What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.19%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.61%.
U.S. stocks this morning are moderately higher, with the Dow Jones Industrials climbing to a 1-1/4 month high. M&A activity is supportive for stocks after Nasdaq Inc agreed to Adenza from buyout firm Thoma Bravo for $10.5 billion. Also, Novartis AG agreed to buy Chinook Therapeutics Inc for as much as $3.5 billion. The markets are looking ahead to interest rate decisions from the Fed, ECB, and BOJ this week.
The outlook for U.S. price pressure to continue to ease may prompt the Fed to pause its rate hike campaign and is bullish for stocks. The consensus is that Tuesday’s U.S. consumer price report will show May CPI eased to +4.1% y/y from +4.9% y/y in April.
Market odds for the Fed to raise the fed funds target range by +25 bp at Wednesday’s FOMC meeting stand at 28%.
Global bond yields are mixed. The 10-year T-note yield is up +3.5 bp at 3.774%. The 10-year German bund yield is down -0.4 bp at 2.373%, and the UK 10-year gilt yield is up +8.1 bp at 4.320%.
Global bond yields are mixed. The 10-year T-note yield is up +3.7 bp at 3.755%. The 10-year German bund yield is down -1.6 bp at 2.386%, and the UK 10-year gilt yield rose to a 1-1/2 week high of 4.354% and is up +6.9 bp at 4.318%.
On the bullish side of stocks, Catalent is up more than +10% after reporting Q3 net revenue above consensus. Also, Chinook Therapeutics is up more than +56% after Novartis AG agreed to buy the company for $40 a share in a deal valued at $3.5 billion. In addition, chip stocks are moving higher today.
On the bearish side, energy stocks and energy service providers are falling today in pre-market trading, with the price of WTI crude down more than -3% at a 1-week low. Also, Nasdaq Inc is down more than -10% after announcing it will acquire Adenza from buyout firm Thoma Bravo for $10.5 billion in cash and stock.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.64%. China’s Shanghai Composite closed down -0.08%, and Japan’s Nikkei Stock Index closed up +0.52%.
Today’s stock movers…
Cruise line stocks are climbing today, with Carnival (CCL) up more than +12% to lead gainers in the S&P 500 after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $16. Also, Norwegian Cruise Line Holdings (NCLH) is up more than +7%, and Royal Caribbean Cruises (RCL) is up more than +3%.
Catalent (CTLT) is up more than +10% after reporting Q3 net revenue of $1.04 billion, stronger than the consensus of $956.3 million.
Airline stocks are climbing after Bloomberg Intelligence said U.S. full-service airlines of United, American, and Delta are beating the S&P 500 Index primarily on robust summer demand, especially for higher-end leisure and overseas travelers. American Airlines Group (AAL) is up more than +4%. Also, United Airlines Holdings (UAL) and Alaska Air Group (ALK) are up more than +2%, and Delta Air Lines (DAL) is up more than +1%. In addition, Southwest Airlines (LUV) is up more than 3% after Raymond James added the stock to its Analyst Current Favorites List.
Chip stocks are moving higher today. Intel (INTC) is up more than +4% to lead gainers in the Nasdaq 100 and Down Jones Industrials. Also, Broadcom (AVGO) and Globalfoundries (GFS) are up more than +3%. In addition, Marvell Technology (MRVL), Micron Technology (MU), and ON Semiconductor (ON) are up more than +2%
Oracle (ORCL) is up more than +4% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $130.
Advanced Micro Devices (AMD) is up more than +2% after KeyBanc Capital Markets raised its price target on the stock to $150 from $110.
Chinook Therapeutics (KDNY) is up more than +56% after Novartis AG agreed to buy the company for $40 a share in a deal valued at $3.5 billion.
Energy stocks and energy service providers are falling, with the price of WTI crude down more than -2% at a 1-week low. APA Corp (APA) is down more than -3%. Also, ConocoPhillips (COP), Marathon Oil (MRO), Diamondback Energy (FANG), and Halliburton (HAL) are down more than -2%. In addition, Schlumberger (SLB), Devon Energy (DVN), Baker Hughes (BKR), and Phillips 66 (PSX) are down more than -1%. Finally, Chevron (CVX) is down more than -1% to lead losers in the Dow Jones Industrials.
Nasdaq Inc (NDAQ) is down more than -10% to lead losers in the S&P 500 after announcing it will acquire Adenza from buyout firm Thoma Bravo for $10.5 billion in cash and stock.
T Rowe Price Group (TROW) is down more than -2% after reporting assets under management of 1.35 trillion as of May 31, down -$9.6 billion for the month.
Old Dominion Freight Line (ODFL) is down more than -2% after Jeffries initiated coverage on the stock with a hold rating, saying the stock’s premium valuation is fairly accounted for and expects “limited opportunity” for the company to repeat the performance over the last five years.
U.S. Bancorp (USB) is down more than -1% after Citigroup opened a 90-day negative catalyst watch on the stock and cut its price target to $33 from $39.
Across the markets…
September 10-year T-notes (ZNU23) today are down -5 ticks, and the 10-year T-note yield is up +3.5 bp at 3.774%. T-notes this morning gave up an early advance and turned lower after a rally in stocks curbed safe-haven demand for T-notes. Also, supply pressures are undercutting T-note prices as the Treasury will auction $40 billion of 3-year T-notes and $32 billion of 10-year T-notes later today as part of this week’s $90 billion auctions of T-notes and T-bonds. T-notes today initially moved higher on a decline in inflation expectations as the 10-year inflation breakeven rate today fell to a 1-week low of 2.191%. Also, expectations that the Fed will pause its rate hike campaign after the Tue/Wed FOMC meeting are supportive for T-notes.
The dollar index (DXY00) this morning recovered from a 2-1/2 week low and is up +0.05%. The dollar today rebounded from overnight losses and is slightly higher on strength in T-note yields. Also, a decline in the yuan to a 6-1/4 month low is positive for the dollar. On the negative side are expectations for the Fed to pause its rate hike campaign after the Tue/Wed FOMC meeting. Also, strength in stocks today has curbed liquidity demand for the dollar.
EUR/USD (^EURUSD) today is up by +0.02% and climbed to a 2-1/2 week high. The main bullish factor for the euro is central bank divergence on the prospects for the Fed to pause raising interest rates this week while the ECB continues to raise interest rates. A rebound in the dollar today is limiting gains in EUR/USD.
USD/JPY (^USDJPY) today is up by +0.05%. The yen gave up overnight gains and is slightly lower. Today’s Japanese economic reports were dovish for BOJ policy and negative for the yen after Japan May PPI rose less than expected, and after May machine tool orders posted their largest decline in 2-3/4 years. Lower T-note yields today are limiting losses in the yen.
Japan May PPI eased to +5.1% y/y from +5.9% y/y in Apr, slower than expectations of +5.6% y/y.
Japan May machine tool orders fell -22.2% y/y, the steepest pace of decline in 2-3/4 years.
August gold (GCQ3) this morning is down -7.0 (-0.35%), and July silver (SIN23) is down -0.305 (-1.25%). Precious metals prices this morning are moderately lower. A recovery in the dollar today is bearish for metals prices after the dollar index rebounded from a 2-1/2 week low and is slightly higher. Also, strength in stocks today has reduced safe-haven demand for precious metals. Losses in precious metals are limited by the prospects for the Fed to pause its rake hike campaign at the Tue/Wed FOMC meeting.
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.
