What you need to know…
The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.45%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.11%.
Stock indexes Wednesday settled mixed, with the S&P 500 posting a 1-week high and the Nasdaq 100 climbing to an 8-1/2 month high.
The broader market rallied Wednesday after the U.S. April CPI report showed that inflation moderated, which knocked bond yields lower and sparked a rally in mega-cap technology stocks. The benign CPI report also bolstered speculation the Fed may be able to halt its rate-hike regime.
The U.S. Apr CPI eased to a 2-year low of 4.9% y/y from 5.0% y/y in Mar, better than expectations of unchanged at 5.0% y/y. Apr CPI ex-food and energy eased to 5.5% y/y from 5.6% y/y in Mar, right on expectations.
The U.S. Apr monthly budget statement showed a surplus of $176.2 billion, lower than expectations of $235.0 billion.
U.S. debt ceiling talks Tuesday yielded little results, but White House officials and Republican leaders pledged additional negotiations. On Friday, President Biden will meet again with congressional leaders, including House Speaker McCarthy. Treasury Secretary Yellen said that the Treasury Department may run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised.
Global bond yields Wednesday moved lower. The 10-year T-note yield fell -7.4 bp to 3.445%. The 10-year German bund yield fell -6.3 bp to 2.288%, and the UK 10-year gilt yield fell -5.5 bp at 3.800%.
On the bullish side for stocks, mega-cap technology stocks and chips stocks rallied Wednesday as bond yields declined on the dovish Apr CPI report. Also, Exact Sciences closed up more than +10% after reporting Q1 revenue above consensus and raising its full-year revenue forecast. In addition, Akamai Technologies closed up more than +8% after reporting Q1 adjusted EPS above consensus and forecasting full-year adjusted EPS above consensus.
On the bearish side, Airbnb closed down more than -10% after forecasting Q2 revenue below consensus. Also, Twilio closed down more than -15% after forecasting Q2 revenue well below consensus. In addition, regional bank stocks retreated as sentiment remained negative for the sector.
Overseas stock markets Wednesday settled lower. The Euro Stoxx 50 closed down -0.38%. China’s Shanghai Composite closed down -1.15%, and Japan’s Nikkei Stock Index closed down -0.41%.
Today’s stock movers…
Lower bond yields Wednesday sparked a rally in mega-cap technology stocks. Alphabet (GOOGL) closed up more than +4%, and Amazon.com (AMZN) closed up more than +3%. Also, Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA) closed more than +1%.
Akamai Technologies (AKAM) closed up more than +8% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $1.40, stronger than the consensus of $1.32, and forecast full-year adjusted EPS of $5.69-$5.84, well above the consensus of $5.48.
A rally in chip stocks is supportive of the overall market. KLA Corp (KLAC), Advanced Micro Devices (AMD), ASML Holding NV (ASML), Lam Research (LRCX), and Microchip Technology (MCHP) closed up more than +2%. Also, Marvell Technology (MRVL), ON Semiconductor (ON), and Applied Materials (AMAT) closed up more than +1%.
Illumina (ILMN) closed up more than +8% after Glass Lewis, an influential proxy advisory firm, recommended Illumina investors withhold support for CEO deSouza’s reappointment to the board of directors and instead support activist investor Carl Icahn’s nominees.
Exact Sciences (EXAS) closed up more than +10% after reporting Q1 revenue of $602.5 million, better than the consensus of $543.1 million, and raising its full-year revenue forecast to $2.38 billion-$2.42 billion from a previous forecast of $2.27 billion-$2.32 billion, above the consensus of $2.30 billion.
Syneos Health (SYNH) closed up more than +8% after a consortium that includes Elliot Investment Management, Patient Square Capital, and Veritas Capital were said to be in advanced talks to acquire the company.
Airbnb (ABNB) closed down more than -10% to lead losers in the Nasdaq 100 after forecasting Q2 revenue of $2.35 billion-$2.45 billion, with the midpoint below the consensus of $2.42 billion.
Twilio (TWLO) closed down more than -12% after forecasting Q2 revenue of $980 million-$990 million, weaker than the consensus of $1.05 billion.
Southern Copper (SCCO) closed down more than -5% after Goldman Sachs downgraded the stock to sell from neutral.
Coherent Corp (COHR) closed down more than -4% after reporting Q3 revenue of $1.24 billion, weaker than the consensus of $1.34 billion, and cutting its full-year revenue estimate to $5.08 billion-$5.15 billion from a previous estimate of $5.35 billion-$5.50 billion, well below the consensus of $5.39 billion.
Regional bank stocks retreated Wednesday as sentiment remains negative for the sector. KeyCorp (KEY) closed down more than -4%, and Lincoln National (LNC) and Comerica (CMA) closed down more than -3%. Also, Zions Bancorp (ZION), Citizens Financial Group (CFG), Huntington Bancshares (HBAN), and Truist Financial (TFC) closed down more than -2%.
Occidental Petroleum (OXY) closed down more than -3% after reporting Q1 adjusted EPS of $1.09, below the consensus of $1.23.
Across the markets…
June 10-year T-notes (ZNM23) on Wednesday closed up +23 ticks, and the 10-year T-note yield fell by -7.4 bp to 3.445%. June T-notes rallied Wednesday after the U.S. Apr CPI eased to a 2-year low of +4.9% y/y, which was dovish for Fed policy. T-notes extended their gains Wednesday afternoon on strong demand for the Treasury’s $35 billion 10-year T-note auction with a bid-to-cover ratio of 2.45, above the 10-auction average of 2.40.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
