What you need to know…
The S&P 500 Index ($SPX) (SPY) Monday closed up +0.69%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.65%.
Stocks on Monday settled mostly higher on a rally led by chip stocks and the technology sector. Also, cybersecurity stocks rose after Palo Alto Networks forecast stronger-than-expected full-year billings. In addition, an increase in M&A activity was bullish for stocks after Permian Resources acquired Earthstone Energy in a deal valued at $4.5 billion.
Johnson & Johnson fell more than -2% Monday to hold the Dow Jones Industrials in negative territory. Also, stocks were under pressure from higher bond yields after the 10-year T-note yield rose to a 16-year high.
Global equity markets had some negative carryover from a fall in China’s Shanghai Composite Stock Index to a 7-1/2 month low Monday on economic concerns after Chinese banks cut their prime loan rates less than expected.
In consultation with state-owned commercial banks, the People's Bank of China (PBOC) cut the 1-year loan prime rate by -10 bp to 3.45%, a smaller cut than expectations of -15 bp to 3.40%. Also, the 5-year loan prime rate was left unchanged at 4.20% versus expectations for a -15 bp cut to 4.05%.
The markets are discounting the odds at 12% for a +25 bp rate hike at the September 20 FOMC meeting and at 45% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields Monday moved higher. The 10-year T-note yield jumped to a 16-year high of 4.352% and finished up +8.1 bp at 4.336%. The 10-year German bund yield rose +8.1 bp to 2.703%. The 10-year UK gilt yield rose +5.4 bp to 4.729%.
Overseas stock markets on Monday settled mixed. The Euro Stoxx 50 closed up +0.28%. China’s Shanghai Composite Index closed down -1.24%. Japan’s Nikkei Stock Index closed up +0.37%.
Today’s stock movers…
Cybersecurity stocks moved higher Monday after Palo Alto Networks forecast 2024 billing of $10.9 billion-$11.0 billion, stronger than the consensus of $10.77 billion. As a result, Palo Alto Networks (PANW) closed up more than +14% to lead gainers in the S&P 500 and Nasdaq 100. Also, CrowdStrike Holdings (CRWD) and Zscaler (ZS) closed up more than +4%, and Fortinet (FTNT) closed up more than +1%.
Moderna (MRNA) closed up more than +9% after a weekend article in Barron’s said the company’s big cash position and recent decline make it an appealing buy.
Nvidia (NVDA) closed up more than +8% to lead chip stocks higher after KeyBanc Capital Markets raised its price target on the stock to $620 from $550. Also, Applied Materials (AMAT), Broadcom (AVGO), and Marvell Technology (MRVL) closed up more than +4%. In addition, Advanced Micro Devices (AMD), NXP Semiconductors NV (NXPI), KLA Corp (KLAC), Lam Research (LRCX), and ON Semiconductor (ON) closed up more than +2%.
SentinelOne (S) closed up more than +16% on a report from Reuters that said the company has been exploring strategic options that could include a sale.
Earthstone Energy (ESTE) closed up more than +16% after Permian Resources acquired the company in a deal valued at $4.5 billion.
Sculptor Capital Management (SCU) closed up more than +5% after it said 70 potential buyers had contacted its advisers after it disclosed that it was pursuing strategic options.
VMware (VMW) closed up more than +4% after Broadcom said it expects its acquisition of the company will close Oct 30 after the UK CMA gave its final transaction approval.
Insulet (PODD) closed down more than -4% to lead losers in the S&P 500 after Baird downgraded the stock to neutral from outperform and cut its price target on the stock to $219 from $320.
Estee Lauder (EL) closed down more than -3% after Evercore ISI cut its price target on the stock to $200 from $250.
Johnson & Johnson (JNJ) closed down more than -2% to lead losers in the Dow Jones Industrials after it said it plans to accept only 23.8% of its shares swapped for Kenvue stock, below consensus for 25% to 30% of stock exchanged. J&J split its consumer healthcare business named Kenvue into a new publicly traded company.
Newell Brands (NWL) closed down more than -2% after Moody’s downgraded the company’s long-term corporate debt rating to Ba2 from Ba1.
Napco Security Technologies (NSSC) closed down more than -45% after it said it would have to restate three quarters of financial statements.
Deere & Co (DE) closed down more than -1% after Stifel cut its price target on the stock to $460 from $493.
Across the markets…
September 10-year T-notes (ZNU23) Monday closed down -18 ticks, and the 10-year T-note yield rose +8.1 bp to 4.336%. Sep T-notes Monday sold off to a 10-month nearest-futures low, and the 10-year T-note yield rose to a 16-year high of 4.352%. Higher European government bond yields Monday pressured T-note prices. Also, Monday’s strength in stocks curbed the safe-haven demand for T-notes. In addition, speculation that Fed Chair Powell will remain hawkish when he speaks Friday at the Fed’s annual symposium in Jackson Hole, Wyoming, weighed on T-note prices.
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.
