Morning Call: Wednesday's hawkish Fed minutes weigh on U.S. stocks; Dec E-mini S&Ps down -0.38%; Dec 10-year T-notes down -7.5 ticks to a 1-week low.
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Overnight Markets and News

Dec E-mini S&Ps (ESZ18 -0.39%) this morning are down -0.38% and the 10-year T-note yield climbed to a 1-week high of 3.21% on signs the Fed will continue to raise interest rates into next year. Wednesday’s minutes of the Sep 25-26 FOMC meeting showed Fed officials appeared to favor an eventual move in the fed funds rate above the level they see as neutral for the economy. Weakness in energy stocks is also weighing on the overall market as Nov WTI crude oil (CLX18 -0.95%) fell -1.06% to a 1-month low after the EIA reported weekly U.S. crude stockpiles rose more than expected. European stocks are up +0.02% as strength in quarterly earnings of drug makers leads the overall market higher with Roche Holding AG up 2% after it reported stronger-than-expected Q3 sales and Novartis AG is up over 2% after it raised its 2018 sales guidance. Asian stocks settled mostly lower: Japan -0.80%, Hong Kong -0.03%, China -2.94%, Taiwan -0.25%, Australia +0.06%, Singapore -0.05%, South Korea -0.92%, India -1.09%. China's Shanghai Composite tumbled to a fresh 3-3/4 year low on fears of forced selling due to widespread margin calls. The yuan dropped to a nearly 2-year low against the dollar after the U.S. Treasury stopped short of declaring China a currency manipulator, which bolstered speculation the PBOC will now let the yuan drift even lower. Japanese stocks retreated on weaker-than-expected trade data that showed Japan exports last month unexpectedly fell by the most in nearly 2 years.

The dollar index (DXY00 -0.06%) is down -0.06%. EUR/USD (^EURUSD +0.16%) is up +0.14%. USD/JPY (^USDJPY -0.16%) is down -0.12%.

Dec 10-year T-note prices (ZNZ18 -0-060) are down -7.5 ticks at a 1-week low.

ECB Governing Council member Rehn said, "if the economy develops roughly in line with the current outlook, the first ECB rate increases will take place in Q4 of 2019."

UK Sep retail sales ex auto fuel fell -0.8% m/m, weaker than expectations of -0.4% m/m and the biggest decline in 9 months. Sep retail sales including auto fuel also fell -0.8% m/m, weaker than expectations of -0.4% m/m.

The Japan Sep trade balance was in surplus by +139.6 billion yen, better than expectations of a -45.1 billion yen deficit. Sep exports unexpectedly fell -1.2% y/y, weaker than expectations of +2.1% y/y and the biggest decline in nearly 2 years. Sep imports rose +7.0% y/y, weaker than expectations of +13.7% y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly initial unemployment claims (expected -3,000 to 211,000, previous +7,000 to 214,000) and continuing claims (expected +5,000 to 1.665 million, previous +4,000 to 1.660 million), (2) Oct Philadelphia Fed business outlook survey (expected -2.9 to 20.0, Sep +11.0 to 22.9), (3) St. Louis Fed President James Bullard speaks about the U.S. economic outlook to the Economic Club of Memphis, (4) Sep leading indicators (expected +0.5%, Aug +0.4%), (5) Treasury auctions 30-year TIPS.

Notable Russell 2000 earnings reports today include: PayPal (consensus $0.54), American Express (1.77), Bank of NY Mellon (1.04), Nucor (2.31), Travelers (2.27), Textron (0.76).

U.S. IPO's scheduled to price today: Niu Technologies (NIU), SolarWinds (SWI), LogicBio Therapeutics (LOGC).

Equity conferences during the remainder of this week: Arm TechCon Conference on Tue-Thu, CXO Summit on Thu, European Society for Medical Oncology Meeting on Fri.

Market Comments

Dec S&P 500 E-minis (ESZ18 -0.39%) this morning are down -10.75 points (-0.38%). Wednesday's closes: S&P 500 -0.03%, Dow Jones -0.36%, Nasdaq 100 +0.03%. The S&P 500 on Wednesday closed lower on the hawkish tone of the FOMC minutes and the unexpected -0.6% decline in U.S. Sep building permits to a 16-month low of 1.241 million, weaker than expectations of +2.0% to 1.275 million. There was also weakness in energy stocks as crude oil prices tumbled -3.02% to a 4-week low.

Dec 10-year T-notes (ZNZ18 -0-060) this morning are down -7.5 ticks at a 1-week low. Wednesday's closes: TYZ8 -5.50, FVZ8 -3.50. Dec 10-year T-notes on Wednesday closed lower on the hawkish FOMC meeting minutes where a number of Fed officials said they favored raising the fed funds rate above its neutral level. T-notes were supported by a rally in German bunds to a 2-week high and by reduced inflation expectations after the 10-year T-note breakeven inflation rate fell to a 1-month low.

The dollar index (DXY00 -0.06%) this morning is down -0.059 (-0.06%), EUR/USD (^EURUSD +0.16%) is up +0.0016 (+0.14%), and USD/JPY (^USDJPY -0.16%) is -0.13 (-0.12%). Wednesday's closes: Dollar Index -0.011 (-0.01%), EUR/USD -0.0073 (-0.63%), USD/JPY +0.40 (+0.36%). The dollar index on Wednesday closed higher on weakness in EUR/USD after the 10-year German bund yield fell to a 2-week low, which weakens the euro's interest rate differentials. The dollar was also supported by the Sep 25-26 FOMC meeting minutes that stated some policy makers judged that it may be necessary to temporarily raise the funds rate above its neutral level.

Metals prices this morning are weaker with Dec gold (GCZ18 -0.05%) -0.6 (-0.05%), Dec silver (SIZ18 -0.87%) -0.128 (-0.87%) and Dec copper (HGZ18 -1.51%) -0.041 (-1.46%). Wednesday's closes: Dec gold -3.6 (-0.29%), Dec silver -0.038 (-0.26%), Dec copper -0.0015 (-0.05%). Metals on Wednesday closed lower on a rally in the dollar index and by the unexpected decline in U.S. Sep building permits to a 16-month low, which is negative for copper demand. Copper prices were supported by news of a -3,275 MT decline in LME copper inventories to a 2-1/3 year low.

Nov WTI crude oil prices (CLX18 -0.95%) this morning are down -74 cents (-1.06%) at a 1-month low and Nov gasoline (RBX18 -1.28%) is -2.88 (-1.50%) at a 7-month nearest-futures low. Wednesday's closes: Nov crude oil -5.86 (-2.96%), Nov gasoline +3.30 (+1.70%). Nov crude oil and gasoline on Wednesday closed sharply lower with Nov crude at a 4-week low. Crude oil prices were undercut by a stronger dollar and a negative EIA report. The EIA report showed a +6.49 million bbl increase in EIA crude inventories (well above expectations of +2.5 million bbl) and a +1.78 million bbl increase in crude supplies at Cushing to a 3-1/2 month high. Gasoline prices were supported by the unexpected -2.02 million bbl decline in EIA gasoline supplies, weaker than expectations of +550,000 bbl.

Overnight U.S. Stock Movers

The Gap (GPS -0.44%) was downgraded to 'Underweight' from 'Neutral' at JPMorgan Chase with a price target of $24.

Constellation Brands (STZ +0.11%) lost almost 2% in after-hours trading after CEO Rob Stands said he will step down as CEO on March 1, 2019.

Kaiser Aluminum (KALU +1.55%) gained almost 2% in after-hours trading after it reported Q3 net sales of $393 million, better than consensus of $382 million.

Fluor (FLR -0.28%) was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $59.

Texas Capital Bancshares (TCBI +1.21%) tumbled nearly 10% in after-hours trading after it reported Q3 EPS of $1.65, below consensus of $1.70.

CH Robinson Worldwide (CHRW -0.55%) was rated a new 'Buy' at Loop Capital Markets with a price target of $107.

ForeScout Technologies (FSCT -0.99%) was rated a new 'Outperform' at Baird with a price target of $42.

Zillow Group (ZG +0.68%) slid more than 3% in after-hours trading after COO Amy Bohutinsky said she will step away from her role as COO in January 2019.

Alcoa (AA +1.41%) climbed almost 4% in after-hours trading after it reported Q3 adjusted Ebitda of $795 million, well above consensus of $649.8 million.

Sealed Air (SEE -0.34%) dropped more than 6% in after-hours trading after it cut its outlook for full-year EPS to $2.40 to $2.45 from a prior estimate of $2.45 to $2.55, below consensus of $2.51.

Krystal Biotech (KRYS -13.42%) fell 4% in after-hours trading after it announced that it had commenced an underwritten public offering of $60 million of its common stock.

Aclaris Therapeutics (ACRS -2.33%) dropped nearly 7% in after-hours trading after it announced that it will offer $75 million of its common stock in an underwritten public offering.

OncoMed Pharmaceuticals (OMED +20.52%) fell more than 7% in after-hours trading after Celgene said it will not exercise its option to license Rosmantuzumab and said it will subsequently terminate its collaboration with OncoMed with respect to Rosmantuzumab effective February 12,2019.

Proteostasis Therapeutics (PTI -1.05%) surged almost 30% in after-hours trading after its combination of PTI-801 and PTI-808 for treatment in patients with cystic fibrosis met its primary goal in a Phase 1 study.