Stocks Moderately Higher on Soft U.S. Inflation and Labor Market News

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.55%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.24%.

U.S. stock indexes this morning are moderately higher after today’s U.S. PPI and unemployment claims reports were dovish for Fed policy.  The markets are currently pricing in a 74% chance of a 25 bp rate hike at the upcoming May 2-3 FOMC meeting.

The U.S. Mar final-demand PPI eased to +2.7% y/y from +3.9% y/y in Feb, weaker than expectations of +3.0% y/y and the weakest report in more than two years.  Mar PPI ex-food and energy eased to +3.4% y/y from +4.8% y/y, right on expectations and the weakest report in 2 years.

U.S. weekly initial unemployment claims rose +11,000 to 239,000, showing a weaker labor market than expectations of 235,000. However, weekly continuing claims unexpectedly fell -13,000 to 1.810 million, showing a stronger labor market than expectations of an increase to 1.833 million.

Stocks are awaiting Q1 earnings reporting season, which kicks off Friday with earnings results from big U.S. banks, including Citigroup, JPMorgan Chase, and Wells Fargo. 

On the bullish side for stocks, mega-cap technology stocks are climbing today and supporting the overall market.  Also, mining stocks are moving higher after the price of gold today climbed to a 13-month high.  In addition, Enphase Energy, Booking Holdings, and VF Corp are up +1% or more after being upgraded.

On the bearish side, Progressive is down more than -6% after reporting below-consensus Q1 net premiums earned.  Also, industrial stocks are under pressure after Fastenal reported March daily sales growth that was weaker than in previous months.  In addition, Sportsman’s Warehouse Holdings is down more than -19% after reporting weaker-than-expected Q4 net sales and forecasting Q1 net sales below consensus.

Global bond yields are slightly lower.  The 10-year T-note yield is down -1.5 bp at 3.376%. The 10-year German bund yield is down -0.4 bp at 2.365%, and the 10-year UK gilt yield is down -2.3 bp at 3.547%.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.59%.  China’s Shanghai Composite closed down -0.27%, and Japan’s Nikkei Stock Index closed up +0.26%. 

Today’s stock movers…

Newmont (NEM) is up more than +3%, and Freeport-McMoRan (FCX) is up more than +2% as mining stocks rally after the gold price today climbed to a 13-month high. 

A decline in bond yields today is fueling gains in mega-cap technology stocks.  Alphabet (GOOGL), Amazon.com (AMZN), Meta Platforms (META), and Tesla (TSLA) are up more than +2%.  Also, Apple (AAPL) is up more than +1% to lead gainers in the Dow Jones Industrials.

Booking Holdings (BKNG) is up more than +2% after Argus Research raised its price target on the stock to $3,000 from $2,800.

Crispr Therapeutics (CRSP) is up more than +13% after Cantor Fitzgerald initiated coverage of the stock with a recommendation of overweight. 

VF Corp (VFC) is up more than +1% after Edward Jones upgraded the stock to buy from hold.

Progressive (PGR) is down more than -6% to lead losers in the S&P 500 after reporting Q1 net premiums earned of $13.53 billion, below the consensus of $13.58 billion.

Industrial stocks are moving lower, with Fastenal (FAST) down more than -3% to lead losers in the Nasdaq 100 after reporting March daily sales growth of 6.8%, weaker than previous months.  Also, Parker-Hannifin (PH) and WW Grainger (GWW) are down more than -3%.  In addition, Old Dominion Freight Line (ODFL) and Ingersoll Rand (IR) are down more than -2%.

Utility stocks are under pressure today.  American Electric Power (AEP), Atmos Energy (ATO), Entergy (ETR), NiSource (NI), and Xcel Energy (XEL) are down more than -1%.  Also, Exelon (EXC)  and Constellation Energy (CEG) are down -1%. 

Sportsman’s Warehouse Holdings (SPWH) is down more than -19% after reporting Q4 net sales of $379.3 million, weaker than the consensus of $379.8 million, and forecasting Q1 net sales of $265 million-$270 million, well below the consensus of $324.5 million.

LyondellBasell Industries (LYB) is down more than -3% after Jeffries downgraded the stock to hold from buy.

Across the markets…

June 10-year T-notes (ZNM23) today are up +3 ticks, and the 10-year T-note yield is down -1.5 bp at 3.376%.  T-notes recovered from overnight losses and moved higher this morning after U.S. Mar producer prices rose less than expected and weekly U.S. initial jobless claims rose more than expected.   Supply pressures are limiting gains in T-notes as the Treasury will auction $18 billion of re-opened 30-year T-bonds today as part of this week’s $90 billion T-notes and T-bonds auction package.

The dollar index (DXY00) today is down by -0.54%.  The dollar today moved lower for the third straight session and posted a 10-week low.  Today’s U.S. PPI and initial unemployment claims reports were dovish for Fed policy and weighed on the dollar.  Also, the strength in stocks today is reducing liquidity demand for the dollar.

EUR/USD (^EURUSD) today is up by +0.67% and posted a 1-year high. Today’s U.S. PPI and initial unemployment claims reports battered the dollar and gave the euro a boost.  Also, central bank divergence is giving EUR/USD a boost on speculation the Fed may be close to ending its rake-hike campaign while the ECB continues to raise interest rates. 

Today’s Eurozone economic news supported the euro after Eurozone Feb industrial production rose +1.5% m/m, stronger than expectations of +1.0% m/m and the largest increase in 6 months.

USD/JPY (^USDJPY) today is down by -0.83%.  The yen is moving higher today on a decline in T-note yields. Also, a surge in foreign demand for Japanese stocks is bullish for the yen after the Ministry of Finance reported that overseas funds bought a net 2.4 trillion yen ($18 billion) of Japanese stocks in the week ending April 7, the highest amount for a weekly period ever.

June gold (GCM3) this morning is up +32.4 (+1.60%), and May silver (SIK23) is up +0.527 (+2.07%).  Precious metals prices this morning are moderately higher, with gold posting a 13-month high and silver prices posting an 11-3/4 month high.  A slump in the dollar today to a 10-week low is bullish for metals prices. Metals also gained on today’s dovish U.S. economic reports.  In addition, gold has support on strong demand from fund buying as gold holdings in exchange-traded funds (ETFs) rose to a 2-1/2 month high Wednesday. 

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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.