Markets Today: Stock Indexes Tumble As Bond Yields
Rise On Strong U.S. PPI...
Morning Markets
December S&P 500 futures ( ESZ22) this morning are down -0.54%, and December Nasdaq 100 E-Mini futures ( NQZ22) are down -0.61%.
Stock indexes this morning erased overnight gains and are moderately lower after U.S. November producer prices rose more than expected, bolstering speculation the Fed will keep monetary policy tighter for longer. U.S. Nov PPI final demand rose +7.4% y/y, above expectations of +7.2% y/y.
The stronger-than-expected U.S Nov PPI report also boosted T-note yields that weighed on stocks, with the 10-year T-note yield up +2.2 bp to 3.504%. Fed officials have recently signaled that the Fed will downshift to a +50 bp rate hike at next week’s FOMC meeting after four straight +75 bp increases.
Stock indexes initially moved higher in overnight trading on strength in technology stocks, with Broadcom up more than +4% in pre-market trading after reporting better-than-expected Q4 revenue and forecasting Q1 revenue above expectations. Chip stocks may see some support today after Taiwan Semiconductor Manufacturing (TSMC), the world’s biggest maker of made-to-order chips, reported its November revenue jumped +50%. Today’s U.S. producer price report was above expectations and bearish for stocks. Nov PPI final demand rose +0.3% m/m and +7.4% y/y, above expectations of +0.2% m/m and +7.2% y/y. Also, Nov PI ex-food & energy rose +0.4% m/m and +6.2% y/y, above expectations of +0.2% m/m and +5.9% y/y.
Overseas stocks today are stronger. The Euro Stoxx 50 index is up +0.19%. Lower valuations enticed stock buyers today after five consecutive days of losses. European chip stocks are moving higher today after Taiwan Semiconductor Manufacturing (TSMC), the world’s biggest maker of made-to-order chips, reported its Nov revenue jumped +50% to $7.3 billion, a sign of strong demand. Travel and leisure stocks also rose on optimism that global travel will be boosted as China eases pandemic travel restrictions.
China’s Shanghai Composite closed up +0.30%, and Japan’s Nikkei Stock Market Index closed up by +1.18%. Chinese stocks recovered from early losses and posted modest gains. Strength in casino and property stocks led the overall market higher as the Chinese government pivots away from Covid Zero, ending some of the harshest restrictions, including frequent testing. Stocks also rose today on signs that China is ramping up stimulus after the Ministry of Finance said it will sell 750 billion yuan ($108 billion) of special sovereign bonds next week to help "support economic and social" development.
Today’s inflation news supported Chinese stocks after China's Nov PPI fell -1.3% y/y, unchanged from Oct and a smaller decline than expectations of -1.5% y/y. Also, Nov CPI rose +1.6% y/y, right on expectations and the slowest pace of increase in 8 months.
In a sign that China is ramping up stimulus, the Ministry of Finance said it would sell 750 billion yuan ($108 billion) of special sovereign bonds next week to help "support economic and social" development. The People's Bank of China (PBOC) will carry out open market operations with relevant banks, which implies the PBOC will likely provide liquidity support for the banks to buy the bonds.
Japan’s Nikkei Stock Index today closed moderately higher on carry-over support from Thursday’s U.S. rally in stocks and optimism about China’s easing of Covid restrictions. In addition, a rally in Japanese gaming stocks gave the overall market a lift as the U.S. Federal Trade Commission seeks to block Microsoft’s $69 billion acquisition of Activision Blizzard....
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