What you need to know…
The S&P 500 Index ($SPX) (SPY) Monday closed up +0.67%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.19%.
Stocks on Monday settled moderately higher. Strength in technology stocks Monday boosted the overall market, with Tesla closing up more than +10% after Mogan Stanley upgraded the stock. Also, Qualcomm closed up more than +3% after Apple extended its contract with the company to provide it with modem semiconductor chips for three more years. In addition, M&A activity supported stocks after JM Smucker agreed to acquire Hostess Brands for $5.6 billion. Higher T-note yields Monday limited gains in stocks.
Comments on Sunday from U.S. Treasury Secretary Yellen were bullish for stocks when she said she's "feeling very good" about the case for a soft landing in the U.S. as "every measure of inflation is on the road down," and she's increasingly confident that the U.S. will be able to contain inflation without major damage to the job market.
U.S. and European stocks garnered carryover support Monday from a +0.84% rally in China’s Shanghai Composite on positive Chinese credit and inflation news.
The markets are discounting the odds at 7% for a +25 bp rate hike at the September 20 FOMC meeting and 44% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields Monday moved higher. The 10-year T-note yield rose +1.6 bp to 4.280%. The 10-year German bund yield rose +2.8 bp to 2.638%. The 10-year UK gilt yield rose +4.8 bp to 4.472%.
Overseas stock markets on Monday settled mixed. The Euro Stoxx 50 closed up +0.40%. China’s Shanghai Composite Index closed up +0.84%. Japan’s Nikkei Stock Index closed down -0.43%.
China Aug CPI rose +0.1% y/y from a -0.3% y/y decline in July, right on expectations. China Aug PPI eased to -3.0% y/y from -4.4% y/y in July, weaker than expectations of -2.9% y/y.
China Aug new yuan loans were 1.36 trillion yuan, above expectations of +1.25 trillion yuan. Aug aggregate financing, the broadest measure of credit growth, rose +3.12 trillion yuan, stronger than expectations of +2.69 trillion yuan.
The European Commission cut its 2023 Eurozone GDP forecast to +0.8% from an earlier projection of +1.1%. It also cut its 2023 Eurozone inflation forecast to +5.6% from a previous forecast of +5.8%.
Today’s stock movers…
Tesla (TSLA) closed up more than +10% to lead gainers in the S&P 500 and Nasdaq 100 after Morgan Stanley upgraded the stock to overweight from equal weight and said Tesla’s Dojo supercomputer may add as much as $500 billion to the company’s market value through faster adoption of robotaxis and network services.
CVS Health Corp (CVS) closed up more than +4% after Wolfe Research projected that the company would regain its four-star quality rating on its Medicare Advantage contract for 2025 after losing it in 2024.
Qualcomm (QCOM) closed up more than +3% after Apple extended its modem chip contract with the company for three more years.
M&T Bank (MTB) closed up more than +3% after analysts said the company gave a positive update on its guidance at the Barclays Global Financial Services Conference.
Kenvue (KVUE) closed up more than +3% after Deutsche Bank raised its recommendation on the stock to buy with a price target of $27.
Dexcom (DXCM) closed up more than +2% after Bloomberg Intelligence said that the company generated $287 million in August for its continuous glucose monitoring devices, up +64% y/y, which positions the stock to beat Q3 earnings estimates.
Crinetics Pharmaceuticals (CRNX) closed up more than +63% after it said its oral, once-daily Paltusotine achieved positive results and met the primary endpoint and all secondary goals to treat people living with acromegaly and neuroendocrine tumors.
Hostess Brands (TWNK) closed up more than +19% after JM Smucker agreed to acquire the company for $5.6 billion.
RTX Corp (RTX) closed down more than -7% to lead losers in the S&P 500 after cutting its full-year sales forecast to $67.5 billion-$68.5 billion from a previous estimate of $73 billion-$74 billion, weaker than the consensus of $73.64 billion.
JM Smucker (SJM) closed down more than -7% after it agreed to acquire Hostess Brands for $5.6 billion.
Newell Brands (NWL) closed down more than -6% and added to last week’s -6% fall ahead of its demotion to the S&P SmallCap 600 Index from the S&P 500 due to take effect before the market opening on Sep 18.
VF Corp (VFC) closed down more than -6% after it was ordered to pay $505 million in taxes related to its reorganization of TBL Licensing LLC.
Ovintiv Inc (OVV) closed down more than -3% after announcing a sale of 15 million shares of the company’s common stock by a holder.
AstraZeneca Plc (AZN) closed down more than -2% after data released from a Phase III trial of its Tagrisso drug combined with chemotherapy showed the efficacy benefit of the drug came with a cost of added toxicity from the chemo regimen.
Evergy Inc (EVRG) closed down more than -2% after Wolfe Research downgraded the stock to peer perform from outperform.
Brunswick Corp (BC) closed down by more than -1% after JPMorgan Chase downgraded the stock to neutral from overweight.
Across the markets…
December 10-year T-notes (ZNZ23) on Monday closed down -4.5 ticks, and the 10-year T-note yield rose +1.6 bp to 4.280%. Dec T-notes on Monda posted moderate losses on negative carryover from a slump in Japanese government bonds. The 10-year JGB bond yield soared to a 9-1/2 year high Monday after BOJ Governor Ueda said an end to negative interest rates is possible by year-end. Also, an increase in inflation expectations weighed on T-notes after the 10-year inflation breakeven rate rose to a 2-week high Monday at 2.355%. In addition, a rally in stocks Monday curbed safe-haven demand for T-notes. Prices climbed from their worst levels on solid demand for the Treasury’s $44 billion auction of 3-year T-notes with a bid-to-cover ratio of 2.75, above the 10-auction average of 2.70.
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.
