What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.49%.
U.S. stock indexes this morning are mixed. Lower T-note yields today are supportive of stocks. However, a fall of more than -3% in Tesla is weighing on technology stocks and the Nasdaq 100 after it raised its 2023 capital expenditures target. This week's earnings from mega-cap technology stocks Amazon.com, Microsoft, and Meta Platforms will be parsed for insights into the effect of higher borrowing costs and a struggling economy.
The U.S. Apr Dallas Fed manufacturing activity index unexpectedly fell -7.7 to a 9-month low of -23.4, weaker than expectations of an increase to -12.0.
Lower T-note yields this morning are providing underlying support for stocks. The markets are showing a 92% chance of a 25 bp rate hike by the Federal Reserve at the May 2-3 FOMC meeting and have fully priced in a 25 bp rate hike by the ECB at its May 4 ECB meeting.
Global bond yields are mixed. The 10-year T-note yield is down -5.9 bp at 3.513%. The 10-year German bund yield is up +0.4 bp at 2.485%. The 10-year UK gilt yield is up +0.3 bp at 3.761%.
On the bearish side for stocks, Tesla is down more than -3% after raising its 2023 capex forecast to $7 billion-$9 billion from a January forecast of $6 billion-$8 billion. Also, U.S.-listed Chinese stocks are falling today on rising geopolitical tensions, with President Biden planning an executive order to limit American business investment in parts of China’s economy. In addition, KeyCorp is down more than -2% after Moody’s Investors Service late Friday cut its outlook on the stock to negative from stable.
On the positive side, First Republic Bank is up more than +7% on short covering ahead of the company’s Q1 earnings results that will be released after today’s close. Also, recently beaten-down managed healthcare stocks are climbing today on bargain hunting.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.09%. China’s Shanghai Composite closed down -0.78%, and Japan’s Nikkei Stock Index closed up +0.10%.
Today’s stock movers…
First Republic Bank (FRC) is up more than +6% to lead gainers in the S&P 500 on short covering ahead of the company’s Q1 earnings results that will be released after today’s close.
Recently beaten down managed healthcare stocks are climbing today on bargain hunting. Elevance Health (ELV), HCA Healthcare (HCA), Centene (CNC), and Molina Healthcare (MOH) are up more than +2%. Also, Universal Health Services (UHS), Humana (HUM), and Cigna Group (CI) are up more than +1%.
Medtronic Plc (MDT) is up more than +3% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $100, saying the FDA’s approval of its insulin pump is a “major milestone” for the firm.
Crinetics Pharmaceuticals (CRNX) is up more than +2% after Piper Sandler initiated coverage of the stock with an overweight rating and a price target of $56.
PPG Industries (PPG) is up nearly +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $156.
Tesla (TSLA) is down more than -3% to lead losers in the Nasdaq 100 after raising its 2023 capex forecast to $7 billion-$9 billion from a January forecast of $6 billion-$8 billion.
U.S. listed Chinese stocks are falling today on rising geopolitical tensions, with President Biden planning an executive order to limit investment in parts of China’s economy by American businesses. PDD Holdings (PDD) is down more than -3% to lead losers in the Nasdaq 100. Also, JD.com (JD) is down more than -2%. In addition, Alibaba Group Holding (BABA) and Baidu (BIDU) are down more than -1%.
KeyCorp (KEY) is down more than -2% after Moody’s Investors Service late Friday cut its outlook on the stock to negative from stable. Other regional bank stocks fell on the news, with Zions Bancorp (ZION) down more than -2% and Comerica (CMA), US Bancorp (USB), and Huntington Bancshares (HBAN) down more than -1%.
Viatris (VTRS) fell more than -2% in pre-market trading after Barclays downgraded the stock to equal weight from overweight.
Across the markets…
June 10-year T-notes (ZNM23) today are up +13 ticks, and the 10-year T-note yield is down -5.9 bp at 3.513%. This morning’s weaker-than-expected Dallas Fed report was supportive of T-note prices. Last Friday’s Weekly Commitment of Traders (COT) data showed that hedge funds boosted their net short positions on 10-year Treasury note futures to a record 1.29 million contracts the week ending April 18. Additional gains in T-notes may be limited by supply pressures, with the Treasury scheduled to auction $144 billion of T-notes and floating-rate notes this week, beginning with Tuesday’s $42 billion auction of 2-year T-notes.
The dollar index (DXY00) today is down by -0.19% and fell to a 1-week low. The dollar is under pressure today from weaker T-note yields. Also, hawkish ECB comments today boosted EUR/USD to a 1-week high and undercut the dollar.
EUR/USD (^EURUSD) today is up by +0.28% and posted a 1-week high. A larger-than-expected increase today in the German Apr IFO business climate index to a 14-month high gave the euro a boost. Also, hawkish comments today from ECB Governing Council member Wunsch sparked gains in EUR/USD when he said the ECB would only agree to halt interest rate increases once wage growth starts to fall.
The German Apr IFO business climate index rose +0.4 to a 14-month high of 93.6, stronger than expectations of 93.4.
ECB Governing Council member Wunsch said we are "not seeing" inflation going in the right direction yet, and the ECB will only agree to halt interest rate increases once wage growth starts to fall. "We are waiting for wage growth and core inflation to go down, along with headline inflation, before we can arrive at the point where we can pause."
USD/JPY (^USDJPY) today is up by +0.36%. The yen is moving lower today on comments from BOJ Governor Ueda that downplayed expectations of a shift in BOJ policy at this week’s meeting when he said the BOJ is not at a stage to talk about how to normalize YCC and that premature talk on tweaking YCC could confuse the markets. Losses in the yen today are contained due to a decline in T-note yields.
June gold (GCM3) this morning is down -2.9 (-0.15%), and May silver (SIK23) is down -0.003 (-0.01%). Precious metals prices this morning are moderately lower. The prospect of additional rate hikes from global central banks is undercutting precious metals prices. ECB Governing Council member Wunsch said the ECB would only agree to halt interest rate increases once wage growth starts to fall. Silver is also under pressure on negative carryover from a slump in iron ore prices today to a 4-month low and a drop in copper prices to a 2-1/2 week low. A weaker dollar and lower T-note yields today are limiting declines in metals 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.
