Markets Today: Stocks Slip on Additional Hawkish Fed Comments

Morning Markets

December E-Mini S&P 500 futures (ESZ23) are down -0.41%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.44%.

Stock index futures this morning are moderately lower.  Stock markets worldwide are under pressure today on concerns that global central banks will have to keep interest rates higher for longer to combat inflation. Hawkish Fed comments today are also weighing on stocks after Minneapolis Fed President Kashkari said he expects the Fed will have to raise interest rates one more time this year due to strength in the U.S. economy.  The markets are awaiting U.S. reports on consumer confidence and new home sales later this morning.

China’s worsening property debt crisis remains an albatross for the global stock markets due to concern the debt crisis will derail the country’s growth prospects and drag down the global economy.  China Evergrande Group said its subsidiary Hengda Real Estate Group defaulted on a 4 billion yuan ($547 million) debt payment due Monday, and Chinese authorities detained former company executives.

Minneapolis Fed President Kashkari said, "If the economy is fundamentally much stronger than we realized, on the margin that would tell me rates probably have to go a little bit higher and then be held higher for longer to cool things off."

The markets are discounting a 21% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 46% chance for that +25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields today are lower.  The 10-year T-note yield fell back from a new 16-year high of 4.562% and is down -3.0 bp at 4.503%.  The 10-year German bund yield fell back from a new 12-year high of 2.821% and is down -2.6 bp at 2.772%.  The 10-year UK gilt yield is down -4.4 bp at 4.280%.  

Overseas stock markets are lower today.  The Euro Stoxx 50 is down -0.78%.  China’s Shanghai Composite Index closed -0.43%.  Japan’s Nikkei 225 today closed -1.11%.

The Euro Stoxx 50 today fell to a 6-month low and is moderately lower as stocks price in the prospects for higher interest rates for longer.  Losses in luxury goods makers are leading the overall market lower on concern a worsening of China’s property debt crisis will dampen the country’s spending for European luxury goods.  Also, European mining stocks are weaker as Chinese economic concerns pushed iron ore prices down to a 2-week low.  Stocks recovered from their worst levels after dovish comments from ECB Governing Council member Muller knocked the 10-year German bund yield down from a 12-year high.

ECB Governing Council member Muller said he's not currently expecting further increases in interest rates from the ECB.

China’s Shanghai Composite Stock Index today posted moderate losses.  Stock prices of Chinese property developers fell further today amid fresh signs of turmoil in the sector.   China Evergrande Group missed a debt payment, and former executives of the company were detained by Chinese authorities.  That fueled concern the Chinese property debt crisis is worsening, with negative implications for the Chinese and global economies.  Chinese healthcare stocks retreated today after Morgan Stanley cut its price target on those property-developer stocks.  Morgan Stanley also said biopharmaceutical and medical device companies are the most exposed sectors in the country’s anti-corruption campaign on hospitals.  On the positive side, Chinese stocks related to artificial intelligence rallied after OpenAI said it is rolling out new voice and image functions in ChatGPT over the next two weeks.

Japan’s Nikkei Stock Index closed moderately lower.  Losses in technology stocks led the overall market lower today on concerns that interest rates in the U.S. will be higher for longer after the 10-year T-note yield jumped to a 16-year high.  The yen recovered most of its losses after falling to an 11-month low against the dollar today after Japanese Finance Minister Suzuki said, “I’m watching market trends with a high sense of urgency.”  The warnings come as policymakers in Japan try to talk up the yen without resorting to further forex intervention.  On the positive side, Rasa Corp rallied more than +8% today after reporting first-half-year earnings that were better than expected.

Pre-Market U.S. Stock Movers

Tesla (TSLA) is down more than -1% in pre-market trading after Bloomberg News reported that the EU’s anti-subsidy probe into Chinese electric vehicles (EVs) showed Tesla benefited from exports of its Chinese-made EVs to Europe. 

United Natural Foods (UNFI) sank more than -12% in pre-market trading after reporting Q4 net sales of $7.42 billion, weaker than the consensus of $7.46 billion, and forecasting 2024 adjusted Ebitda of $450 million-$550 million, well below the consensus of $617.2 million.

Thor Industries (THO) dropped more than -2% in pre-market trading after forecasting 2024 EPS of $6.25-$7.25, the midpoint well below the consensus of $7.15. 

Olin Corp (OLN) slid more than -1% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Coty Inc (COTY) tumbled more than -4% in pre-market trading after offering 33 million shares as part of its plan to add a Paris stock listing. 

Flowserve (FLS) gained more than +1% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $50. 

Edwards Lifesciences Corp (EW) rose more than +1% in pre-market trading after Oppenheimer upgraded the stock to outperform from market perform with a price target of $90.

DraftKings (DKNG) climbed more than +3% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $37.

Immunovant (IMVT) surged more than +50% in pre-market trading after announcing top-line results from an early-stage trial of its drug for autoimmune diseases. 

Earnings Reports (9/26/2023)

AAR Corp (AIR), Cintas Corp (CTAS), Costco Wholesale Corp (COST), Ferguson PLC (FERG), MillerKnoll Inc (MLKN), Progress Software Corp (PRGS), TD SYNNEX Corp (SNX), United Natural Foods Inc (UNFI).

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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.