What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.26%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.39%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.20%.
Stock indexes this morning are mixed, with the S&P 500 climbing to a 4-week high. The broader market is mildly higher after this morning’s monthly U.S. payrolls report fueled speculation the Fed will pause its rate hike campaign. Although monthly nonfarm payrolls rose slightly more than forecast, the August unemployment rate unexpectedly jumped to a 1-1/2 year high, and hourly earnings eased. However, stock indexes fell back from their best levels, and the Nasdaq 100 turned negative as tech stocks retreated after bond yields rose when the Aug ISM manufacturing index rose more than expected to a 6-month high.
Today’s Fed comments were negative for stocks. Atlanta Fed President Bostic said that the U.S. economy faces a period of some disruption as debts are refinanced at significantly higher interest rates, putting some pressure on both financial institutions and the government. Also, Cleveland Fed President Mester said U.S. inflation remains "too high" despite recent improvements, and the labor market is still strong.
U.S. Aug nonfarm payrolls rose +187,000, stronger than expectations of +170,000. However, the August unemployment rate unexpectedly rose +0.3 to a 1-1/2 year high of 3.8%, showing a weaker labor market than expectations of no change at 3.5%.
U.S. Aug average hourly earnings eased to +4.3% y/y from +4.4% y/y in July, right on expectations.
The U.S. Aug ISM manufacturing index rose +1.2 to a 6-month high of 47.6, stronger than expectations of 47.0.
U.S. July construction spending rose +0.7% m/m, stronger than expectations of +0.5% m/m.
The markets are discounting the odds at only 7% for a +25 bp rate hike at the September 20 FOMC meeting and at 40% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields are higher. The 10-year T-note yield recovered from a 3-week low of 4.054% and is up +7.3 bp at 4.181%. The 10-year German bund yield is up +7.0 bp at 2.536%. The 10-year UK gilt yield recovered from a 3-week low of 4.334% and is up +4.3 bp at 4.403%.
The China Aug Caixin manufacturing PMI unexpectedly rose +1.8 to 51.0, stronger than expectations of a decline to 49.0 and the fastest pace of expansion in 6 months.
Today’s stock movers…
Freeport-McMoRan (FCX) is up more than +4% to lead gainers in the S&P 500, with the price of Comex copper today climbing more than +1% to a 4-week high.
Intel (INTC) is up more than +3%, adding to Thursday’s +1% gain to lead gainers in the Dow Jones Industrials after CEO Gelsinger said the company is on course to hit its Q3 forecasts, helped by an improving personal computer market.
Lululemon Athletica (LULU) is up more than +4% to lead gainers in the Nasdaq 100 after reporting Q2 net revenue of $2.21 billion, better than the consensus of $2.17 billion, and raising its 2024 net revenue forecast to $9.51 billion-$9.57 billion from a prior forecast of $9.44 billion-$9.51 billion, stronger than the consensus of $9.50 billion.
Energy stocks and energy service providers are moving higher today, with the price of WTI crude up more than +1% at a 3-1/2 week high. As a result, Baker Hughes (BKR), Devon Energy (DVN), APA Corp (APA), Phillips 66 (PSX), Marathon Oil (MRO), and Occidental Petroleum (OXY) are up more than +2%. Also, Chevron (CVX), Valero Energy (VLO), Marathon Petroleum (MPC), Exxon Mobil (XOM), and Schlumberger (SLB) are up more than +1%.
Dell Technologies (DELL) is up more than +20% after reporting Q2 total net revenue of $22.93 billion, well above the consensus of $20.84 billion.
Nutanix (NTNX) is up more than +13% after reporting Q4 subscription revenue of $459.5 million, stronger than the consensus of $426.5 million, and forecasting 2024 annual contract billings of $1.08 billion-$1.10 billion, better than the consensus of $1.07 billion.
MongoDB (MDB) is up more than +3% after reporting Q2 adjusted EPS of 93 cents, more than double the consensus of 46 cents and raising its 2024 adjusted EPS forecast to $2.27-$2.35 from a previous estimate of $1.42-$1.56, well above the consensus of $1.53.
Illumina (ILMN) is up more than +2% after Evercore ISI added the stock to its tactical outperform list.
Paramount Global (PARA) is down more than -6% after Moody’s Investors Service cut its senior debt rating to Baa3 from Baa2, one level above junk.
Broadcom (AVGO) is down more than -5% after forecasting Q4 revenue of $9.27 billion, below the consensus of $9.28 billion.
Dollar General (DG) is down more than -4% after Evercore ISI downgraded the stock to inline from outperform.
Tesla (TSLA) is down more than -4% after cutting prices on several of its vehicle models in China.
Walgreens Boots Alliance (WBA) is down more than -4% to lead losers in the Dow Jones Industrials after CEO Brewer stepped down effective immediately.
Walt Disney (DIS) is down more than -2% after Charter Communications said Disney pulled its video channels off of Charter’s video networks because of a contract dispute. Charter is the second-largest cable provider in the U.S. Charter Communications (CHTR) is also down more than -2% on the news.
VMware (VMW) is down more than -1% after reporting Q2 revenue of $3.41 billion, below the consensus of $3.46 billion.
Across the markets…
December 10-year T-notes (ZNZ23) today are down -16 ticks, and the 10-year T-note yield is up +7.3 bp at 4.181%. T-note prices today retreated from a 3-week high and posted moderate losses after today’s news showed an improvement in U.S. manufacturing activity as the Aug ISM manufacturing index rose to a 6-month high. T-note prices saw support after the U.S. Aug unemployment rate unexpectedly rose to a 1-1/2 year high, a sign of a weaker labor market that is dovish for Fed policy.
The dollar index (DXY00) today is up +0.29%. The dollar today recovered from early losses and moved higher as T-note yields rose on the stronger-than-expected U.S. Aug ISM manufacturing index. The dollar today initially moved lower after the U.S. Aug unemployment rate unexpectedly rose to a 1-1/2 year high.
EUR/USD (^EURUSD) is down by -0.30%. A stronger dollar today is weighing on the euro. Also, Eurozone economic news today weighed on EUR/USD after the Eurozone Aug S&P manufacturing PMI was revised lower, and Italian July producer prices fell by the most on record, a dovish factor for ECB policy.
ECB Governing Council member Villeroy said we are close or very close to an interest rate peak, and keeping rates high for long enough matters more.
The Eurozone Aug S&P manufacturing PMI was revised lower by -0.2 to 43.5 from the initially reported 43.7.
Italy's July PPI eased to -13.8% y/y from -8.2% y/y in June, the fastest pace of decline since the data began in 2001.
USD/JPY (^USDJPY) is up +0.29%. The yen retreated from a 3-week high against the dollar today and turned lower after the stronger-than-expected Aug ISM manufacturing report pushed T-note yields higher. The yen was also under pressure from weaker-than-expected Japanese capital spending and manufacturing activity reports.
Japan Q2 company profits unexpectedly rose +11.6% y/y, stronger than expectations of a -0.1% y/y decline.
Japan Q2 capital spending rose +4.5% y/y, weaker than expectations of +8.3% y/y. Q2 capital spending ex-software roe +4.4% y/y, weaker than expectations of +7.5% y/y.
The Japan Aug Jibun bank manufacturing PMI was revised lower by -0.1 to 49.6 from the initially reported 49.7.
October gold (GCV3) today is down -3.9 (-0.20%), and Dec silver (SIZ23) is down -0.237 (-0.96%). Precious metals prices this morning are moving lower, with gold falling back from a 3-1/2 week high. A recovery in the dollar today from early losses to moderate gains is pressuring metals prices. Also, higher T-note yields today are bearish for precious metals. Metals today initially moved higher after the August unemployment rate unexpectedly rose to a 1-1/2 year high, a dovish factor for Fed policy. Silver also garnered carryover support from a rally in copper prices to a 4-week high today on stronger-than-expected manufacturing news in China and the U.S., a sign of strength for industrial metals demand.
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.
