The S&P 500 Index ($SPX) (SPY) today is down -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.28%.
US stocks today are slightly lower. Weak US housing news is weighing on stocks after US July housing starts and building permits fell more than expected to 4-year lows. Also, negative corporate news is undercutting stocks, with Applied Materials down more than -2% to lead chip stock lower after a disappointing Q4 sales forecast and Amcor Plc down more than -6% after reporting weaker-than-expected Q4 net sales.
However, stocks recovered from their worst levels today after the University of Michigan US Aug consumer sentiment index rose more than expected. Stocks are also seeing support from lower T-note yields, which fell on the weaker-than-expected US housing starts report and dovish Fed comments. Chicago Fed President Goolsbee said the US labor market and some leading indicators on the economy are flashing warning signs, and there are concerns unemployment will continue to rise. His comments suggest he will support a rate cut at the September 17-18 FOMC meeting.
US July housing starts fell -6.8% m/m to a 4-year low of 1.238 million, weaker than expectations of 1.333 million. July building permits, a proxy for future construction, fell -4.0% m/m to a 4-year low of 1.396 million, weaker than expectations of 1.425 million.
The University of Michigan US Aug consumer sentiment index rose +1.4 to 67.8, stronger than expectations of 66.9.
The University of Michigan US Aug 1-year inflation expectations were unchanged from July at 2.9%, stronger than expectations of 2.8%. Also, Aug 5-10 year inflation expectations were unchanged from July at 3.0%, stronger than expectations of 2.9%.
The market consensus is that Q2 earnings for the S&P 500 companies will rise +7.4% y/y. More than 80% of the companies in the S&P 500 have reported thus far. According to Bloomberg, most reporting companies have beaten their earnings consensus, but only 43% have beaten revenue expectations, the lowest percentage in five years.
The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 26% for a -50 bp rate cut at that meeting.
Overseas stock markets today are higher. The Euro Stoxx 50 rallied to a 2-week high and is up +0.62%. China's Shanghai Composite closed up +0.07%. Japan's Nikkei Stock 225 rose to a 2-week high and closed up sharply by +3.64%.
Interest Rates
September 10-year T-notes (ZNU24) today are up +3 ticks. The 10-year T-note yield is down -1.2 bp at 3.902%. Sep T-notes today are slightly higher on dovish comments from Chicago Fed President Goolsbee, who said the US labor market and some leading indicators on the economy are flashing warning signs. T-notes also garnered support from today’s decline in US July housing starts and building permits to 4-year lows, dovish factors for Fed policy.
T-note prices fell back from their best levels today when the University of Michigan US Aug consumer sentiment index rose more than expected. Also, the University of Michigan US Aug inflation expectations indicator was unchanged from July, stronger than expectations of a slight decline.
European government bond yields today are moving lower. The 10-year German bund yield is down -1.4 bp at 2.248%. The 10-year UK gilt yield is down -0.3 bp at 3.920%.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
US Stock Movers
Applied Materials (AMAT) is down more than -2% to lead losers in the Nasdaq 100 and pressure chip stocks after forecasting Q4 net sales of $6.53 billion to $7.33 billion, which was in line with the market consensus but disappointed investors hoping for a bigger payoff from AI spending. Also, Lam Research (LRCX) and KLA Corp (KLAC) are down more than -2%. In addition, Texas Instruments (TXN), Broadcom (AVGO), and ASML Holding NV (ASML) are down more than -1%.
Amcor Plc (AMCR) is down more than -6% to lead losers in the S&P 500 after reporting Q4 net sales of $3.54 billion, weaker than the consensus of $3.59 billion.
Energy stocks and energy service providers are moving lower due to today’s decline of more than -2% in WTI crude oil prices to a 1-week low. APA Corp (APA), Diamondback Energy (FANG), Schlumberger (SLB), ConocoPhillips (COP), and Devon Energy (DVN) are down more than -1%.
Pfizer (PFE) is down more than -2% after its Covid-flu vaccine co-developed with BioNTech SE missed one of its goals in a final stage trial.
Vistra Corp (VST) is down more than -1% on signs of insider selling after an SEC filing showed EVP Moore sold $2.79 million of shares on Tuesday.
Ulta Beauty (ULTA) is up more than +2%, adding to Thursday’s +11% surge after Berkshire Hathaway disclosed it took a new stake in the company.
Cisco Systems (CSCO) is up more than +2% to lead gainers in the Dow Jones Industrials after HSBC upgraded the stock to buy from hold with a price target of $58.
H&R Block (HRB) is up more than +18% after reporting Q4 revenue of $1.06 billion, stronger than the consensus of $1.05 billion, and forecasting 2025 revenue of $3.69 billion-$3.75 billion, above the consensus of $3.67 billion.
Coherent (COHR) is up more than +3% after reporting Q4 revenue of $1.31 billion, better than the consensus of $1.27 billion, and forecasting Q1 revenue of $1.27 billion-$1.35 billion, the midpoint above the consensus of $1.29 billion.
Fox Corp (FOXA) is up more than +1% after Wells Fargo Securities double-upgraded the stock to overweight from underweight with a price target of $46.
Earnings Reports (8/16/2024)
Flowers Foods Inc (FLO), Himalaya Shipping Ltd (HSHP), Madison Square Garden Entertainment Corp (MSGE).
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.
