Stocks Finish Higher as Economic News Shows Economy Holding Up

The S&P 500 Index ($SPX) (SPY) Friday closed up +1.01%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.55%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.29%.

Stocks on Friday settled moderately higher, with the Dow Jones Industrials posting a new all-time high.  Positive corporate and economic news Friday boosted stocks.  Intel closed up more than +9% after Bloomberg News reported that the company is discussing various scenarios, including a split of its product design and manufacturing businesses.  Also, Marvell Technology rose more than +9% after reporting stronger-than-expected Q2 net revenue and forecasting Q3 net revenue above consensus.  In addition, MongoDB closed up more than +18% after reporting Q2 adjusted EPS well above consensus and raising its 2025 adjusted EPS forecast.

Stocks also found support Friday from the favorable US July core PCE price index and July personal spending reports.  The reports suggest the Fed has so far been able to tame price pressures without causing too much pain to consumers, thus boosting the prospects for a soft landing. The Fed-friendly PCE report also reinforced expectations the Fed will cut interest rates at the Sep 17-18 FOMC meeting. 

On the negative side for stocks Friday were higher bond yields when the mostly better-than-expected US economic reports reinforced the outlook for a less aggressive pace of Fed interest rate cuts.  Also, weakness in energy stocks on Friday weighed on the broader market after crude prices fell more than -3%. 

US July personal spending rose +0.5% m/m, right on expectations.  July personal income rose +0.3% m/m, slightly stronger than expectations of +0.2% m/m.

The US July core PCE price index, the Fed's preferred inflation gauge, remained unchanged from June at +2.6% y/y, better than expectations of an increase to +2.7% y/y.

The US Aug MNI Chicago PMI unexpectedly rose ++0.8 to 46.1, stronger than expectations of a decline to 44.8.

The University of Michigan US Aug consumer sentiment index was revised upward by +0.1 to 67.9, weaker than expectations of 68.1.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 31% for a -50 bp rate cut at that meeting.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 fell back from a 1-1/2 month high and closed down -0174%.  China's Shanghai Composite rose to a 1-1/2 week high low and closed up +0.68%.  Japan's Nikkei Stock 225 climbed to a 4-week high and closed up +0.74%.

Interest Rates

September 10-year T-notes (ZNU24) Friday closed down -8.5 ticks.  The 10-year T-note yield rose +4.9 bp to 3.911%.  Sep T-notes were under pressure Friday as a rally in stocks curbed safe-haven demand for government debt.  T-notes extended their losses after Friday’s mostly better-than-expected US economic reports dampened hopes that the Fed will cut rates by 50 bp in September.  Month-end buying of T-notes by bond fund managers supported T-note prices as bond fund managers extended the duration of their portfolios and bought longer-term debt. Also, Friday’s -3% fall in crude oil prices reduced inflation expectations and supported T-notes. 

European government bond yields Friday were mixed.  The 10-year German bund yield rose +2.4 bp to 2.299%.  The 10-year UK gilt yield fell -0.4 bp to 4.015%.

The Eurozone Aug CPI eased to 2.2% y/y from 2.6% y/y, right on expectations and the smallest increase in 3 years.  Also, Aug core CPI eased to 2.8% y/y from 2.9% y/y in July, right on expectations. 

The Eurozone July unemployment rate unexpectedly fell -0.1 to a record low 6.4%, showing a stronger labor market than expectations of no change at 6.5%.

ECB Executive Board member Schnabel said the ECB shouldn't lower interest rates too quickly as risks to inflation's return to 2% persist.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.

US Stock Movers

Intel (INTC) closed up more than +9% to lead gainers in the S&P 500 and Dow Jones Industrials after Bloomberg News reported the company is discussing various scenarios, including a split of its product design and manufacturing businesses. 

Energy producers and energy service providers were under pressure Friday as the price of WTI crude oil fell more than -3%.  As a result, APA Corp (APA) closed down more than -2%.  Also, Diamondback Energy (FANG), Haliburton (HAL), Schlumberger (SLB), ConocoPhillips (COP), Devon Energy (DVN), Marathon Oil (MRO), Baker Hughes (BKR), and Occidental Petroleum (OXY) closed down more than -0.40%.

MongoDB (MDB) closed up more than +18% to lead gainers in the Nasdaq 100 after reporting Q2 adjusted EPS of 70 cents, well above the consensus of 49 cents, and raising its 2025 adjusted EPS forecast to $2.33-$2.47 from a previous forecast of $2.15-$2.30, stronger than the consensus of $2.33. 

Marvell Technology (MRVL) closed up more than +9% after reporting Q2 net revenue of $1.27 billion, better than the consensus of $1.25 billion, and forecasting Q3 net revenue of $1.45 billion-$1.46 billion, stronger than the consensus of $1.40 billion. 

Dell Technologies (DELL) closed up more than +4% after reporting Q2 adjusted EPS of $1.89, above the consensus of $1.71. 

GE Vernova (GEV) closed up more than +5% after William O’Neill initiated coverage on the stock with a buy recommendation.

Sherwin-Willams (SHW) closed up more than +2% after UBS raised its price target on the stock to $412 from $375.

Crowdstrike Holdings (CRWD) closed up more than +2% after HSBC upgraded the stock to buy from hold with a price target of $339. 

Ulta Beauty (ULTA) closed down more than -4% to lead losers in the S&P 500 after reporting Q2 net sales of $2.55 billion, below the consensus of $2.61 billion, and cutting its 2025 net sales forecast to $11.0 billion-$11.2 billion from a previous forecast of $11.5 billion-$11.6 billion, weaker than the consensus of $11.51 billion. 

Dollar General (DG) closed down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight.

DaVita (DVA) closed down more than -1% on signs of insider selling after an SEC filing showed CFO and Treasurer Ackerman sold $10.7 million of shares Tuesday and Wednesday.

Elastic NV (ESTC) closed down more than -26% after cutting its full-year revenue forecast to $1.44 billion from a previous forecast of $147 billion-$1.48 billion, below the consensus of $1.48 billion.

Alnylam Pharmaceuticals (ALNY) closed down more than -8% on disappointment that data from a trial of its drug Amvuttra to treat heart disease failed to improve conditions better than existing drugs. 

Earnings Reports (9/3/2024)

Asana Inc (ASAN), Gitlab Inc (GTLB), HealthEquity Inc (HQY), Lovesac Co/The (LOVE), PagerDuty Inc (PD), Zscaler Inc (ZS).

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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.