U.S. stocks are choppy in pre-market trading on the heels of yesterday's drop ahead of tomorrow's comments from Fed Chairman Jerome Powell. Unrest in China as protests erupted in the region in response to its zero-tolerance COVID policy has unnerved the global markets, but optimism appears to remain that the country may ease COVID-related restrictions. Equity news is light, with Dow member UnitedHealth Group issuing mixed 2023 guidance, while Chemours issued a full-year outlook that came in below estimates. In economic news, home prices cooled, and after the opening bell, we will get the release of the Consumer Confidence Index. Treasury yields are ticking mostly higher, and the U.S. dollar is declining. Crude oil and gold prices are advancing. Asia finished mostly to the upside, with mainland Chinese and Hong Kong markets leading the way amid the lingering optimism that COVID restrictions may ease and as China announced further measures to support its property market. Europe is mixed as the markets monitor the developments in China and mixed economic data in the region.
As of 8:51 a.m. ET, the December S&P 500 Index future is 1 point below fair value, and the DJIA future is 49 points south of fair value, while the Nasdaq Index future is 14 points above fair value. WTI crude oil is rising $1.43 to $78.67 per barrel and Brent crude oil is increasing $1.79 to $85.68 per barrel. The gold spot price is advancing $10.40 to $1,750.70 per ounce. Elsewhere, the Dollar Index is decreasing 0.2% to 106.45.
Dow member UnitedHealth Group Incorporated (UNH $532) reaffirmed its current year earnings-per-share (EPS) guidance, while issuing 2023 EPS guidance with a midpoint below FactSet estimates. However, the company delivered 2023 revenue guidance that was above expectations. The guidance comes ahead of its annual investor conference that will take place tomorrow.
Chemours Co. (CC $31) issued full-year guidance below expectations after the Teflon maker said market demand for titanium dioxide has weakened in Q4, particularly in Europe and Asia amid an increasingly uncertain global outlook. CC also said Q4 seasonality and higher raw material costs are impacting its thermal & specialized solutions and advanced performance materials units.
Q3 earnings season is mostly in the books, and Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her article, Disappearing Act: Earnings, how earnings weakness is starting to materialize across a broader swath of industries, with hits coming from a strong dollar, weaker demand, and aggressive monetary policy.
Home prices decline month over month, consumer confidence report due out after opening bell
The 20-city composite S&P CoreLogic Case-Shiller Home Price Index for September showed a 10.43% year-over-year (y/y) gain in home prices, below the Bloomberg consensus estimate of a 10.55% rise, and versus the prior month's downwardly revised 13.06% increase. Home prices were down 1.24% month-over-month (m/m) on a seasonally adjusted basis, compared to forecasts calling for a 1.20% decline, and versus the prior month's positively revised 1.30% decrease.
Treasury yields are ticking mostly higher, as the yield on the 2-year note is nudging 1 basis point (bp) upward to 4.47%, the yield on the 10-year note is little changed at 3.71%, and the 30-year bond rate is gaining 2 bps to 3.76%.
Inflation has been the driving factor behind the aggressive monetary policy from the Federal Reserve. The increase in bond yields and this year's rally in the U.S. dollar have fostered the choppiness in the markets. Schwab's Chief Fixed Income Strategist Kathy Jones discusses the bond and currency markets in her article, Markets to Fed: Slow Down, You Move Too Fast, noting how if these trends continue, the Fed may end up slowing its pace of tightening—but not stopping it. Additionally, as noted in the latest Schwab Market Perspective: Stress Cracks, as the Federal Reserve continues to ratchet up the pressure with higher interest rates, cracks are beginning to appear beneath the surface of the U.S. economy.
After the opening bell, the economic calendar will bring the release of the Conference Board's November Consumer Confidence Index, which is predicted to decrease to 100 from prior month’s 102.5 level.
Europe mixed amid data and China developments
Stocks in Europe are mixed in afternoon action as global markets continue to monitor the developments in China looking to see if the country will ease COVID restrictions and as protests in the country in response to China's zero-tolerance policy continue. Meanwhile, the markets continue to be choppy as they grapple with the implications of the aggressive tightening of monetary policies on both sides of the pond to try to combat inflation pressures. However, there was some inflation data that may be easing concerns, with German November preliminary consumer prices declining m/m and rising by a smaller amount than expected y/y. In other economic news, Eurozone economic confidence improved more than anticipated for November, along with services sentiment, though its industrial confidence fell more than forecasted.
Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses in his latest article, Central Banks Stepping Down, how central banks seem to be stepping down from aggressive rate hikes, and this could lead to a year-end "Santa Pause" rally for stocks. The euro and British pound are trading higher versus the U.S. dollar, while bond yields in the Eurozone are mostly lower and rates in the U.K. are ticking higher.
The U.K. FTSE 100 Index is up 0.6%, France's CAC-40 Index is ticking 0.1% higher, Germany's DAX Index is dipping 0.1%, Italy's FTSE MIB Index is decreasing 0.2%, Spain's IBEX 35 Index is declining 0.3%, and Switzerland's Swiss Market Index is trading 0.2% lower.
Asia mostly higher as China remains in focus
Stocks in Asia were mostly higher as focus remained on China and optimism resurfaced that the country could ease COVID-related restrictions as virus cases were lower than Sunday's number and China announced increased vaccination rates for seniors. The optimism overshadowed the recent unrest in the region in response to the country's zero-tolerance COVID policy. In his latest article, Risk for 2023: China Reopening, Schwab's Jeffrey Kleintop notes that Chinese officials may be preparing to bring an end to China's zero-COVID policy but reopening the world's second-largest economy could bring inflationary challenges.
Investors also digested more stimulus measures from China's government, which yesterday lowered the reserve requirements for its largest banks to try to stabilize the economy that has been hampered by the impact of COVID lockdowns. Also, China announced further measures to try to help its struggling property market. The persistent inflation pressures have been a main factor in the aggressive measures taken by central banks across the world that have caused volatility in the markets. The Reserve Bank of New Zealand upped its benchmark interest rate by 75 bps last week, the largest increase in the bank's history, and the Reserve Bank of Australia (RBA) recently decided to raise interest rates for a second-straight meeting. Central banks in Europe have also aggressively tightened monetary policy, while the Fed in the U.S. has led the way with its string of four-straight 75-bp rate hikes. In economic news, Japan's October retail sales came in below expectations, South Korea's retail sales decelerated for last month, and Hong Kong's exports fell more than anticipated in October.
Japan's Nikkei 225 Index was 0.5% lower, with the yen holding onto yesterday's gains versus the U.S. dollar. However, China's Shanghai Composite Index increased 2.3%, and the Hong Kong Hang Seng Index led the way, rallying 5.2%. Meanwhile, South Korea's Kospi Index rose 1.0%, while Australia's S&P/ASX 200 Index and India's S&P BSE Sensex 30 Index advanced 0.3%.
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