The S&P 500 Index ($SPX) (SPY) today is down by -1.52%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -1.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -1.49%.
Stocks are under pressure today, with the Dow Jones Industrials falling to a 4-week low. Today’s as-expected US consumer price report is weighing on stocks after US core consumer prices in August rose +3.2% y/y, unchanged from July and well above the Fed’s +2.0% target. The stickiness of core prices boosted T-note yields and knocked the chances of a 50 bp rate cut at next week’s FOMC meeting down to 19% from 50% after the release of last Friday’s US payroll report. The weakness in bank stocks and health insurers today also weighed on the overall market.
US MBA mortgage applications rose +1.4% in the week ended September 6, with the purchase mortgage sub-index up +1.8% and the refinancing mortgage sub-index up +0.9%. The average 30-year fixed rate mortgage fell -14 bp to a 19-month low of 6.29% from 6.43% in the prior week.
US Aug CPI eased to +2.5% y/y from +2.9% y/y in July, right on expectations and the smallest increase in 3-1/2 years. However, Aug CPI ex-food and energy was unchanged from July at +3.2% y/y, right on expectations.
In the wake of last night’s debate, the odds on the betting website PredictIt of Vice President Harris winning the presidency rose to 56% from 53% before the debate.
The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 19% for a -50 bp rate cut at that meeting.
Overseas stock markets today are lower. The Euro Stoxx 50 is down -0.04%. China's Shanghai Composite fell to a 7-month low and closed down -0.82%. Japan's Nikkei Stock 225 closed down by -1.49%.
Interest Rates
December 10-year T-notes (ZNZ24) today are up by +5 ticks. The 10-year T-note yield is down -2.1 bp at 3.622%. Dec T-notes today rallied to a 15-month high, and the 10-year T-note yield fell to a 15-month low of 3.603%. Strength in European government bonds today is providing carryover support to T-notes. Also, today’s slide in stocks has boosted safe-haven demand for T-notes.
T-notes fell back from their best levels after the US Aug core CPI rose +3.2% y/y, right on expectations but well above the Fed’s 2.0% price target. The core CPI report knocked the chances of a 50 bp rate cut at next week’s FOMC meeting down to 17% from 50% last Friday. Supply pressures are also negative for T-notes as the Treasury will auction $39 billion 10-year T-notes later today. Losses in T-notes are limited due to carryover support from
European government bond yields today are moving lower. The 10-year German bund yield fell to a 5-week low of 2.092% and is down -3.8 bp at 2.093%. The 10-year UK gilt fell to a 5-week low of 3.745% and is down -7.1 bp at 3.748%.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
US Stock Movers
Bank stocks are under pressure for a second day after JPMorgan Chase President Pinto said Tuesday that analysts are too optimistic in projecting next year's expenses and net interest income. As a result, Discover Financial Services (DFS) is down more than -4%. Also, Capital One Financial (COF), Regions Financial (RF), Citizens Financial Group (CFG), Cincinnati Financial Corp (CINF), and M&T Bank (MTB) are down more than -3%.
Health insurance stocks with Medicare Advantage plans are falling for a second day after Leerink Partners published a report Tuesday that said those plans might have a tougher time earning high-quality “star ratings” that drive bonus payments. As a result, Humana (HUM) is down more than -5% to lead losers in the S&P 500, and UnitedHealth Group (UNH) is down more than -2% to lead losers in the Dow Jones Industrials. Also, CVS Health Corp (CVS) is down more than -3%, and Elevance Health (ELV) is down more than -1%.
Albemarle (ALB) is up more than +8% to lead gainers in the S&P 500 as lithium stocks rallied after UBS said CATL curtailed lithium production at its Jiangxi operation.
Starbucks (SBUX) is up more than +1% to lead gainers in the Nasdaq 100 after CEO Niccol said he is open to exploring a new joint venture partnership structure in China.
Trump Media & Technology (DJT) is down more than -14% following last night’s Harris-Trump debate, as the odds on the betting website PredictIt of Vice President Harris winning the presidency rose to 56% from 53% before the debate.
GameStop (GME) is down more than -16% after reporting Q2 net sales of $798.3 million, weaker than the consensus of $895.5 million.
Palantir Technologies (PLTR) is down more than -2% after a trading update showed exchange-traded funds managed by Cathie Wood’s Ark Investment Management sold 124,626 shares of Palantir.
Rollins Inc (ROL) is down more than -4% on negative carryover from a -20% plunge in peer Rentokil after it issued a surprise downgrade to its full-year growth estimates.
Morgan Stanley (MS) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy.
Viridian Therapeutics (VRDN) is up more than +8% after Needham & Co. raised its price target on the stock to $48 from $30.
AES Corp (AES) is up more than +4% after Jeffries initiated coverage on the stock with a recommendation of buy and a price target of $20.
Viking Therapeutics (VKTX) is up more than +7% after JPMorgan Chase initiated coverage on the stock with a recommendation of overweight and a price target of $80.
William-Sonoma (WSM) is up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $156.
Earnings Reports (9/11/2024)
Designer Brands Inc (DBI), Oxford Industries Inc (OXM), Vera Bradley Inc (VRA).
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.
