The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.25%.
Stock indexes on Wednesday posted modest gains. FedEx rose more than +15% after reporting better-than-expected Q4 adjusted EPS and forecasting 2025 adjusted EPS above consensus. Also, Amazon.com closed up more than +3% after announcing plans to launch an online storefront for low-priced apparel and home goods.
Stock gains were limited Wednesday from higher bond yields after hawkish comments from Fed Governor Bowman pushed the 10-year T-note yield up to a 1-1/2 week high and dampened expectations for Fed rate cuts this year. Bond yields rose after Fed Governor Bowman said that inflation would remain inflated for some time, so it is not yet appropriate for the Fed to cut interest rates.
US May new home sales fell -11.3% m/m to a 6-month low of 619,000, weaker than expectations of 633,000.
US MBA mortgage applications rose +0.8% in the week ended June 21. The purchase mortgage sub-index rose +1.2%, and the refinancing mortgage sub-index fell -0.1%. The average 30-year fixed rate mortgage fell -1 bp to 6.93% from 6.94%.
The markets are awaiting Friday’s release of the US May core PCE deflator, the Fed’s preferred inflation gauge, to see if price pressures are abating, which could pave the way for the Fed to begin cutting interest rates. The consensus is that the May core PCE deflator eased to +2.6% y/y from +2.8% y/y in April.
The markets are discounting the chances for a -25 bp rate cut at 10% for the next FOMC meeting on July 30-31 and 59% for the following meeting on September 17-18.
Generally positive Q1 earnings results are supportive of stocks. Q1 earnings are expected to climb +7.1% y/y, well above the pre-earnings season estimate of +3.8%. According to data compiled by Bloomberg Intelligence, about 81% of reporting S&P 500 companies have beaten Q1 earnings estimates.
Overseas stock markets Wednesday settled mixed. The Euro Stoxx 50 fell back from a 1-1/2 week high and closed down -0.41%. China's Shanghai Composite recovered from a 4-month low and closed up +0.76%. Japan's Nikkei Stock 225 Index climbed to a 2-1/2 month high and closed up +1.26%.
Interest Rates
September 10-year T-notes (ZNU24) Wednesday closed down -17 ticks. The 10-year T-note yield rose +6.8 bp to 4.316%. Sep T-notes Wednesday fell to a 1-1/2 week low, and the 10-year T-note yield rose to a 1-1/2 week high of 4.318%. T-notes were under pressure Wednesday on hawkish comments from Fed Governor Bowman, who said that inflation will remain inflated for some time, so it is not yet appropriate for the Fed to cut interest rates. Also, an increase in inflation expectations undercut T-notes after the 10-year breakeven inflation rate climbed to a 2-week high Wednesday of 2.264%. T-notes dropped to their lows Wednesday afternoon on weak demand for the Treasury’s $70 billion of 5-year T-notes that had a bid-to-cover ratio of 2.35, below the 10-auction average of 2.42.
European government bond yields today are moving higher. The 10-year German bund yield rose to a 1-1/2 week high of 2.457% and finished up +4.1 bp at 2.452%. The 10-year UK gilt yield rose to a 1-1/2 week high of 4.140% and finished up +5.3 bp at 4.132%.
The German July GfK consumer confidence index unexpectedly fell -0.8 to -21.8 versus expectations of an increase to -19.5.
ECB Governing Council member Rehn said investor expectations for the ECB to cut interest rates twice more this year "are reasonable expectations."
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 9% for the July 18 meeting and 67% for the September 12 meeting.
US Stock Movers
FedEx (FDX) closed up +15% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $5.41, better than the consensus of $5.34, and forecasting 2025 adjusted EPS of $20.00-$22.00, the midpoint above the consensus of $20.85. Other shippers gained on the news, with United Parcel Service (UPS) closing up more than +3%, and Old Dominion Freight Line (ODFL) and JB Hunt Transport Services (JBHT) closing up +1%.
Amazon.com (AMZN) closed up more than +3% to lead gainers in the Dow Jones Industrials after announcing plans to launch an online storefront for low-priced apparel and home goods.
Campbell Soup (CPB) closed up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $52.
Whirlpool (WHR) closed up more than +16% after Reuters reported that Robert Bosch GmbH is considering an offer for the company.
Apple (AAPL) closed up more than +1% after Rosenblatt Securities upgraded the stock to buy from neutral with a price target of $260.
Vista Outdoor (VSTO) closed up more than +9% after MNC Capital Partners said it increased its all-cash offer to buy the company to $42 per share, or approximately $3.2 billion.
Rivian Automotive (RIVN) closed up more than +23% after Volkswagen said it plans to establish a joint venture and invest $5 billion in the company.
Moderna (MRNA) closed down more than -10% to lead losers in the S&P 500 and Nasdaq 100 after new data showed the efficacy of its RSV vaccine fell sharply in the second year and was lower than that of rival vaccines.
Aptiv Plc (APTV) closed down more than -7% after Piper Sandler downgraded the stock to underweight from neutral with a price target of $63.
Paychex (PAYX) closed down more than -6% after CEO Gibson said in an earnings call that his company continues to face a challenging operating environment due to complex regulations, a tight labor market, and inflation.
General Mills (GIS) closed down more than -4% after reporting Q4 net sales of $4.71 billion, below the consensus of $4.87 billion, and forecast 2025 organic net sales of 0% to +1%, weaker than the consensus of +1.18%.
Worthington Enterprises (WOR) closed down more than -3% after reporting Q4 net sales of $318.8 million, well below the consensus of $353 million.
Earnings Reports (6/27/2024)
Accolade Inc (ACCD), Acuity Brands Inc (AYI), Apogee Enterprises Inc (APOG), Lindsay Corp (LNN), McCormick & Co Inc/MD (MKC), NIKE Inc (NKE), Simply Good Foods Co/The (SMPL), SunPower Corp (SPWR), Walgreens Boots Alliance Inc (WBA).
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.
