U.S Pre- Market – Stocks decline as concerns about global growth persist in the pre-market brief

Oct 11, 2022
VOT Research Desk

Market Insights & Analysis

The Nasdaq100 posted its lowest close since July 2020, driven by a chip-fueled decline in tech stocks following the White House’s announcement of new export restrictions aimed at hobbling China’s semiconductor industry and investors’ concerns about the impact of higher interest rates. This morning, December S&P 500 futures (ESZ22) are trending down -0.86%.Losses in the Oil & Gas, Technology, and Healthcare sectors made up the majority of the weighting in three major stock indexes in the United States.

Lael Brainard, Vice Chair of the Federal Reserve, stated on Monday that “real GDP growth will be essentially flat this year” and that a “second-half rebound will be limited.”To ensure that inflation returns to the 2% target set by the central bank, monetary policy will be restrictive for some time. In addition, Chicago Fed President Charles Evans stated on Monday that officials at the U.S. Federal Reserve were in complete agreement regarding the necessity of raising the target policy rate to approximately 4.5 percent by March of next year.

In a note, Goldman Sachs stated, “We continue to expect that the Fed will hike by 75bp in November, 50bp in December, and 25bp in February to reach a terminal forecast of 4.5-4.75%.”

At the same time, U.S. rate futures have priced in a 23.5 percent probability of a 50 basis point rate increase and a 76.5 percent probability of a 75 basis point increase at the monetary policy meeting in November.

Meanwhile, earnings estimates for the third quarter have been falling in recent weeks. In comparison to the increase of 11.1% anticipated at the beginning of July, analysts now anticipate S&P 500 companies’ y/y earnings to rise by 4.1% in the prevalent Q3.

Investors will likely concentrate on the September U.S. IBD/TIPP Economic Optimism data today, which showed 44.7.The October figure is expected to be 40.5, according to economists.

The 10-year interest rate in the United States is 3.941%, up +1.44%, on the bond markets.

This morning, the Euro Stoxx 50 futures are down -1.13%, with the basic resources sector leading losses due to concerns over the global economic outlook and expectations of further central bank monetary policy

tightening. Additionally, a worldwide rise in the yields on government bonds put pressure on European stocks. The more than 6% drop in Givaudan (GIVN.Z.IX) after the Swiss fragrance and flavor manufacturer said it was on track to implement price increases to offset higher input costs is another negative factor for European equities.

Today’s data included the U.K. Unemployment Rate, Italy Industrial Production, the U.K. Claimant Count Change, the U.K. Employment Change 3M/3M, and the U.K. Average Earnings Index +Bonus.

In contrast to expectations of 5.9%, the U.K. August Average Earnings Index +Bonus has been reported at 6.0%.

The United Kingdom’s September Claimant Count Change was 25.5K, lower than the 4.2K expected. The United Kingdom’s Employment Change 3M/3M was -109K m/m, higher than the -155K expected, and the United Kingdom’s August Unemployment Rate was 3.5%, higher than the 3.6% expected.

In August, Italian industrial production exceeded expectations by 2.3% month-over-month and 2.9% year-over-year, exceeding expectations.

Technology majors remained under pressure from new U.S. export restrictions and an aggressive Federal Reserve today, as Asian stock markets settled with mixed results. The Shanghai Composite Index (SHCOMP) in China ended the day up 0.19 percent, while the Nikkei 225 Stock Index (NIK) in Japan ended down -2.64%.

Due to a positive outlook from battery manufacturer Contemporary Amperex Technology Co Ltd and COSCO Shipping Holdings Co Ltd ahead of the third-quarter earnings season, China’s Shanghai Composite closed higher today. On the other hand, Japan’s Nikkei Stock Index closed lower today in catch-up trade after a holiday on Monday, fueled by losses in the Precision Instruments, Gas & Water, and Non-Metal Minerals sectors.The implied volatility of Nikkei 225 options is taken into account in the Nikkei Volatility, which ended the day at 23.33, up 1.97 percent.

The Adjusted Current Account of Japan was -0.53 trillion, which was lower than the expected -0.47 trillion.

Technical Parameters

Nasdaq100

S&P 500

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