S&P 500 and Nasdaq 100 Rally to Record Highs on Fed-Friendly Economic Reports

The S&P 500 Index ($SPX) (SPY) this morning is up +0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.54%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.79%. 

US stock indexes this morning are mildly higher, with the S&P 500 and the Nasdaq 100 posting all-time highs and the Dow Jones Industrials posting a 6-week high.  Stocks rallied as bond yields fell after US consumer prices eased as expected.  Also, the US retail sales, Empire manufacturing, and NAHB housing index reports were weaker than expected, bolstering the outlook for the Fed to cut interest rates this year.

US Apr CPI eased to +3.4% y/y from +3.5% y/y in March, right on expectations.  Apr CPI ex-food and energy eased to +3.6% y/y from +3.8% y/y in March, right on expectations and the smallest increase in 3 years.

US Apr retail sales were unchanged m/m, weaker than expectations of +0.4% m/m.  However, Apr retail sales ex-autos rose +0.2% m/m, right on expectations.

The US May Empire manufacturing survey general business conditions index unexpectedly fell -1.3 to -15.6, weaker than expectations of an increase to -10.0.

The US May NAHB housing market index fell -6 to a 4-month low of 45, weaker than expectations of 50.

Hawkish comments Tuesday evening from Kansas City Fed President Schmid were negative for stocks when he said interest rates could remain high "for some time" as policymakers await evidence that price pressures are easing.

Generally positive Q1 earnings results are supportive of stocks.  Q1 earnings are expected to climb +6.5% 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. 

The markets are discounting the chances for a -25 bp rate cut at 5% for the June 11-12 FOMC meeting and 31% for the following meeting on July 30-31.

Overseas stock markets today are mixed.  The Euro Stoxx 50 rose to a 6-week high and is up +0.27%. China's Shanghai Composite fell to a 2-week low and closed down -0.82%.  Japan's Nikkei Stock Index rose to a 1-week high and closed up +0.08%. 

Interest Rates

June 10-year T-notes (ZNM24) today are up +14 ticks.  The 10-year T-note yield is down -6.8 bp at 4.371%.  June T-notes today rallied to a 5-week high, and the 10-year T-note yield fell to a 5-week low of 4.336%.  T-note prices are climbing today after several Fed-friendly US economic reports bolstered the outlook for the Fed to cut interest rates this year.  Also, a decline in inflation expectations is bullish for T-notes after the 10-year breakeven inflation expectations rate today fell to a 3-1/2 week low of 2.308%.  On the negative side, Kansas City Fed President Schmid said interest rates could remain high "for some time."

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-week low of 2.418% and is down -11.4 bp at 2.433%.  The 10-year UK gilt yield fell to a 5-week low of 4.064% and is down -9.9 bp at 4.074%.

Eurozone Mar industrial production rose +0.6% m/m, stronger than expectations of +0.4% m/m.

The European Commission forecasted Eurozone 2024 GDP growth at +0.8%, unchanged from a February estimate, and reduced its Eurozone 2024 inflation forecast to 2.5% from February’s 2.7% forecast.

ECB Governing Council member Villeroy de Galhau said Eurozone inflation data for April give the ECB confidence to begin cutting interest rates in June before continuing to loosen monetary policy at a pragmatic pace.

US Stock Movers

Homebuilder stocks are climbing today after the 10-year T-note yield fell to a 5-week low, a supportive factor for housing demand.  DR Horton (DHI), Builders FirstSource (BLDR), and Toll Brothers (TOL) are up more than +3%.   Also, Lennar (LEN) and PulteGroup (PHM) are up more than +2%. 

A rally in chip stocks today is supportive of the overall market. Advanced Micro Devices (AMD) is up more than +3%.  Also, Nvidia (NVDA), Qualcomm (QCOM), Lam Research (LRCX), and Micron Technology (MU) are up more than +2%.  KLA Corp (KLAC) and Applied Materials (AMAT) are up more than +1%. 

Teradyne (TER) is up more than +3% after a 13F filing with the SEC showed Aspex Management HK reported a new 1.1% position in the company. 

Monday.com (MNDY) is up more than +19% after reporting Q1 revenue of $216.9 million, better than the consensus of $210.5 million. 

NU Holdings Ltd (NU) is up more than +6% after reporting Q1 net income of $378.8 million, well above the consensus of $336.1 million. 

Shift4 Payments (FOUR) is up more than +6% on signs of insider buying after an SEC filing showed CEO Isaacman purchased $5.76 million of stocks on Tuesday. 

Arista Networks (ANET) is up more than +3% after Willian O’Neil & Co. reinstated coverage of the stock with a buy recommendation. 

Solventum (SOLV) is down more than -3% after Spin-Off Research downgraded the stock to hold from buy.

Walt Disney (DIS) is down more than -2% to lead losers in the Dow Jones Industrials after CEO Iger said marketing expenses at Disney + are too high and the company is “dramatically” reducing content spending in linear television.

Boeing (BA) is down more than -2% as the company faces possible criminal prosecution after the US Justice Department found Boeing violated a deferred-prosecution agreement tied to two fatal crashes five years ago. 

Dlocal (DLO) is down more than -25% after reporting Q1 revenue from continuing operations of $184.4 million, weaker than the consensus of $191.9 million. 

Accenture Plc (ACN) and Six Flags Entertainment (SIX) are down more than -1% after Deutsche Bank downgraded the stocks to hold from buy. 

Earnings Reports (5/15/2024)

374Water Inc (SCWO), AST SpaceMobile Inc (ASTS), B Riley Financial Inc (RILY), Bit Digital Inc (BTBT), Cadiz Inc (CDZI), Celcuity Inc (CELC), Cisco Systems Inc (CSCO), Consolidated Water Co Ltd (CWCO), Daily Journal Corp (DJCO), Dole PLC (DOLE), Dynatrace Inc (DT), Empire Petroleum Corp (EP), European Wax Center Inc (EWCZ), Eyenovia Inc (EYEN), Hawkins Inc (HWKN), Ispire Technology Inc (ISPR), Kodiak Sciences Inc (KOD), Omeros Corp (OMER), PDS Biotechnology Corp (PDSB), Quipt Home Medical Corp (QIPT), SWK Holdings Corp (SWKH), Urban One Inc (UONEK), Velo3D Inc (VLD), Verde Clean Fuels Inc (VGAS), Workhorse Group Inc (WKHS).

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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.