Stocks Mixed Ahead of Triple Witching

The S&P 500 Index ($SPX) (SPY) today is down -0.31%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.46%.

Stock indexes today are mostly lower.  The broader market is lower on concerns about the Eurozone economy that has sparked a risk-off mood in asset markets after today’s news that the Eurozone June S&P manufacturing PMI unexpectedly fell to a 6-month low.

Today’s US S&P PMI reports showed that the US economy continuing to expand, which is positive for corporate profits but may prompt the Fed to delay interest rate cuts.  The US June S&P manufacturing PMI unexpectedly rose +0.4 to 51.7, stronger than expectations of a decline to 51.0.  Also, the June S&P services PMI unexpectedly rose +0.3 to a 2-year high of 55.1, stronger than expectations of a decline to 54.0.

Stock volatility may be excessive today due to the triple-witching event, when derivatives contracts tied to equities, index options, and futures mature, which prompts traders to roll over their existing positions or start new ones.  According to options platform SpotGamma, about $5.5 trillion of positions are set to expire today.

The markets are discounting the chances for a -25 bp rate cut at 10% for the next FOMC meeting on July 30-31 and 64% 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 today are lower.  The Euro Stoxx 50 is down -0.86%.  China's Shanghai Composite fell to a 2-3/4 month low and closed down -0.24%.  Japan's Nikkei Stock 225 Index closed down -0.09%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +6 ticks.  The 10-year T-note yield is down -3.3 bp at 4.226%.  Today, T-notes are moderately higher on carryover support from rallies in European government bonds following weaker-than-expected Eurozone PMI reports.  T-notes fell back from their best levels after the US Jun S&P manufacturing and services PMIs unexpectedly rose.

European government bond yields today are moving lower.  The 10-year German bund yield is down -5.9 bp to 2.372%.  The 10-year UK gilt yield fell to a 2-1/2 month low of 3.998% and is down -0.8 bp to 4.049%. 

The Eurozone June S&P manufacturing PMI unexpectedly fell -1.7 to a 6-month low of 45.6, weaker than expectations of an increase to 47.9.  The June S&P composite PMI unexpectedly fell -1.4 to 50.8, weaker than expectations of an increase to 52.5.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 6% for the July 18 meeting and 59% for the September 12 meeting.

US Stock Movers

Micron Technology (MU) is down more than -5% to lead losers in the S&P 500 and Nasdaq 100 after Aletheia Capital Limited downgraded the stock to hold from buy.

Nvidia (NVDA) is down more than -2% to lead chip stocks lower as it corrects lower from a record high on Thursday.  Other chip stocks are also sliding, with Applied Materials (AMAT), Broadcom (AVGO), Qualcomm (QCOM), Marvell Technology (MRVL), and ASML Holding NV (ASML) down more than -1%.

Palantir (PLTR) is down more than -3% after Monness, Crespi, Hardt & Co. downgraded the stock to sell from neutral with a price target of $20.

LendingTree (TREE) is down more than -2% on a report that said hackers are selling data about consumers of its QuoteWizard subsidiary after it detected unauthorized access on a cloud database hosted by Snowflake. 

CME Group (CME) is down more than -1% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $187.

Smith & Wesson Brands (SWBI) is down more than -8% after it said in a conference call that it expects Q1 sales to be down approximately 10% y/y. 

Northop Grumman (NOC) is down more than -1% after Bernstein downgraded the stock to market perform from outperform. 

Gilead Sciences (GILD) is up more than +5% to lead gainers in the S&P 500 and Nasdaq 100.  Gilead today added to Thursday’s 8% rally after announcing a Phase 3 Purpose 1 trial of its lenacapavir drug showed 100% efficacy in the prevention of HIV in cisgender women. 

FactSet Research Systems (FDS) is up more than +3% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $4.37, stronger than the consensus of $3.91.

CarMax (KMX) is up more than +2% after reporting Q1 EPS of 97 cents, better than the consensus of 96 cents.

Sarepta Therapeutics (SRPT) is up more than +33% after the US Foos and Drug Administration (FDA) approved expanded use of the company’s Elevidys gene therapy to treat children aged four and above with Duchenne muscular dystrophy. 

Spirit AeroSystems (SPR) is up more than +4% after Reuters reported that Boeing is nearing a deal to buy the company. 

Alcoa (AA) is up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $50. 

Earnings Reports (6/21/2024)

3D Systems Corp (DDD), Avid Bioservices Inc (CDMO), CarMax Inc (KMX), DZS Inc (DZSI), FactSet Research Systems Inc (FDS), Methode Electronics Inc (MEI).

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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.