Strength in Tech Stocks Boosts Market Sentiment

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.99%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.66%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.36%.

U.S. stock indexes this morning are moderately higher.  Strength in technology stocks is lifting market sentiment, with Micron Technology up more than +5% after forecasting stronger-than-expected Q3 sales.  An unexpected increase in U.S. Feb pending home sales also boosted hopes for the economic outlook.

U.S. tech stocks also have carryover support from a rally in Chinese technology companies after Alibaba Group Holding’s plan, announced on Tuesday, to split into six separate units sparked optimism that China’s regulatory crackdown on the sector might be over. 

Some positive corporate news is bullish for stocks. Lululemon Athletica is up more than +13% after reporting stronger-than-expected Q4 net revenue and forecasting 2024 net revenue above consensus.  Also, Cintas is up more than +4% after reporting better-than-expected Q3 revenue and raising its full-year revenue estimate.

Regional bank stocks are moving higher today on hopes for more support from U.S. authorities.  Also, energy stocks are climbing, with WTI crude up more than +1% at a 2-week high. 

U.S. Feb pending home sales unexpectedly rose +0.8% m/m, stronger than expectations of a -3.0% m/m decline.

Global bond yields are moving higher today as fears about banking turmoil continue to wane.  The 10-year T-note yield is up +0.8 bp at 3.577%.  Also, the 10-year German bund yield is up +1.5 bp at 2.305% gilt yield is up +0.2 bp at 3.459%.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +1.51%.  China’s Shanghai Composite stock index closed down -0.16%, and Japan’s Nikkei Stock Index closed up +1.33%.

Today’s stock movers…

Chip stocks are rallying today, with Micron Technology (MU) up more than +5% to lead gainers in the S&P 500 on its forecast for Q3 sales of $3.90 billion, better than the consensus of $3.75 billion.  Other chip makers also moved higher on the news, with Marvell Technology (MRVL) up more than +4% and Intel (INTC) up more than +4% to lead gainers in the Dow Jones Industrials.  Also, Lam Research (LRCX), ASML Holding NV (ASML), Applied Materials (AMAT), KLA Corp (KLAC), GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), and Qualcomm (QCOM) are up more than +2%.

Regional bank stocks are moving higher today as hope for more support from U.S. authorities boosts sentiment toward the banking sector.  First Republic Bank (FRC) is up more than +4%.  Also, Lincoln National (LNC), Comerica (CMA), and KeyCorp (KEY) are up more than +2%.

Lululemon Athletica (LULU) is up more than +13% to lead gainers in the Nasdaq 100 after reporting Q4 net revenue of $2.77 billion, above the consensus of $2.70 billion and forecast 2024 net revenue of $9.30 billion-$9.41 billion, stronger than the consensus of $9.10 billion.

Cintas (CTAS) is up more than +4% after reporting Q3 revenue of $2.19 billion, better than the consensus of $2.15 billion, and raising its full-year revenue estimate to $8.74 billion-$8.80 billion from a prior forecast of $8.67 billion-$8.75 billion, stronger than the consensus of $8.72 billion. 

Hartford Financial Services Group (HIG) is up more than +3% after Goldman Sachs upgraded the stock to buy from hold.

Carnival (CCL) is up more than +3% after Susquehanna Financial upgraded the stock to positive from neutral.

Retailers are under pressure today after UBS downgraded five stocks in the sector to sell.  Ross Stores (ROST) is down more than -1% to lead losers in the S&P 500.  Also, Foot Locker (FL), Burlington Stores (BURL), Urban Outfitters (URBN), and Bath & Body Works (BBWI) are down -1% or more.

Lucid Group (LCID) is down more than -2% today to lead losers in the Nasdaq 100.  Lucid added to Tuesdays -7% plunge on negative carryover when it said it plans to lay off about 18% of its workforce.

Managed healthcare companies that manage private Medicare plans are falling for a second day after Senator Warren on Tuesday urged the Biden administration to finalize new rules that would curb how much the Medicare Advantage program pays health insurers.  Humana (HUM), which gets the bulk of its revenue from Medicare Advantage, is down -0.77%.  Also, Molina Healthcare (MOH), Centene (CNC), Cigna Group (CI), Elevance Health (ELV), and UnitedHealth Group (UNH) are down more than -0.5%. 

Medtronic Plc (MDT) is down more than -1% after UBS downgraded the stock to sell from buy.

Across the markets…

June 10-year T-notes (ZNM23) today are down -8 ticks, and the 10-year T-note yield is up +0.8 bp at 3.577%.  June T-notes are moving lower today as a stock rally reduces the safe-haven demand for government debt.  Also, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate today climbed to a 2-week high of 2.351%.  In addition, supply pressures are weighing on T-note prices as the Treasury will auction $22 billion of 2-year floating-rate notes and $35 billion of 7-year T-note today as part of this week’s $142 billion auction package of T-notes and floating-rate notes.

The dollar index (DXY00) today is up by +0.27%.  Higher T-note yields today are supporting moderate gains in the dollar.  Also, waning concerns of banking-sector contagion are weakening the yen.  Strength in stocks today is curbing liquidity demand for the dollar. 

EUR/USD (^EURUSD) today is down by -0.06%.  Dollar strength today is weighing on the euro.  However, losses in EUR/USD are limited due to some hawkish ECB comments and a larger-than-expected increase in German Apr GfK consumer confidence.

ECB Chief Economist Lane said the ECB will need to increase interest rates further if recent tensions in the financial system stay "fairly limited." 

ECB Governing Council member Kazimir said the ECB should continue with interest-rate increases despite the turbulence around the financial industry, though the pace of hikes may need to slow.

The German Apr GfK consumer confidence index rose +1.1 to a 9-month high of -29.5, stronger than expectations of -30.0.

USD/JPY (^USDJPY) today is up by +1.21%.  The yen is sharply lower today as easing of the U.S.-European banking turmoil has curbed the safe-haven demand for the yen.  Also, today’s rally in the Nikkei Stock Index to a 2-week high is reducing safe-haven demand for the yen.  In addition, comments today from BOJ Governor Kuroda undercut the yen when he said it is “appropriate” for the BOJ to continue with monetary easing as the benefits of easing exceed its costs. 

April gold (GCJ3) this morning is down -8.3 (-0.42%), and May silver (SIK23) is down -0.040 (-0.17%).  Precious metals prices this morning are moderately lower.  A stronger dollar today is weighing on metals prices.  Also, higher global bond yields and higher stock prices are weighing on precious metals.  However, losses in gold were limited as the recent banking turmoil has sparked fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to an 8-week high Tuesday.

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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.