Stocks Push Higher as Bond Yields Fall After U.S. Jobless Claims Jump

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.64%.

U.S. stocks this morning are moderately higher.  Strength in technology stocks is leading the overall market higher after a jump in weekly U.S. initial unemployment claims to a 19-month high knocked bond yields lower.  Market expectations for the Fed to raise the fed funds target range by +25 bp at next week’s FOMC meeting fell to 30% today from 34% Wednesday. 

U.S. weekly initial unemployment claims rose +28,000 to a 19-month high of 261,000, showing a weaker labor market than expectations of 235,000.

Global bond yields are mixed.  The 10-year T-note yield fell back from a 1-1/2 week high of 3.819% and is down -5.6 bp at 3.739%.  The 10-year German bund yield fell back from a 1-1/2 week high of 2.482% and is down -3.6 bp at 2.420%, and the UK 10-year gilt yield is up +0.4 bp at 4.255%.

On the bullish side of stocks, Warner Bros Discovery is up more than +6% and adding to Wednesday’s +8% surge after the Wall Street Journal reported a potential deal between Amazon.com, Warner Bros Discovery, and Paramount Global to add the ad-based tiers of Max and Paramount+ on Amazon Channels. Also, Adobe is up more than +4% after it said it is launching subscriptions for new generative AI features that will include copyright protection.  In addition, Cardinal Health is up more than +3% after raising the lower end of its full-year adjusted EPS forecast and approving a $3.5 billion share buyback authorization.

On the bearish side, real estate investment trusts are sliding today on concerns about commercial real estate as financing freezes up as banks remain reluctant to lend to the sector.  Also, Signet Jewelers is down more than -10% after cutting its 2024 sales outlook.  In addition, Oxford Industries is down more than -7% after cutting its full-year sales forecast.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.12%.  China’s Shanghai Composite closed up +0.49%, and Japan’s Nikkei Stock Index closed down -0.85%. 

Today’s stock movers…

Warner Bros Discovery (WBD) is up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 and is adding to Wednesday’s +8% surge after the Wall Street Journal reported a potential deal between Amazon.com, Warner Bros Discovery, and Paramount Global to add the ad-based tiers of Max and Paramount+ on Amazon Channels.

Adobe (ADBE) is up more than +4% after it said it is launching subscriptions for new generative AI features that will include copyright protection. 

Cardinal Health (CAH) is up more than +3% after raising the lower end of its full-year adjusted EPS forecast to $5.65-$5.80 from a prior estimate of $5.60-$5.80 and approving a $3.5 billion share buyback authorization.

Amazon.com (AMZN) is up more than +3% after UBS raised its price target on the stock to $150 from $130, saying artificial intelligence will support the company’s cloud-computing division.

Aptiv Plc (APTV) is up more than +2% after Wolfe Research upgraded the stock to outperform from peer perform. 

REV Group (REVG) is up more than +18% after reporting Q2 net sales of $681.2 million, well above the consensus of $580.6 million, and raised its full-year sales forecast to $2.45 billion-$2.55 billion from a previous forecast of $2.30 billion-$2.50 billion, stronger than the consensus of $2.41 billion. 

International Game Technology (IGT) is up more than +9% after its board said it is evaluating potential options for its Global Gaming and PlayDigital segments, including a sale, merger, or spin-off.

Trip.com (TCOM) is up more than +4% after reporting Q1 revenue of 9.21 billion yuan, above the consensus of 8.05 billion yuan.

Semtech (SMTC) is up more than +3% after reporting Q1 net sales of $236.5 million, better than the consensus of $234.5 million, and forecasting Q2 net sales of $233 million-$243 million, the midpoint above the consensus of $237.4 million.

Autoliv (ALV) is up more than +1% after it said it is accelerating its global cost reductions, including reducing its global headcount by around 6,000 positions. 

Real estate investment trusts are sliding today on concerns about commercial real estate as financing freezes up as banks remain reluctant to lend to the sector.  Simon Property Group (SPG) is down more than -3%.  Also, Boston Properties (BXP) and Healthpeak Properties (PEAK) are down more than -2%.  In addition, Kimco Realty (KIM), Mid-America Apartment Communities (MAA), Camden Property Trust (CPT), Federal Realty Investment Trust (FRT), and Alexandria Real Estate Equities (ARE) are down more than -1%. 

GE Healthcare Technologies (GEHC) is down more than -3% after holder Morgan Stanley offered 25 million shares of the stock. 

Smartsheet (SMAR) is down more than -20% after forecasting 2024 revenue of $943 million-$948 million, the midpoint below the consensus of $945.9 million.

Signet Jewelers (SIG) is down more than -10% after cutting its 2024 sales outlook to $7.10 billion-$7.30 billion from a previous forecast of $7.67 billion-$7.84 billion, well below the consensus of $7.72 billion.

Oxford Industries (OXM) is down more than -7% after cutting its full-year sales forecast to $1.59 billion-$1.63 billion from a previous forecast of $1.62 billion-$1.66 billion, below the consensus of $1.64 billion.

Wynn Resorts (WYNN) and Las Vegas Sands (LVS) fell more than -1% in pre-market trading after Jeffries downgraded both stocks to hold from buy. 

Across the markets…

September 10-year T-notes (ZNU23) today are up +12 ticks, and the 10-year T-note yield is down -5.6 bp at 3.739%.  Sep T-notes this morning recovered from a 1-week low and moved higher, and the 10-year T-note yield fell back from a 1-1/2 week high of 3.819% after weekly U.S. jobless claims jumped to a 19-month high. T-notes this morning initially moved lower on carryover weakness in European government bond markets. 

The dollar index (DXY00) this morning is down -0.52%.  The dollar is moving lower after today’s jump in U.S. weekly initial unemployment claims to a 19-month high knocked T-note yields lower and bolstered expectations for the Fed to pause its rate hike campaign.  The market expects only a 28% chance that the Fed will raise the fed funds target range by 25 bp next week.

EUR/USD (^EURUSD) today is up by +0.57%.  Dollar weakness today is giving the euro a boost.  Also, central bank divergence is boosting the euro today on the prospects for the Fed to pause raising interest rates next week while the ECB raises rates.  EUR/USD is moving higher today despite a downward revision to Eurozone Q1 GDP.

Eurozone Q1 GDP was revised downward to -0.1% q/q and +1.0% y/y from the previously reported unchanged q/q and +1.2% y/y.

USD/JPY (^USDJPY) today is down by -0.78%.  The yen is climbing today after Japan’s Q1 GDP was revised higher. Also, signs of weakness in the U.S. labor market pushed T-note yields slower and boosted the yen after weekly U.S. jobless claims rose to a 19-month high.  In addition, an increase in the 10-year JGB bond yield to a 1-1/2 week high today of 0.445% strengthened the yen’s interest rate differentials. 

Japanese economic news today was mixed for the yen.  On the positive side, Japan's Q1 GDP was revised upward to +2.7% (q/q annualized) from the previously reported +1.9%.  Conversely, the May eco watchers survey outlook unexpectedly fell -1.2 to 54.4, weaker than expectations of an increase to 56.1. 

August gold (GCQ3) this morning is up +21.8 (+1.11%), and July silver (SIN23) is up +0.716 (+3.04%).  Precious metals prices this morning are moving higher, with silver up sharply at a 3-1/2 week high.  A weaker dollar today is bullish for metals.  Also, a decline in T-note yields today is supportive of metals prices.  In addition, metals are also climbing as today’s jump in U.S. jobless claims to a 19-month high bolsters the case for the Fed to pause or even end its rate hike campaign.

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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.