Markets Today: Stocks Mildly Lower on Weakness in Tech

Morning Markets

March E-Mini S&P 500 futures (ESH24) are down -0.28%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.31%. 

Stock index futures this morning are mildly lower on weakness in technology stocks.  Apple is down more than -1% in pre-market trading after cutting the price of its iPhone 15 and other products in China.  Also, Tesla is down more than -2% after CEO Musk said he wants 25% control of the company before building AI products.

Strength in bank earnings lifted stock index futures from their worst levels as Goldman Sachs and Morgan Stanley rose more than +1% in pre-market trading after posting solid Q4 earnings results.  Also, M&A activity supported stocks after Synopsys acquired Ansys for $35 billion. 

The U.S. Jan Empire manufacturing survey general business conditions index unexpectedly plunged -29.2 to a 3-1/2 year low of -43.7, weaker than expectations of an increase to -5.0.

The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 75% for that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields today are higher.  The 10-year T-note yield is up +5.5 bp at 3.994%.  The 10-year German bund yield is down -1.0 bp at 2.225%.  The 10-year UK gilt yield is down -1.7 bp at 3.781%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.38%.  China’s Shanghai Composite Index closed up +0.27%.  Japan’s Nikkei Stock Index closed down -0.79%.

The Euro Stoxx 50 today fell to a 6-week low and is moderately lower.  Weakness in European bank stocks is leading the overall market lower after JPMorgan Chase predicted downgrades to banks due to lower forward rates, expecting earnings growth to come to an end this year with limited net interest income growth.  Also, ECB Governing Council member Villeroy de Galhau pushed back on expectations for ECB interest rate cuts after he said the ECB would "probably be a bit more patient" than the market estimates.  Losses in stocks were limited after the ECB’s Nov inflation expectations declined and after the German investor outlook unexpectedly improved as the Jan ZEW survey expectations of economic growth unexpectedly rose to an 11-month high. 

ECB Governing Council member Villeroy de Galhau said, "The question of an ECB interest rate cut this year is a premature one" as the ECB will "probably be a bit more patient." 

The ECB's Eurozone Nov 1-year inflation expectations eased to +3.2% from +4.0% in Oct, the lowest in 21 months.  The Nov 3-year inflation expectations eased to a 22-month low +2.2% from +2.5% in Oct, better than expectations of +2.4%.

The German Jan ZEW survey expectations of economic growth index unexpectedly rose +2.4 to an 11-month high of 15.2, stronger than expectations of a decline to 11.7.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 3% for its next meeting on January 25 and at 28% for the following meeting on March 7.

China’s Shanghai Composite Index today recovered from a 3-1/2 year low and posted modest gains. Stocks recovered on signs of more Chinese stimulus after Bloomberg reported that China is considering 1 trillion yuan ($139 billion) of new debt issuance under a special sovereign bond plan to fund food, energy, supply chains, and urbanization projects.  Chinese stocks also rose today on expectations that Wednesday’s reports on industrial production and retail sales will show improvement.  The Shanghai Composite today initially moved lower on weakness in property stocks, led by a -4% fall in Country Garden Holdings after it said it expects deliveries of more than 480,000 homes in 2024, a drop of about 20% compared to last year. 

Japan’s Nikkei Stock Index today closed moderately lower.  Long liquidation pressure emerged in Japanese stocks after the Nikkei Stock index rose for six straight sessions.  Stocks were also undercut by today’s report showing stronger than expected Japanese Dec producer prices, which was hawkish for BOJ policy.  Some negative corporate news also undercut stocks as Nintendo fell more than -2% after being downgraded by Macquarie Capital.  Losses in the overall market were limited by strength in exporter stocks after the yen fell to a 5-week low against the dollar.   

Japan's Dec PPI rose +0.3% m/m and was unchanged y/y, stronger than expectations of unchanged m/m and -0.3% y/y.

Pre-market U.S. Stock Movers

Apple (AAPL) is down more than -1% in pre-market trading after it lowered the price of its iPhone 15 and other products in China in an attempt to boost weakening demand.  

Tesla (TSLA) dropped more than -2% in pre-market trading after CEO Musk said he would rather build AI products outside of Tesla if he doesn’t have 25% voting control,    suggesting he prefers a bigger stake in the company. 

PNC Financial Services Group (PNC) fell more than -2% in pre-market trading after reporting Q4 diluted EPS of $1.85, weaker than the consensus of $2.57, and forecast 2024 net interest income would decline -4% to -5%.

Synopsys (SNPS) dropped more than -1% in pre-market trading after acquiring Ansys for about $35 billion.

RTX Co (RTX) slid nearly -1% in pre-market trading after Baird downgraded the stock to neutral from outperform. 

Boeing (BA) tumbled more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

MasTech Inc (MTZ) fell nearly -1% in pre-market trading after Baird downgraded the stock to neutral from outperform. 

Goldman Sachs (GS) is up more than +1% in pre-market trading after reporting Q4 net revenue of $11.32 billion, stronger than the consensus of $10.84 billion.

Morgan Stanley (MS) climbed more than +1% in pre-market trading after reporting Q4 wealth management net revenue of $6.65 billion, better than the consensus of $6.409 billion.

Ansys (ANSS) jumped more than +5% in pre-market trading after Synopsys acquired the company for $390.14 a share or about $35 billion. 

Fluence Energy (FLNC) rose more than +3% in pre-market trading after BMO Capital Markets upgraded the stock to outperform from market perform.

Triumph Group (TGI) rose more than +2% in pre-market trading after Baird upgraded the stock to outperform from neutral with a price target of $20.

NEXTracker (NXT) is up more than +1% in pre-market trading after Goldman Sachs initiated coverage on the stock with a buy recommendation and a price target of $62. 

Parsons Corp (PSN) rose more than +1% in pre-market trading after Baird upgraded the stock to outperform from neutral with a price target of $75.

Earnings Reports (1/16/2024)

Goldman Sachs Group Inc/The (GS), Interactive Brokers Group Inc (IBKR), Morgan Stanley (MS), Pinnacle Financial Partners In (PNFP), PNC Financial Services Group Inc (PNC).

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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.