Stock Indexes Rally to Record Highs on a Resilient US Economy

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.68%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.44%. 

Stocks on Thursday extended Wednesday’s rally, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 posting new all-time highs. Stocks rallied on the outlook for Fed rate cuts later this year after the FOMC on Wednesday maintained its projections for a total of 75 bp of interest rate cuts this year. 

Stock indexes also found support as Thursday’s stronger-than-expected US economic reports signal a resilient US economy that bolsters the outlook for an economic soft landing. 

US weekly initial unemployment claims unexpectedly fell -2,000 to 210,000, showing a stronger labor market than expectations of an increase to 213,000.  Weekly continuing claims rose +4,000 to 1.807 million, showing a stronger labor market than expectations of 1.820 million.

The US Mar Philadelphia Fed business outlook survey fell -2.0 to 3.2, stronger than expectations for a decline to -2.5.

The US Mar S&P manufacturing PMI unexpectedly rose +0.3 to a 1-3/4 year high of 52.5, stronger than expectations of a decline to 51.8. 

US Feb existing home sales unexpectedly rose +9.5% m/m to a 1-year high of 4.38 million, stronger than expectations for a decline to 3.95 million.

US Feb leading indicators unexpectedly rose +0.1% m/m, stronger than expectations of a -0.1% m/m decline.

The markets are discounting the chances for a -25 bp rate cut at 15% for the April 30-May 1 FOMC meeting and 81% for the meeting after that on June 11-12.

Overseas stock markets on Thursday settled mixed.  The Euro Stoxx 50 climbed to a 23-year high and closed up +1.04%.  China's Shanghai Composite closed down -0.08%.  Japan's Nikkei Stock Index rallied to a new record high and closed up +2.03%.

Interest Rates

June 10-year T-notes (ZNM24) on Thursday closed down -1.5 ticks.  The 10-year T-note yield fell -0.2 bp to 4.271%.  June T-note prices Thursday gave up an early advance and turned lower on stronger-than-expected US economic reports, hawkish factors for Fed policy.  Also, a jump in inflation expectations weighed on T-notes after the 10-year breakeven inflation rate Thursday rose to a 4-1/4 month high of 2.372%. 

T-notes Thursday initially moved higher on carryover support from Wednesday when the FOMC maintained its projections for 75 bp in interest rate cuts this year.  T-notes also had carryover support from Thursday’s rallies in European government bond prices. 

European government bond yields today are lower.  The 10-year German bund yield fell -2.7 bp to 2.405%. The 10-year UK gilt yield fell to a 1-week low of 3.924% and finished down -2.1 bp at 3.995%.

The Bank of England (BOE) voted 8-1 to keep the official bank rate at 5.25%, and BOE Governor Bailey said the bank was “not yet at the point where we can cut interest rates.”

The Eurozone Mar S&P manufacturing PMI unexpectedly fell -0.8 to 45.7, weaker than expectations of an increase to 47.0.  The Mar S&P composite PMI rose +0.7 to a 10-month high of 49.9, stronger than expectations of 49.7.

US Stock Movers

Micron Technology (MU) closed up more than +14% to lead gainers in the S&P 500 and Nasdaq 100 and is giving chip stocks a boost after reporting Q2 adjusted revenue of $5.82 billion, better than the consensus of $5.35 billion and forecasting Q3 adjusted revenue of $6.4 billion-$6.8 billion, well above the consensus of $5.99 billion.  Also, Western Digital (WDC) closed up more than +5%, and Lam Research (LRCX) closed up more than +4%.  In addition, Applied Materials (AMAT), Marvell Technology (MRVL), KLA Corp (KLAC), NXP Semiconductors NV (NXPI), and ASML Holding NV (ASML) closed up more than +2%.

Guess?  Inc (GES) closed up more than +20% after reporting Q4 net revenue of $891.1 million, stronger than the consensus of $855.4 million. 

Astera Labs (ALAB) closed up more than +8%, adding to Wednesday’s 72% surge after the company’s initial public offering topped expectations to raise $713 million.  

Broadcom (AVGO) closed up more than +5% after Cowen upgraded the stock to outperform from market perform with a price target of $1,500.

Illumina (ILMN) closed up more than +3% after the European Union’s (EU) Court of Justice said the European Commission exceeded its authority by probing Illumina’s $7 billion acquisition of Grail Inc. 

Bank stocks are climbing today after the FOMC maintained its projection for 75 bp of rate cuts this year on Wednesday.  As a result, Goldman Sachs (GS) closed up more than +4% to lead gainers in the Dow Jones Industrials.  Also, Truist Financial (TFC) closed up more than +3%.  In addition, Comerica (CMA), US Bancorp (USB), PNC Financial Services Group (PNC), Northern Trust (NTRS), and KeyCorp (KEY) closed up more than +2% 

Commercia Metals (CMC) closed up more than +5% after reporting Q2 net sales of $1.85 billion, stronger than the consensus of $1.80 billion.

Bridgebio Pharma (BBIO) closed up more than +1% after Raymond James resumed coverage of the stock with a recommendation of outperform and a price target of $45. 

Accenture (ACN) closed down more than -9% to lead losers in the S&P 500 after cutting its full-year adjusted EPS forecast to $11.97-$12.20 from a previous forecast of $11.97-$12.32, below the consensus of $12.22. 

FactSet Research Systems (FDS) closed down more than -7% after forecasting full-year adjusted EPS of $15.60-$16.00, weaker than the consensus of $16.10.

Darden Restaurants (DRI) closed down more than -6% after reporting Q3 sales of $2.97 billion, weaker than the consensus of $3.03 billion, and cut its full-year sales forecast to $11.4 billion from a previous estimate of $11.5 billion. 

Paramount Global (PARA) closed down more than -5% after CNBC reported that the company is not interested in selling its studio separately.

Designer Brands (DBI) closed down more than -5% after forecasting 2025 EPS of 70 cents-80 cents, weaker than the consensus of 81 cents. 

Apple (AAPL) closed down more than -4% to lead losers in the Dow Jones Industrials after the US Justice Department and 16 attorneys general sued the company, accusing it of violating antitrust laws. 

Five Below (FIVE) closed down more than -15% after reporting Q4 net sales of $1.34 billion, weaker than the consensus of $1.35 billion, and forecast 2025 net sales of $3.97 billion-$4.07 billion, below the consensus of $4.11 billion. 

Steelcase (SCS) closed down more than -5% after reporting Q4 revenue of $775.2 million, below the consensus of $780.3 million, and forecast Q1 revenue of $715 million-$740 million, weaker than the consensus of $741 million. 

Earnings Reports (3/22/2024)

American Realty Investors Inc (ARL), ARS Pharmaceuticals Inc (SPRY), Atara Biotherapeutics Inc (ATRA), Eagle Pharmaceuticals Inc/DE (EGRX), Erasca Inc (ERAS), Humacyte Inc (HUMA), inTEST Corp (INTT), Maui Land & Pineapple Co Inc (MLP), Orchestra BioMed Holdings Inc (OBIO), Transcontinental Realty Invest (TCI), Waldencast plc (WALD).

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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.