Early today, September E-Mini S&P 500 futures (ESU23) are showing a gain of +0.06%, while Sep Nasdaq 100 E-Mini futures (NQU23) are up by +0.07%.
Nvidia Stock Surges Before Earnings
Stock indices have a modestly higher stance this morning, propelled by the strength of technology stocks. Nvidia stock (NASDAQ:NVDA) has surged over +1% in pre-market trading due to optimism surrounding its upcoming Q2 earnings announcement later in the day. Additionally, a decline in bond yields is providing support to the stock market. However, gains in the overall market are being tempered by a drop in activewear apparel makers’ stocks. This decline was triggered by Foot Locker’s pre-market plunge of over -30% after reducing its earnings forecast for 2023.
According to the Mortgage Bankers Association, weekly U.S. mortgage applications witnessed a decline of -4.2% week-over-week in the week ending on August 18. Home-purchase applications also dropped by -5.0% week-over-week, hitting their lowest level since 1995. A significant jump of +15 basis points was observed in the 30-year fixed mortgage rate, reaching 7.31%, marking its highest point since 2000.
Market sentiment suggests a 12% probability of a +25 basis point rate hike at the upcoming September 20 Federal Open Market Committee (FOMC) meeting, and a 45% probability for the same rate hike at the November 1 FOMC meeting.
Global bond yields are trending lower. The 10-year T-note yield has decreased by -4.6 basis points to 4.279%. Similarly, the 10-year German bund yield dropped to a 1-1/2 week low of 2.524%, down by -7.8 basis points at 2.567%. The 10-year UK gilt yield also hit a 1-1/2 week low of 4.499%, sliding by -10.7 basis points to 4.537%.
Overseas stock markets display mixed performances. The Euro Stoxx 50 is slightly up by +0.05%, while China’s Shanghai Composite Index has closed with a -1.34% drop. Japan’s Nikkei Stock Index has ended positively, up by +0.48%.
The Euro Stoxx 50 index is showing slight gains today. The uptick in stocks follows weaker-than-expected Eurozone economic data that has led to lower government bond yields, fueling speculations of a pause in the European Central Bank’s (ECB) interest rate hike cycle next month. The Eurozone’s August S&P composite PMI experienced a decline of -1.6, reaching a 2-3/4 year low of 47.0. Consequently, Eurozone government bond prices increased, causing the 10-year German bund yield to hit a 1-1/2 week low. Market sentiment suggests a 36% probability of a +25 basis point rate hike at the September 14 ECB meeting.
Regarding Eurozone manufacturing, the August S&P manufacturing PMI showed improvement, rising by +1.0 to 43.7, surpassing the expected value of 42.7. However, the overall composite PMI for August declined by -1.6 to 47.0, below expectations of a -0.1 decrease, marking a 2-3/4 year low of 48.5.
China’s Shanghai Composite experienced a moderate decline, hovering just above the 7-1/2 month low recorded on Tuesday. This dip was primarily led by technology and telecom stocks. Meanwhile, Chinese suppliers to Nike and other U.S. peers faced setbacks due to concerns about China’s sluggish consumer recovery and the persistent issue of elevated inventories impacting profitability within the activewear industry. On a positive note, Chinese consumer discretionary companies and businesses tied to China’s service sector witnessed gains. These sectors have experienced a shift in consumer behavior, with increased spending on experiences like catering, trips, and movies due to prolonged Covid restrictions and a deepening property crisis.
Foreign investors are continuing to withdraw from Chinese stocks. Bloomberg data indicates that overseas funds have divested approximately $10.7 billion worth of Chinese stocks over a thirteen-day period, marking the longest stretch of withdrawals since Bloomberg began tracking this data in 2016.
Japan’s Nikkei Stock Index is currently at a 1-week high, registering a modest increase. Japanese tech hardware stocks experienced a rally in anticipation of Q2 earnings results from U.S. chipmaker Nvidia. Nvidia stock briefly touched a record high amid a blockbuster 212% rally this year that’s been fueled by A.I. buzz. Defensive domestic stocks that are less influenced by overseas economic conditions also gained traction, with electric and gas utility stocks making gains. Additionally, land transportation stocks saw an uptick, led by a +2% surge in Japan Central Railway following its announcement of a stock split. Conversely, Japanese seafood companies faced declines due to Hong Kong’s imposition of restrictions on seafood and seaweed imports from Japan, in response to the Japanese government’s plan to release treated wastewater from the damaged Fukushima nuclear plant.
The Japan August Jibun Bank manufacturing PMI witnessed a slight increase of +0.1, reaching 49.7.
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