Markets Today: Stocks Extend This Week’s Plunge on Recession Fears

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Morning Markets

December S&P 500 futures (ESZ22) this morning are down by -1.21% at a 2-month low. Stock indexes this morning are extending this week’s sell-off on concern that the Fed’s resolve to fight inflation will push the economy into recession.  Losses in stock indexes accelerated this morning after Goldman Sachs cut its year-end target for the S&P 500 to 3,600 from 4,300.   Stocks are also under pressure today from rising bond yields as the 10-year T-note yield jumped to a 12-year high of 3.825%.

A report from Bank of America today said EPFR data show investors moved $30.3 billion into cash, while global equity funds saw outflows of $7.8 billion, and global bond funds lost $6.9 billion in the week through Sep 21.

Goldman Sachs cut its year-end target for the S&P 500 to 3,600 from 4,300, saying a dramatic shift in the outlook for interest rates will weigh on valuations for U.S. equities. 

The Euro Stoxx 50 today is down sharply by -2.58% and plummeted to a 1-3/4 year low.  European stocks are sinking today, led by losses in energy stocks and miners as commodities slumped on demand concerns as global rate hikes weigh on economic growth. 

Weaker-than-expected European economic news also weighed on stocks after the Eurozone Sep  S&P Global Manufacturing PMI fell -1.1 to 48.5, the weakest level in 2-1/4 years.   Soaring bond yields are also pressuring stocks after the 10-year UK gilt yield climbed to an 11-year high today at 3.839%, and the 10-year German bund yield rose to a 10-year high of 2.112%.

ECB Governing Council member Kazaks said interest rates in the Eurozone would “definitely” have to be raised, and he favors a 75 bp rate hike at the ECB’s October meeting.

The Eurozone Sep S&P Global Manufacturing PMI fell -1.1 to 48.5, weaker than expectations of 48.8 and the steepest pace of contraction in 2-1/4 years.  The Eurozone Sep S&P Global Composite PMI fell -0.7 to 48.2, right on expectations and the steepest pace of contraction in 20 months.

Asian markets today closed lower.  China’s Shanghai Composite Index closed down -0.66%, Hong Kong’s Hang Seng Index closed down (-1.18%), and Japan was closed today for a holiday. 

China’s Shanghai Composite Index today tumbled to a 3-3/4 month low and closed moderately lower, while Hong Kong’s Hang Seng Index plunged to a 10-year low.  Asian markets retreated on concern the Fed’s aggressive rate hike stance to fight inflation will undercut economic growth and cause a recession, which would crimp demand for Asian exports.  Chinese stocks were also under pressure today after Nomura Holdings cut its China 2023 GDP forecast to 4.3% from a previous forecast of 5.1%.  Chinese stocks bounced from their worst levels today as Chinese exporters rallied when the yuan dropped to a new 2-year low against the dollar, boosting exporters’ earnings prospects. 

Nomura Holdings cut its China 2023 GDP forecast to 4.3% from a previous forecast of 5.1%, citing China’s extension of Covid lockdowns, slowing exports, a “timid” recovery of the real estate market, and a weakening in passenger car sales in 2023 when the effect of this year’s tax cuts tapers off.

Pre-Market U.S. Stock Movers

Costco Wholesale (COST) dropped more than -3% in pre-market trading even after reporting Q4 EPS of $4.20, above the consensus of $4.14, but Stifel said it expects the stock price to remain choppy amid uncertainty on the health of the global consumer and heightened inflation. 

Advanced Micro Devices (AMD) slipped more than -1% in pre-market trading after Morgan Stanley cut its price target for the stock to $95 from $102, citing a worsening PC end market and headwinds on the client business, including a collapse in gaming GPUs. 

FedEx (FDX) fell nearly -2% in pre-market trading after forecasting Q2 EPS of $2.75, below the consensus of $2.80, citing uncertain economic conditions. 

Accenture Plc (ACN) slid more than -1% in pre-market trading after forecasting Q1 revenue of $15.20 billion to $15.75 billion, weaker than the consensus of $16.12 billion. 

Energy stocks and energy service providers are falling in pre-market trading, with the price of WTI crude down more than -3% at a 2-week low.  Devon Energy (DVN), Diamondback Energy (FANG), Exxon Mobil (XOM), ConocoPhillips (COP), Halliburton (HAL), Occidental Petroleum (OXY), and Marathon Oil (MRO) are all down more than -1%. 

Raytheon Technologies (RTX) is up more than +1% in pre-market trading after beating out Boeing and Lockheed Martin for a $1 billion contract from the U.S. Air Force to produce a new hypersonic weapon. 

CalAmp (CAMP) climbed +3% in pre-market trading after reporting Q2 revenue of $72.8 million, above the consensus of $68.9 million.

Spero Therapeutics (SPRO) jumped more than +6% in pre-market trading after Evercore ISI raised its recommendation on the stock to outperform from inline.

Today’s U.S. Earnings Reports (9/23/2022)

DENTSPLY SIRONA Inc (XRAY), Enochian Biosciences Inc (ENOB), Hyzon Motors Inc (HYZN), Radiant Logistics Inc (RLGT).

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