional rate increases will likely be needed to get inflation on a path down to the FOMC's 2% target" to fully restore price stability.

The markets are discounting the odds at 16% for a +25 bp rate hike at the September 20 FOMC meeting and 38% for a +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields are higher.  The 10-year T-note yield is up +5.1 bp at 4.084%.  The 10-year German bund yield is up +2.9 bp at 2.591%.  The 10-year UK gilt yield is up +6.2 bp at 4.441%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.20%.  China’s Shanghai Composite Index today closed down -0.59%.  Japan’s Nikkei Stock Index closed up +0.19%.

The Euro Stoxx 50 today is slightly lower.  Weakness in mining stocks is leading the overall market lower today after Goldman Sachs warned of the possibility that China may cut steel output in this half of the year.  Also, concerns about the German economy, the Eurozone’s largest, weighed on stocks after German Jun industrial production fell more than expected.   Losses in European stocks were contained after the Eurozone Aug Sentix investor confidence index unexpectedly increased. 

The Eurozone Aug Sentix investor confidence index unexpectedly rose +3.6 to -18.9, stronger than expectations of a decline to -24.5.

German Jun industrial production fell -1.5% m/m, weaker than expectations of -0.5% m/m.

China’s Shanghai Composite today posted moderate losses.  A slump in Chinese healthcare and pharmaceutical stocks weighed on the overall market today after authorities widened an anti-graft crackdown on the sectors. According to a local media report, at least 155 officials nationwide were being probed for allegedly violating laws and regulations, more than double the amount investigated last year. Losses in the overall market were limited as Chinese companies that develop computer operating systems and information security equipment rallied after the Ministry of Finance announced standards for the products that it plans to purchase via public tenders. 

Japan’s Nikkei Stock Index today recovered from a 3-1/2 week low and closed slightly higher.  Japanese steelmakers rallied today, led by a +3% gain in Nippon Steel after it raised its full-year net income forecast above the consensus. Also, telecom stocks rose after Softbank reported better-than-expected Q1 operating profit.  In addition, property and retail stocks gained amid expectations for stable inflation.  Finally, weakness in the yen today pushed exporter stocks higher as the weaker yen bolsters the earnings prospects of exporters.

The Japan Jun leading index CI fell -0.3 to 108.9, right on expectations.

Pre-Market U.S. Stock Movers

Berkshire Hathaway (BRK/A) rose more than +1% in pre-market trading after reporting Q2 operating income of $10.04 billion, well above the consensus of $9.28 billion. 

Sovos Brands (SOVO) soared more than +24% in pre-market trading after Campbell Soup agreed to acquire the company for about $2.7 billion. 

Elanco Animal Health (ELAN) jumped more than +8% in pre-market trading after reporting Q2 revenue of $1.06 billion, better than the consensus of $1.04 billion, and raising its full-year revenue forecast to $4.35 billion-$4.41 billion from a previous estimate of $4.31 billion-$4.40 billion, stronger than the consensus of $4.35 billion. 

Wayfair (W) climbed more than +2% in pre-market trading after UBS upgraded the stock to buy from neutral with a price target of $110. 

Fortinet (FTNT) moved up more than +3% in pre-market trading after Guggenheim Securities upgraded the stock to buy from neutral with a price target of $70.

PG&E (PCG) gained more than +1% in pre-market trading after UBS upgraded the stock to buy from neutral with a price target of $21.

Monster Beverage (MNST) climbed more than +3% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral. 

Tyson Foods (TSN) tumbled more than -5% in pre-market trading after reporting Q3 sales of $13.14 billion, weaker than the consensus of $13.59 billion. 

Biogen (BIIB) dropped more than -3% in pre-market trading after Piper Sandler cut its price target on the stock to $350 from $380.

Cloudflare (NET) fell more than -2% in pre-market trading after Guggenheim Securities downgraded the stock to sell from neutral with a price target of $50.

American Airlines Group (AAL) slid more than -1% in pre-market trading after Redburn downgraded the stock to neutral from buy.

Southwest Airlines (LUV) fell more than -1% in pre-market trading after Redburn downgraded the stock to sell from neutral.

Apellis Pharmaceuticals (APLS) dropped more than -10% in pre-market trading after Wedbush cut its price target on the stock to $29 from $32. 

Today’s U.S. Earnings Reports (8/7/2023)

Celanese Corp (CE), Coterra Energy Inc (CTRA), Henry Schein Inc (HSIC), International Flavors & Fragrances (IFF), ONEOK Inc (OKE), Paramount Global (PARA), Skyworks Solutions Inc (SWKS), Tyson Foods Inc (TSN), Viatris Inc (VTRS).

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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.