What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.45%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.54%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.45%.
Stocks are mostly lower today, although the Dow Jones Industrials bucked the trend and climbed to a 15-month high. A slump in Netflix and Tesla today weighed on technology stocks and the broader market. Netflix fell more than -8% after projecting weaker-than-expected Q3 revenue, and Tesla is down more than -6% after reporting lower-than-expected Q3 gross margins. A jump in bond yields is also weighing on stocks on signs of U.S. labor market strength after weekly jobless claims unexpectedly fell to a 2-month low.
By contrast, better-than-expected quarterly earnings results from Johnson & Johnson and International Business Machines pushed the Dow Jones Industrials higher.
U.S. weekly initial unemployment claims unexpectedly fell -9,000 to a 2-month low of 228,000, showing a stronger labor market than expectations of an increase to 240,000.
The U.S. July Philadelphia Fed business outlook survey rose +0.2 to -13.5, weaker than expectations of -10.0.
U.S. June existing home sales fell -3.3% m/m to a 5-month low of 4.16 million, weaker than expectations of 4.20 million.
U.S. June leading indicators fell-0.7% m/m, weaker than expectations of -0.6% m/m.
The markets are discounting the odds at 96% for a +25 bp rate hike at the next FOMC meeting on July 25-26. The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.
Global bond yields are higher. The 10-year T-note yield is up +9.2 bp at 3.841%. The 10-year German bund yield is up +3.9 bp at 2.477%. The 10-year U.K. Gilt yield is up +3.0 bp at 4.245%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.02%. China’s Shanghai Composite Index today closed down -0.92%. Japan’s Nikkei Stock Index closed down -1.23%.
Today’s stock movers…
Discover Financial Services (DFS) is down more than -14% to lead losers in the S&P 500 after it said it would suspend share buybacks and that it was in discussion with regulators over how it misclassified some of its credit cards.
Equifax (EFX) is down more than -9% after reporting Q2 operating revenue of $1.32 billion, below the consensus of $1.33 billion, and forecast Q3 revenue of $1.32 billion-$1.34 billion, weaker than the consensus of $1.35 billion.
Netflix (NFLX) is down more than -8% to lead losers in the Nasdaq 100 after reporting Q2 revenue of $8.19 billion, weaker than the consensus of $8.30 billion, and forecast Q3 revenue of $8.50 billion, below the consensus of $8.67 billion.
Tesla (TSLA) is down more than -6% in pre-market trading after reporting Q3 gross margins of 18.2%, below the consensus of 18.8%, and forecast full-year vehicle production of 1.80 million vehicles, below the consensus of 1.88 million.
Semiconductor stocks are under pressure after Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, cut its full-year revenue outlook and projected a 10% fall in sales this year, versus previous guidance for a single-digit decline. As a result, Applied Materials (AMAT), Advanced Micro Devices (AMD), and ASML Holding NV (ASML) are down more than -3%. Also, KLA Corp (KLAC), Globalfoundries (GFS), Microchip Technology (MCHP), Lam Research (LRCX), ON Semiconductor (ON), and NXP Semiconductors NV (NXPI) are down more than -2%
Genuine Parts (GPC) is down more than -5% after reporting Q2 net sales of $5.92 billion, weaker than the consensus of $5.93 billion.
Crown Castle (CCI) is down more than -5% after cutting its full-year FFO estimate to $3.30 billion-$3.33 billion from a previous estimate of $3.35 billion-$3.40 billion, below the consensus of $3.36 billion.
Zions Bancorp (ZION) is up more than +8% to lead gainers in the S&P 500 after reporting Q2 total deposits of $74.32 billion, well above the consensus of $68.49 billion.
Johnson & Johnson (JNJ) is up more than +5% to lead gainers in the Dow Jones Industrials after reporting Q2 sales of $25.53 billion, better than the consensus of $24.67 billion, and raising its full-year sales forecast to $98.9 billion-$99.8 billion from a prior view of $97.9 billion-$98.9 billion.
MarketAxess Holdings (MKTX) is up more than +5% after reporting Q2 EPS of $1,59, above the consensus of $1.58.
Abbott Laboratories (ABT) is up more than +4% after reporting Q2 net sales of $10.0 billion, better than the consensus of $9.73 billion.
Catalent (CTLT) is up more than +3% after Bloomberg News reported that Elliot Investment Management had built a significant stake in the company and is pushing for changes to the company’s board of directors.
International Business Machines (IBM) is up more than +2% after forecasting full-year revenue up +3% to +5%, better than the consensus of +2.89%.
Across the markets…
September 10-year T-notes (ZNU23) today are down -27 ticks, and the 10-year T-note yield is up +9.2 bp at 3.841%. Sep T-notes today dropped to a 1-week low after U.S. weekly jobless claims unexpectedly fell to a 2-month low, a hawkish factor for Fed policy. Also, expectations that the Fed will raise interest rates by +25 bp at next week’s FOMC meeting are weighing on T-note prices.
The dollar index (DXY00) today is up by +0.40%. The dollar today rallied to a 1-week high as bond yields jumped after U.S. weekly initial unemployment claims unexpectedly fell to a 2-month low. Also, a slump in stocks today boosted the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is down by -0.49%. A stronger dollar today has sparked long liquidation in the euro. Also, an easing of price pressures in Germany is dovish for ECB policy and negative for the euro after today’s news showed German June PPI rose at the smallest pace in 2-1/2 years.
The Eurozone July consumer confidence indicator rose +1.0 to a 17-month high of -15.1, stronger than expectations of -15.8.
German June PPI eased to +0.1% y/y from+1.0% y/y in May, the smallest pace of increase in 2-1/2 years.
USD/JPY (^USDJPY) is up by +0.37%. The yen today dropped to a 1-week low against the dollar and is under pressure from higher T-note yields. Also, today’s weaker-than-expected Japan trade news for June is bearish for the yen. Losses in the yen are limited as a slide in global equity markets boosted the safe-haven demand for the yen. Also, an upward revision to Japan’s Jun machine tool orders was bullish for the yen.
Japan trade data was weaker than expected as Jun exports rose +1.5% y/y, weaker than expectations of +2.4% y/y. Also, June imports fell -12.9% y/y, weaker than expectations of -11.3% y/y and the largest decline in 2-3/4 years.
Japan June machine tool orders were revised upward by +0.6 to -21.1% y/y from the initially reported -21.7% y/y.
August gold (GCQ3) today is down -7.2 (-0.36%), and Sep silver (SIU23) is down -0.132 (-0.52%). Precious metals prices this morning gave up an early advance and are moderately lower. Gold fell from a 1-1/2 month high, and silver dropped from a 2-1/4 month high and moved lower as a rally in the dollar today to a 1-week high sparked long liquidation in metals. Also, higher global bond yields today are weighing on metals prices. In addition, the ongoing fund liquidation of gold is weighing on gold as holdings in gold ETFs fell to a 3-1/4 year low on Wednesday. Losses are limited as today’s slide in global equity markets sparked some safe-haven demand for precious metals.
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.
