U.S. stocks are moving higher in pre-market trading, following yesterday's third-straight 75-basis point rate hike from the Fed. Other central banks also are taking action, with the Bank of England and Swiss National Bank both hiking rates, while the Bank of Japan held its monetary policy stance unchanged but intervened in the currency markets for the first time in over 20 years to try to stabilize the falling yen. Housing is dominating the equity front, as Lennar Corporation and KB Home both topped earnings estimates, but the latter's revenues fell short of forecasts. In economic news, jobless claims came in lower than expected, while reports on leading indicators and regional manufacturing are due out after the opening bell. Treasury yields are mostly higher, and the U.S. dollar is subdued after yesterday's rally back to fresh multi-year highs. Crude oil and gold prices are trading higher. Asia finished broadly lower and Europe is mixed, with the global markets digesting recent monetary policy actions.
As of 8:56 a.m. ET, the December S&P 500 Index future is 23 points above fair value, the DJIA future is 67 points north of fair value, and the Nasdaq Index future is 74 points higher than fair value. WTI crude oil is gaining $1.52 to $84.46 per barrel and Brent crude oil is rising $1.48 to $91.31 per barrel. The gold spot price is increasing $17.30 to $1,693.00 per ounce. Elsewhere, the Dollar Index is little changed at 110.60.
Lennar Corporation (LEN $76) reported Q3 earnings-per-share (EPS) of $5.03, above the $4.81 FactSet estimate, with revenues increasing 29.0% year-over-year (y/y) to $8.9 billion, roughly in line with the Street's forecast. The homebuilder's new orders declined but its home deliveries were up y/y, while it continues to maintain a consistent housing starts pace and drive sales by adjusting pricing and incentives.
KB Home (KBH $28) posted Q3 EPS of $2.86, topping the forecasted $2.67, as revenues grew 26.0% y/y to $1.8 billion, slightly below the expected $1.9 billion. The homebuilder said its deliveries fell short of expectations due to extended build times and ongoing supply chain constraints, with rising mortgage rates, inflation, and ongoing macro concerns causing many prospective buyers to pause their homebuying decision. However, KBH said the long-term outlook for the housing market remains favorable.
The S&P 500 Index has remained choppy and has pulled back as of late with inflation pressures persisting and forcing the Fed to aggressively tighten monetary policy as discussed in the article, Stock Market Volatility: Inflation Strikes Again. Meanwhile, Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her latest article, Earnings: Trampled Under Foot? how the bear market has been driven by multiple compression, making valuations look relatively compelling, but expected weakness in earnings may limit the upside potential for stocks.
Jobless claims come in below estimates, leading indicators data on deck
Weekly initial jobless claims (chart) came in at a level of 213,000 for the week ended September 17, below the Bloomberg consensus estimate of 217,000 and above the prior week's downwardly revised 208,000 level. The four-week moving average fell by 6,000 to 216,750, and continuing claims for the week ended September 10 dropped by 22,000 to 1,379,000, south of estimates of 1,418,000. The four-week moving average of continuing claims declined by 8,250 to 1,404,750.
Treasury yields are higher, with the yield on the 2-year note rising 7 bps to 4.06%, the yield on the 10-year note gaining 6 bps to 3.57%, and the 30-year bond rate increasing 3 bps to 3.54%.
Bond yields have risen, and the U.S. dollar has notched fresh multi-decade highs as the Fed hiked rates by 75 basis points (bps) for a third-straight meeting yesterday.
Schwab's Chief Fixed Income Strategist Kathy Jones discusses the Fed's decision in her latest article, With Inflation Offsides, the Fed Keeps Hiking, which included downgraded economic growth forecasts and an increased unemployment rate outlook, as inflation remains the Central Bank's primary concern. She also analysis of the greenback in her commentary, The Strong Dollar: Can It Continue? You can follow Kathy on Twitter: @KathyJones.
Shortly after the opening bell, the economic calendar we will get the release of the August Leading Economic Index (LEI) forecasted to decline 0.1% month-over-month (m/m), following July's 0.4% decrease. Also, we will get data on Kansas City Fed Manufacturing Activity for September, forecasted to improve to 5 from the prior month's 3 level. A reading above 0 denotes expansion.
Europe mixed amid monetary policy decisions
Stocks in Europe are trading mixed in afternoon action as the global markets continue to react to yesterday's monetary policy decision from the Fed, which announced another 75-bp rate for a third-straight meeting. The decision was accompanied by today's actions from the Bank of England (BoE) and Swiss National Bank (SNB), with both hiking rates by 50 and 75 bps, respectively, as expected, ending the era of negative rates in the latter. Earlier this week, Sweden's central bank surprised the markets with a 100-bp rate increase. Inflation pressures have forced central banks to get aggressive with monetary policies and stocks in Europe have been choppy lately amid concerns over economic growth, which have been exacerbated by the continued volatility in the energy markets. Concerns over the war in Europe have been amplified by Russian President Vladimir Putin mobilizing more troops and reiterating his threat to use nuclear weapons.
Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his latest article, Home Is Where the Inflation Is, how central banks that base inflation measures on rentals rather than home prices may persist in hiking rates, thus applying more economic brakes despite easing home sales. The euro and British pound are trading higher versus the U.S. dollar, and bond yields in the Eurozone are declining though rates in the U.K. are moving solidly higher.
The U.K. FTSE 100 Index is dipping 0.1%, France's CAC-40 Index is decreasing 0.5%, Germany's DAX Index is declining 0.4%, and Spain's IBEX 35 Index is down 0.2%, while Switzerland's Swiss Market Index is ticking 0.1% higher, and Italy's FTSE MIB Index is gaining 0.4%.
Asia lower with central bank actions in focus
Stocks in Asia finished broadly lower with the global markets digesting yesterday's monetary policy decision from the Fed in the U.S., which delivered a third-straight 75-bp rate hike and signaled further aggression to come. Today, the Bank of Japan (BoJ) held its monetary policy steady but after the closing bell intervened for the first time in over 20 years in the currency markets to try to stabilize the falling Japanese yen. Global monetary policies have tightened, with today the BoE and the SNB both raising their benchmark interest rates. However, the BoJ and China's central bank have bucked the trend with the latter loosening policy to try to boost the world's second-largest economy that has also been hampered by the impact of COVID-related lockdowns, regulatory crackdowns, real estate issues, and elevated geopolitical tensions with the U.S. Schwab's Jeffrey Kleintop provides commentary on China's situation in his article, China Q&A: Top 5 Questions, discussing various topics including inflationary concerns, currency movements, government policies, and more. In economic news, Japan's department store sales accelerated solidly for August.
Japan's Nikkei 225 Index declined 0.6%, as the yen continued to drop versus the U.S. dollar during the session but is bouncing off multi-decade lows after the close following the BoJ's action. China's Shanghai Composite Index decreased 0.3%, and the Hong Kong Hang Seng Index dropped 1.6%. India's S&P BSE Sensex 30 Index and South Korea’s Kospi index both decreased 0.9%. Markets in Australia were closed for a holiday.
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