Stocks Rally on Dovish US PCE Deflator Report

The S&P 500 Index ($SPX) (SPY) this morning is up +0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.67%. 

Stock indexes this morning are mixed, with the S&P 500 posting a record high and the Nasdaq 100 posting a 1-week high. The broader market is climbing in hopes that last Friday’s dovish Feb core PCE price deflator report.  Stocks also found support on last Friday’s Feb personal spending report, which was stronger than expected, bolstering the case for an economic soft landing.  Stocks are being undercut by today’s climb in the 10-year T-note yield to a 1-1/2 week high.

Last Friday’s US Feb personal spending report rose +0.8% m/m, stronger than expectations of +0.5% m/m and the largest increase in 13 months.  Feb personal income rose +0.3% m/m, weaker than expectations of +0.4% m/m.

Last Friday’s US Feb PCE core deflator report, the Fed's preferred inflation gauge, eased to +2.8% y/y from +2.9% y/y in Jan, right on expectations and the smallest increase in nearly three years.

Last Friday, Fed Chair Powell said, "The fact that the US economy is growing at such a solid pace, the fact that the labor market is still, very, very strong, gives us the chance to just be a little more confident about inflation coming down before we take the important step of cutting rates."   

Optimism in China's economy is supportive for stocks after the China Caixin Mar manufacturing PMI rose +0.2 to 51.1, the highest level in 13 months and above the 50.0 level that indicates expansion for a fifth month, the longest streak in more than two years.

The markets are discounting the chances for a -25 bp rate cut at 10% for the next FOMC meeting on April 30-May 1 and 67% for the following meeting on June 11-12.

Overseas stock markets today are settled mixed.  The Euro Stoxx 50 is closed for the Easter Monday holiday.  China's Shanghai Composite rose to a 1-week high and closed up +1.19%.  Japan's Nikkei Stock Index fell to a 1-1/2 week low and closed down -1.41%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are down -16 ticks.  The 10-year T-note yield is up +10.1 bp at 4.301%. June T-note prices today fell to a 1-1/2 week low, and the 10-year T-note yield rose to a 1-1/2 week high of 4.303%.  T-notes are under pressure from today’s rally in the S&P 500 to a new record high, which curbs safe-haven demand for T-notes.  T-note prices are also being undercut by last Friday’s hawkish comments from Fed Chair Powell, who said, “We don’t need to be in a hurry to cut” interest rates. 

T-notes found some support from last Friday’s US Feb core PCE deflator report, the Fed’s preferred inflation gauge, that showed prices rose +2.8% y/y, right on expectations and the smallest increase in nearly three years.

European government bonds are not trading today, with markets closed for the Easter Monday holiday.

US Stock Movers

Chip stocks are climbing today to lead technology stocks higher.  Micron Technology (MU) is up more than +4% to lead gainers in the S&P 500 and Nasdaq 100.  Also, Western Digital (WDC) and Marvell Technology (MRVL) are up more than +3%.  In addition, Intel (INTC) is up more than +2% to lead gainers in the Dow Jones Industrials.  Finally, Nvidia (NVDA), Applied Materials (AMAT), Broadcom (AVGO), ASML Holding NV (ASML), Lam Research (LRCX), GlobalFoundries (GFS), and Qualcomm (QCOM) are up more than +1%.   

Mining stocks are moving higher today, with Freeport McMoRan (FCX) and Newmont (NEM) climbing more than +2%, with gold prices posting a record high and copper prices posting a 1-week high. 

3M Co (MMM) is up more than +2% to lead gainers in the Dow Jones Industrials after the company’s $10.3 billion settlement with US public water suppliers received final approval from the US District Court in Charleston, South Carolina. 

Baxter International (BAX) is up more than +3% after receiving FDA clearance for its Novum IQ large-volume infusion pump with Dose IQ Safety Software. 

Semtech (SMTC) is up more than +7% after reporting Q4 net sales of $192.9 million, above the consensus of $190.6 million, and forecasting Q1 net sales of $195 million-$205 million, stronger than the consensus of $195.4 million.

Trip.com (TCOM) is up more than +5% after Citigroup opened a positive catalyst watch on the company and raised its price target on the stock to $55 from $53.

Universal Health Services (UHS) is down more than -4% to lead losers in the S&P 500 after an indirect subsidiary of the company, Pavillion Behavioral Health System, was found liable in a lawsuit that awarded a plaintiff more than $500 million in damages related to a sexual assault of a patient back in 2020.

Amgen (AMGN) is down more than -1% to lead losers in the Dow Jones Industrials after a judge late last Thursday failed to dismiss an infringement lawsuit against the company for sales of its Blincyto cancer treatment. 

Bill Holdings (BILL) is down more than -3% after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $60. 

Cognizant Technology Solutions (CTSH) is down more than -2% after Susquehanna Financial downgraded the stock to neutral from positive. 

Trucking companies are under pressure today on downgrades from Barclays.  JB Hunt Transport Services  (JBHT) and Werner Enterprises (WERN) are down more than -1% after Barclays downgraded the stocks to equal weight from overweight.  Also, CH Robinson Worldwide (CHRW) is down more than -2% after being downgraded to underweight from equal weight.

FedEx (FDX) is down more than -1% after it was unable to come to an agreement with the USPS to extend its contract, and UPS was awarded the USPS’s air cargo contract. 

AT&T (T) is down more than -1% after it said personal data from about 7.6 million current account holders and 65.4 million former customers was leaked onto the dark web. 

Earnings Reports (4/1/2024)

374Water Inc (SCWO), ACELYRIN Inc (SLRN), Actinium Pharmaceuticals Inc (ATNM), AST SpaceMobile Inc (ASTS), Children's Place Inc/The (PLCE), Dragonfly Energy Holdings Corp (DFLI), Escalade Inc (ESCA), Microvast Holdings Inc (MVST), Nano-X Imaging Ltd (NNOX), Ocean Biomedical Inc (OCEA), Omeros Corp (OMER), PVH Corp (PVH), Security National Financial Co (SNFCA), SKYX Platforms Corp (SKYX), Terran Orbital Corp (LLAP), Verde Clean Fuels Inc (VGAS).

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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.