What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.50%.
U.S. stocks this morning are mixed. The broader market is finding support today on easing U.S. default concerns after the House late Wednesday passed a bill to raise the debt ceiling. Also, inflation concerns subsided and knocked T-note yields lower, which gave technology stocks a boost after the May U.S. ISM prices paid sub-index contracted at the steepest pace in 5 months. Market expectations for a +25 bp rate hike at the June 13-14 FOMC meeting fell to 28% this morning from 37% Wednesday afternoon.
The debt ceiling agreement struck by White House negotiators and Republican leaders last Saturday was passed by the House late Wednesday in a 314-117 vote. The bill now goes to the Senate for a possible vote later today.
U.S. stock indexes have carryover support from a rally in European stocks on an easing of inflation concerns after Eurozone May CPI slowed more than expected and posted its smallest increase in 15 months.
The U.S. May ADP employment change rose +278,000, stronger than expectations of +170,000.
U.S. weekly initial unemployment claims rose +2,000 to 232,000, showing a stronger labor market than expectations of 235,000.
U.S. Q1 nonfarm productivity was revised upward to -2.1% from -2.7%, better than expectations of -2.4%. Also, Q1 unit labor costs were revised downward to +4.2% from the initially reported +6.3%, better than expectations of +6.0%.
The U.S. May ISM manufacturing index fell -0.2 to 46.9, slightly weaker than expectations of 47.0. The May ISM prices paid sub-index fell -9.0 to 44.2, a bigger decline than expectations of 52.3 and the weakest level in 5 months.
Global bond yields are lower and are supportive of stocks. The 10-year T-note yield fell to a 2-week low of 3.563% and is down -4.0 bp at 3.603%. The 10-year German bund yield fell to a 2-1/2 week low of 2.230% and is down -2.3 bp at 2.259%, and the UK 10-year gilt yield fell to a 1-week low of 4.093% and is down -5.4 bp at 4.128%.
On the bullish side for stocks, NetApp is up more than +7% after reporting stronger-than-expected Q4 adjusted EPS. Also, Hormel Foods is up more than +6% after forecasting full-year EPS above consensus. In addition, Veeva Systems is up more than +11% after reporting stronger-than-expected Q1 revenue and raising its 2024 revenue forecast.
On the bearish side, Dollar General is down more than -19% after reporting Q1 comparable sales below consensus and lowering guidance on its 2024 comparable sales forecast. Also, Salesforce.com is down more than -4% after forecasting 2024 revenue below consensus. In addition, Lucid Group is down more than -15% after it said it was raising about $3 billion in a common stock offering.
Overseas stock markets are mostly higher. The Euro Stoxx 50 is up +0.76%. China’s Shanghai Composite closed unchanged, and Japan’s Nikkei Stock Index closed up +0.84%.
Today’s stock movers…
NetApp (NTAP) is up more than +7% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $1.54, stronger than the consensus of $1.34.
Hormel Foods (HRL) is up more than +6% after forecasting full-year EPS of $1.70-$1.82, the midpoint above the consensus of $1.74.
Match Group (MTCH) is up more than +6% on signs of insider buying after an SEC filing showed CEO Kim purchased $1.08 million worth of shares on Wednesday.
Pure Storage (PSTG) is up more than +17% after reporting Q1 revenue of $589.3 million, above the consensus of $560.6 million.
Veeva Systems (VEEV) is up more than +11% after reporting Q1 revenue of $526.3 million, above the consensus of $515.7 million, and raising its 2024 revenue forecast to $2.36 billion-$2.37 billion from a prior forecast of $2.35 billion-$2.36 billion.
Domino’s Pizza (DPZ) is up more than +2% after JPMorgan Chase upgraded the stock to overweight from neutral and said the stock is too cheap at current levels.
Nordstrom (JWN) is up more than +1% after reporting Q1 total revenue of $3.18 billion, better than the consensus of $3.12 billion.
Dollar General (DG) is down more than -19% to lead losers in the S&P 500 after reporting Q1 comparable sales rose +1.6%, below the consensus of +3.81%, and lowered guidance on its 2024 comparable sales forecast to +1% to +2% from a prior view of +3% to +3.5%, well below the consensus of +3.28%.
Salesforce.com (CRM) is down more than -4% to lead losers in the Dow Jones Industrials after forecasting 2024 revenue of $34.5 billion-$34.7 billion, the midpoint below the consensus of $34.63 billion.
Lucid Group (LCID) is down more than -15% to lead losers in the Nasdaq 100 after it said it was raising about $3 billion in a common stock offering.
Crowdstrike Holdings (CRWD) is down more than -2% after reporting better-than-expected Q1 EPS, but analysts noted a deceleration in billings growth that might weigh on the stock in the near term.
Okta Inc (OKTA) is down more than -20% after reporting better-than-expected Q1 EPS but noted weakness in the outlook for current remaining performance obligations as a concern.
Target (TGT) is down more than -2% after JPMorgan Chase downgraded the stock to neutral from overweight.
Advanced Auto Parts (AAP) is down more than -5% after JPMorgan Chase downgraded the stock to neutral from overweight, and Bank of America downgraded it to neutral from buy.
Across the markets…
September 10-year T-notes (ZNU23) today are up +10 ticks, and the 10-year T-note yield is down -5.5 bp at 3.587%. Sep T-notes this morning rallied to a 1-1/2 week high, and the 10-year T-note yield fell to a 2-week low of 3.563%. T-notes are climbing today on positive carryover from a rally in 10-year German bunds to a 2-1/2 week high. Also, inflation concerns receded and gave T-note prices a lift after the May ISM prices paid sub-index fell more than expected, and after the 10-yer breakeven inflation rate dropped to a 2-1/4 month low today of 2.148%. On the other hand, gains were limited after the May ADP employment change rose more than expected.
The dollar index (DXY00) today is down by -0.44% and slid to a 1-week low. A decline in T-note yields today is undercutting the dollar. The dollar is also under pressure after the May ISM manufacturing index contracted more than expected, which may prompt the Fed to pause its rate hike campaign. In addition, the action by the House to pass the debt ceiling agreement sparked a rally in stocks that has curbed the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is up by +0.37%. Dollar weakness today has sparked short covering in the euro. Also, hawkish comments today from ECB President Lagarde gave EUR/USD a boost when she said, "There is no clear evidence that underlying inflation in the Eurozone has peaked.” On the negative side was today’s report that showed a smaller-than-expected increase in Eurozone May CPI, which is dovish for ECB policy.
ECB President Lagarde said, "There is no clear evidence that underlying inflation in the Eurozone has peaked. We have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels."
Eurozone May CPI eased to +6.1% y/y from +7.0% y/y in Apr, weaker than expectations of +6.3% y/y and the slowest pace of increase in 15 months. Also, May core CPI eased to +5.3% y/y from +5.6% y/y in Apr, weaker than expectations of +5.5% y/y.
The Eurozone May S&P manufacturing PMI was revised upward by +0.2 to 44.8 from the initially reported 44.6.
The Eurozone Apr unemployment rate fell -0.1 to a record low 6.5% (data from 1998), right on expectations.
German Apr retail sales rose +0.8 m/m, the biggest increase in 5 months.
USD/JPY (^USDJPY) today is down by -0.34%. The yen today climbed to a 1-week high against the dollar. A slump in T-note yields today is bullish for the yen. Also, better-than-expected Japanese economic news today was supportive for the yen after Q1 capital spending ex-software posted its largest increase in nearly five years.
The Japan May Jibun Bank manufacturing PMI was revised downward by -0.2 to 50.6 from the initially reported 50.8.
Japan's Q1 capital spending ex-software rose +10.0% y/y, stronger than expectations of +3.7% y/y and the biggest increase in 4-3/4 years.
August gold (GCQ3) this morning is up +9.4 (+0.47%), and July silver (SIN23) is up +0.233 (+0.99%). Precious metals prices this morning climbed to 1-week highs and are moderately higher. Weakness in the dollar is bullish for metals as the dollar index today fell to a 1-week low. Also, lower global bond yields today are supportive of metals. However, gains in metals are limited by today’s stronger-than-expected ADP employment report, which was hawkish for Fed policy. Also, safe-haven demand for precious metals eased after the House passed an agreement to raise the debt ceiling.
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.
