Pre-Market Brief: Stocks Move Higher as Investors Brace for Earnings

Morning Markets

December S&P 500 futures (ESZ22) are trending up +1.38% this morning after three major US benchmark indices closed lower on Friday as increasing expectations for higher for longer inflation added to the Fed fears, dragging growth sectors lower. Three major U.S. stock indexes were weighted down primarily by losses in the Oil & Gas, Basic Materials, and Technology sectors. 

In Friday's trading session, U.S. equities opened higher, then fell after data from the University of Michigan showed consumer sentiment improved in October, but inflation expectations worsened amid rising gasoline prices.

"The main thrust for the market right now is higher interest rates, higher inflation, and the Fed is going to continue to move its fed funds target higher," said Anthony Saglimbene, a chief market strategist at Ameriprise Financial in Troy, Michigan.

After last week's economic data, U.S. rate futures have priced in a 98.8% chance of a 75 basis point rate increase and a 1.2% chance of a super-sized 100 basis point hike at November's monetary policy meeting.

This week, investors will be focused on how major companies are dealing with slowing global growth as the third-quarter earnings season begins. Analysts currently expect third-quarter profits for S&P 500 companies to rise just 3.6% on a year-over-year basis, compared to an 11.1% increase expected at the beginning of July. 

Ahead in the week, market participants will also be closely monitoring the Philadelphia Fed manufacturing index, industrial production, building permits, housing starts, and existing home sales data. In addition, investors are likely to focus on speeches from Fed officials Bullard and Bowman and FOMC member Williams.

Today, all eyes are on the U.S. NY Empire State Manufacturing Index data in a couple of hours. Economists, on average, forecast that the October figure will come in at -4.00 compared to the previous value of -1.50.

In the bond markets, United States 10-Year rates are at 3.965%, down -1.02%.

The Euro Stoxx 50 futures are up +0.92% this morning as the U.K. government plans to shore up confidence in its fiscal policies after weeks of turmoil. New British finance minister Jeremy Hunt will announce tax and spending measures later today. In addition, British government bonds resumed trading on Monday without the support of the Bank of England’s emergency bond-buying program, which expired on Friday.

"The BoE was doing emergency bond-buying that's technically identical to QE with one hand, while furiously raising the policy rate with the other," said analysts at ANZ in a note.

Italy's Consumer Price Index (CPI) and Harmonised Index of Consumer Prices (HICP) were released today.

The Italian September CPI has been reported at +0.3% m/m and +8.9% y/y, in line with expectations.

The Italian September HICP came in at +1.6% m/m and +9.4% y/y, weaker than expectations of +1.7% m/m and +9.5% y/y.

Asian stock markets today settled mixed as investors prepared for a further tightening in global financial conditions. China’s Shanghai Composite Index (SHCOMP) closed up +0.42%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.16%.

China’s Shanghai Composite today closed higher, recovering from early losses. President Xi Jinping stated that the country has no intention of scaling back its strict zero-COVID policy but promised more market-friendly policies, thus supporting Chinese equities. However, a report that Apple has paused plans to use memory chips from China’s Yangtze Memory Technologies in its products weighed on sentiment.

At the same time, Japan’s Nikkei 225 Stock Index closed lower today, weighed down by losses in the Transport, Fishery, and Marine Transport sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 7.03% to 24.72.

The Japanese August Industrial Production stood at +3.4% m/m, stronger than an economic forecast of +2.7% y/y.

Japan's Tertiary Industry Activity Index has been reported at +0.7% m/m, stronger than expectations of +0.3% m/m.

Pre-Market U.S. Stock Movers

Acorda Therapeutics Inc (ACOR) jumped more than +70% in pre-market trading after the company announced a $16.5M award and royalty/supply relief in the AMPYRA arbitration case.

Stronghold Digital Mining Inc (SDIG) plunged about -3% in pre-market trading after the company terminated the data center hosting agreement at the company's Scrubgrass plant.

UnitedHealth Group Incorporated (UNH) rose over +1% in pre-market trading after the company delivered a better-than-expected report for the third quarter.

Unity Biotechnology Inc (UBX) dropped about -1% in pre-market trading after the company filed a $250M mixed securities shelf. 

Opendoor Technologies Inc (OPEN) sank around -2% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral with a price target of $2, down from $7.

Today’s U.S. Earnings Spotlight: Monday - October 17th

Bank of America (BAC), Charles Schwab (SCHW), Rio Tinto ADR (RIO), Bank of NY Mellon (BK), Sandvik AB ADR (SDVKY), Equity Lifestyle (ELS), ServisFirst Bancshares (SFBS), FB Financial (FBK), Guaranty Bancshares (GNTY), Mainstreet Bank (MNSB), CryoCell International (CCEL), DRDGOLD ADR (DRD), Orgenesis (ORGS), ITEX (ITEX), Liquid Media (YVR), Herborium (HBRM).

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