September S&P 500 futures (ESU22) this morning are down -0.80%. Concerns that the Fed will keep its aggressive rate hike path are weighing on stock index futures this morning on speculation that this afternoon’s minutes of the July 26-27 FOMC meeting will have a hawkish tilt. Also, retailer stocks are falling this morning. Led by a -3% drop in Target after it reported weaker than expected Q2 earnings. U.s retail sales data this morning was mixed for stocks.
A jump in global bond yields is another negative factor for stocks this morning. Soaring consumer prices in the UK sparked inflation concerns and pushed up bond yields. The UK 10-year Gilt yield jumped to a 1-1/2 month high of 2.306% after UK July CPI rose more than expected at the fastest pace in 40 years. The jump in European bond yields pushed T-note yields higher, and the 10-year T-note yield climbed to a 3-1/2 week high today at 2.906%.
Strength in Asian equity markets today is a supportive factor for stocks. China’s Shanghai Composite climbed to a 2-1/2 week high today, and Japan’s Nikkei Stock index posted a 7-1/2 month high on speculation China may boost stimulus measures after Chinese Premier Li Keqiang vowed to “reasonably” step up policy support to stabilize employment, prices and ensure economic growth.
U.S. July retail sales were unchanged m/m, weaker than expectations of +0.1% m/m. However, July retail sales ex-autos unexpectedly rose +0.4% m/m, stronger than expectations for a -0.1% m/m decline.
China’s CCTV state television reported that Chinese Premier Li Keqiang asked local officials from six provinces that account for 40% of China’s economy to bolster pro-growth measures, including helping to boost consumption and offering more fiscal support via government bond issuance. He also vowed to “reasonably” step up policy support to stabilize employment, prices and ensure economic growth.
The Euro Stoxx 50 today is down -0.67%. Weaker-than-expected Eurozone economic data today on Q2 GDP and Q2 employment are weighing on stocks today. Also, a jump in European government bond yields is undercutting stocks today after UK July consumer prices accelerated more than expected at the fastest pace in 40 years. The 10-year UK Gilt yield climbed to a 1-1/2 month high of 2.306%, and the 10-year German bund yield rose to a 3-1/2 week high of 1.107%.
Eurozone Q2 GDP was revised lower to +0.6% q/q and +3.9% y/y from the previously reported +0.7% q/q and +4.0% y/y.
Eurozone Q2 employment rose +0.3% q/q and +2.4% yy/y, weaker than the +0.6% q/q and +2.9% y/y pace from Q1.
UK July CPI rose +10.1% y/y, stronger than expectations of +9.8% y/y and the fastest pace of increase in 40 years.
Asian markets today closed higher. China’s Shanghai Composite index today rallied to a 2-1/2 week high and closed up +0.45%. Japan’s Nikkei index pushed up to a new 7-1/2 month high and closed up +1.23%. Chinese stocks erased early declines today and moved higher on the outlook for additional stimulus. China’s state-owned CCTV television reported that Chinese Premier Li Keqiang asked local officials from six provinces that account for about 40% of China’s economy to bolster pro-growth measures.
Japan’s Nikkei Stock Index rallied to a new 7-1/2 month high today on economic optimism. Japanese retailers and consumer-related companies rose after Walmart reported better-than-expected Q2 earnings, which bodes well for Asian suppliers. Also, Japanese trade data today showed better-than-expected Japan exports and imports for July. In addition, Japanese exporter companies moved higher today after the yen fell to a 1-week low against the dollar, which improves the earnings prospects of exporters.
Pre-Market U.S. Stock Movers
Target (TGT) dropped more than -3% in pre-market trading after reporting Q2 adjusted EPS of 39 cents, well below the consensus of 72 cents.
TJX Cos (TJX) slid more than -1% in pre-market trading after reporting Q2 net sales of $11.80 billion, below the consensus of $12.06 billion, and then cut its full-year adjusted EPS forecast to $3.05-$3.13 from a previous forecast of $3.13-$3.20.
Analog Devices (ADI) dropped slid more than -3% in pre-market trading after CEO Roche said that “economic uncertainty is beginning to impact bookings.”
Weber (WEBR) tumbled by more than -4% in pre-market trading after Citigroup downgraded the stock to sell from neutral, citing uncertain demand for grills.
Krispy Kreme (DNUT) sank -13% in pre-market trading after reporting Q2 total net revenue of $375.2 million, below the consensus of $386 million, and lowered its full-year net revenue forecast to $1.49 billion-$1,52 billion from a previous forecast of $1.53 billion-$1.56 billion, weaker than the consensus of $1.56 billion.
Option Care Health (OPCH) fell more than -2% in pre-market trading after it announced the sale of 11.1 million shares of the company’s common stock in an underwritten secondary offering.