Stocks Finish Higher Ahead of Nvidia’s Earnings

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.21%. 

US stock indexes closed moderately higher on Tuesday as they consolidated just below last week’s all-time highs.  Stock gains were limited Tuesday on comments from Fed Governor Waller and Atlanta Fed President Bostic, who said they favor waiting for inflation to decline before cutting interest rates.  A decline in T-note yields Tuesday was a supportive factor for equities.

Fed Governor Waller said he needs to see "several more" months of good inflation figures to begin interest rate cuts. 

Atlanta Fed President Bostic reiterated his view that inflation will continue to decline slowly and that the Fed can likely begin cutting interest rates in the fourth quarter.

The markets are looking ahead to Wednesday’s April 30-May 1 FOMC meeting minutes to see how close the Fed is to cutting interest rates.  Also, earnings results from Nvidia and Analog Devices will be examined on Wednesday to gauge the demand for semiconductor chips.  In addition, earnings results from big-box retailer Target will be scoured on Wednesday for clues to consumer spending.

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. 

The markets are discounting the chances for a -25 bp rate cut at 5% for the June 11-12 FOMC meeting and 25% for the following meeting on July 30-31.

Ethereum (^ETHUSD) on Tuesday rose more than +5% to a 2-month high, adding to Monday’s +13% rally on speculation the US will soon approve exchange-traded funds (ETFs) investing directly in Ether, the second-largest cryptocurrency token.  Bloomberg reported the US Securities and Exchange Commission (SEC) contacted at least one exchange and at least one potential spot-Ether ETF issuer to update related 19b-4 filings, a sign that odds for SEC approval may be rising. 

Overseas stock markets Tuesday settled lower.  The Euro Stoxx 50 fell to a 1-1/2 week low and closed down -0.54%. China's Shanghai Composite closed down -0.42%.  Japan's Nikkei Stock Index closed down -0.31%. 

Interest Rates

June 10-year T-notes (ZNM24) Tuesday closed up +4.5 ticks.  The 10-year T-note yield fell -3.1 bp to 4.412%.  June T-notes Tuesday moved higher on carryover support from strength in European government bonds.  Also, a rally in Canadian bonds kept T-note prices higher after Canada's Apr core CPI rose less than expected.  Gains in T-notes were limited after Fed Governor Waller and Atlanta Fed President Bostic said they favor waiting for inflation to decline before cutting interest rates.

European government bond yields today are moving lower.  The 10-year German bund yield is down -1.9 bp to 2.509%.  The 10-year UK gilt yield is down -1.8 bp to 4.150%.

Eurozone Q1 labor costs accelerated to +4.9% y/y from +3.4% y/y in Q4.

German Apr PPI eased to -3.3% y/y from -2.9% y/y in Mar, weaker than expectations of -3.1% y/y.

US Stock Movers

Tesla (TSLA) closed up more than +6% to lead gainers in the Nasdaq 100 as a coalition of Tesla shareholders are urging peers to reject a $56 billion pay package for CEO Musk and vote against the reelection of directors Kimbal Musk and James Murdoch, saying the board isn’t serving in the company’s best interests.   

Macy’s (M) closed up more than +5% after raising its full-year adjusted EPS estimate to $2.55-$2.90 from a previous estimate of $2.45-$2.85.

Eli Lilly (LLY) closed up more than +2% and posted a record high after receiving approval for its tirzepatide drug in China to treat type 2 diabetes.  It also formed a partnership with Atkis Oncology to develop tumor-targeting radiopharmaceuticals.

AstraZeneca Plc (AZN) closed up more than +2% after it said it expects to deliver $80 billion in total revenue by 2030 through “significant growth” in its existing oncology, biopharmaceuticals, and rare disease portfolio.   

International Business Machines (IBM) closed up more than +2% to lead gainers in the Dow Jones Industrials after it said it was expanding its partnership with Salesforce for AI and data ecosystems.

Lam Research (LRCX) closed up more than +2% after approving a $10 billion share repurchase authorization and a 10-for-1 stock split.

Progressive (PGR) closed up more than +1% after Morgan Stanley named the stock a “top pick” on attractive valuation. 

Nordson (NDSN) closed down more than -9% to lead losers in the S&P 500 after reporting Q2 sales of $650.6 million, weaker than the consensus of $661.4 million, and forecasting Q3 sales of $645 million-$670 million, well below the consensus of $705.3 million. 

Keysight Technologies (KEYS) closed down more than -8% after forecasting Q3 adjusted EPS of $1.30-$1.36, below the consensus of $1.45.

Walgreens Boots Alliance (WBA) closed down more than -6% to lead losers in the Nasdaq 100 after a Wall Street Journal article said the retail apocalypse in the US is catching up to national drugstore chains with Walgreens closing hundreds of stores. 

Cybersecurity stocks were under pressure Tuesday after Palo Alto Networks forecast Q4 billings of $3.43 billion-$3.48 billion, the midpoint below the consensus of $3.47 billion.  As a result, Palo Alto Networks (PANW) closed down more than -3%.  Also, Fortinet (FTNT) and Zscaler (ZS) closed down more than -1%. 

Amer Sports (AS) closed down more than -7% after forecasting a Q2 loss per share of -4 cents to -8 cents, a steeper loss than the consensus of -5 cents. 

AutoZone (AZO) closed down more than -3% after reporting Q3 comparable sales rose +1.9%, weaker than the consensus of +3.3%.

Globe Life (GL) closed down more than -2% after receiving a preliminary, informal inquiry from the SEC requesting information about recent short-seller reports making allegations about the company.

Earnings Reports (5/22/2024)

Analog Devices Inc (ADI), NVIDIA Corp (NVDA), Petco Health & Wellness Co Inc (WOOF), Snowflake Inc (SNOW), Synopsys Inc (SNPS), Target Corp (TGT), TJX Cos Inc/The (TJX), VF Corp (VFC), Williams-Sonoma Inc (WSM).

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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.