S&P 500 and Nasdaq 100 Post Record Highs as Apple Soars

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.27%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.71%.

Stock indexes Tuesday settled mixed, with the S&P 500 and Nasdaq 100 climbing to new record highs, while the Dow Jones Industrials fell to a 1-week low. Apple soared more than +7% to a record high and supported gains in technology stocks when D.A. Davidson upgraded the stock to buy from neutral with a price target of $230 on “expectation of an iPhone upgrade cycle.”  Stocks extended their gains Tuesday afternoon when bond yields tumbled on strong demand for the Treasury’s $39 billion 10-year T-note auction.

Weakness in bank stocks weighed on the Dow Jones Industrials after Pimco said it expects more regional bank failures in the US because of a “very high” concentration of troubled commercial real estate loans on their books. Stocks also saw some downward pressure on caution ahead of Wednesday’s CPI report and the Tue/Wed FOMC meeting results.  Also, a negative carryover from weakness in European stocks weighed on US stocks after the Euro Stoxx 50 fell to a 1-week low on political upheaval in France after French President Macron on Sunday called for early parliamentary elections later this month in an attempt to stop the advance of his far-right rivals.

Stocks are looking ahead to Wednesday’s US May consumer price report, which is expected to show that the May CPI was unchanged from Apr at +3.4% y/y and that the May CPI ex-food and energy eased slightly to +3.5% y/y from +3.6% y/y in April. 

Also, stock investors are awaiting Wednesday’s results of the 2-day FOMC meeting that began Tuesday.  The consensus is that the Fed will keep the Fed funds target rate unchanged at 5.25%-5.50%. The FOMC will also release new estimates for growth and inflation and dot-plot projections for the path of interest rates.  In addition, post-meeting comments from Fed Chair Powell will be scrutinized for when the Fed might cut interest rates. 

The markets are discounting the chances for a -25 bp rate cut at 1% for the June 11-12 FOMC meeting and 8% for the following meeting on July 30-31.

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 Tuesday settled mixed.  The Euro Stoxx 50 fell to a 1-week low and closed down -1.02%.  China's Shanghai Composite fell to a 1-3/4 month low and closed down -0.76%.  Japan's Nikkei Stock 225 Index climbed to a 3-week high and closed up +0.25%.

Interest Rates

September 10-year T-notes (ZNU24) Tuesday closed up +14.5 ticks.  The 10-year T-note yield fell -6.7 bp to 4.400%.  Sep T-note prices Tuesday found support on positive carryover from a rally in European government bonds.  T-notes prices raced to their highs Tuesday afternoon on stellar demand for the Treasury’s $39 billion auction of 10-year T-notes. The auction had a bid-to-cover ratio of 2.67, well above the 10-auction average of 2.50 and the highest in 2-1/4 years.

European government bond yields Tuesday finished lower.  The 10-year German bund yield fell back from a 1-week high of 2.687% and finished down -4.8 bp at 2.622%.  The 10-year UK gilt yield fell -5.4 bp to 4.268%. 

ECB Governing Council member Rehn said the ECB isn't pre-committing to any path for interest rates.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 8% for the July 18 meeting and 49% for the September 12 meeting.

US Stock Movers

Apple (AAPL) closed up more than 7% at a record high to lead gainers in the S&P 500, Dow Jones Industrials, and Nasdaq 100 after D.A. Davidson upgraded the stock to buy from neutral with a price target of $230 on “expectation of an iPhone upgrade cycle.” 

FMC Corp (FMC) closed up +4% after Fermium Research LLC upgraded the stock to buy from hold with a price target of $60.

Crowdstrike (CRWD) closed up more than +2% and added to Monday’s +7% gain after S&P Dow Jones Indices said the stock will join the S&P 500 before trading opens June 24.

Calavo Growers (CVGW) closed up more than +8% after reporting Q2 net sales of $184.4 million, well above the consensus of $159 million. 

General Motors (GM) closed up more than +1% after it authorized a new $6 billion share buyback plan and raised its quarterly dividend by 33% to 12 cents a share. 

Bank stocks were under pressure Tuesday and undercut the broader market after Pimco said It expects more regional bank failures in the US because of a “very high” concentration of troubled commercial real estate loans on their books.  As a result, Synchrony Financial (SYF) and Capital One Financial (COF) closed down more than -4%.  Also, American Express (AXP) closed down more than -3% to lead losers in the Dow Jones Industrials.  In addition, Citigroup (C), Northern Trust (NTRS), and Bank of New York Mellon (BK) closed down more than -3%.  Finally, JPMorgan Chase (JPM), Bank of America (BAC), and M&T Bank (MTB) closed down more than -2%. 

Paramount Global (PARA) closed down more than -7% to lead losers in the S&P 500 after the Wall Street Journal reported that Shari Redstone’s NAI has decided to end talks with Skydance Media about acquiring the company.

Autodesk (ADSK) closed down more than -3% after Bloomberg reported the SEC and Department of Justice are probing the company after it reassigned its CFO following an internal investigation into its accounting practices.

Target Hospitality (TH) closed down more than -31% after the Wall Street Journal reported the Biden administration is closing an Immigration and Customs Enforcement detention center in Dilley, Texas, that was used to house migrant families who crossed the border illegally.   

PayPal Holdings (PYPL) closed down more than -3% to lead losers in the Nasdaq 100 after Apple showed off a new tap-to-cash feature that allows quick payment between individuals. 

Cleveland-Cliffs (CLF) closed down more than -3% after JPMorgan Chase downgraded the stock to neutral from overweight. 

CoreCivic (CXW) closed down more than -19% after Wedbush downgraded the stock to neutral from outperform.

Comcast (CMCSA) closed down more than -1% after BNP Paribas Exane downgraded the stock to underperform from neutral with a price target of $34.

Earnings Reports (6/12/2024)

Broadcom Inc (AVGO), Dave & Buster's Entertainment (PLAY), Oxford Industries Inc (OXM), Torrid Holdings Inc (CURV), Vera Bradley Inc (VRA).

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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.