Stocks Erase Early Gains on Higher Bond Yields

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.23%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.48%.

U.S. stock indexes this morning gave up early gains and are moderately lower.  Higher bond yields are undercutting stocks today after Fed Governor Waller said he favored more policy tightening.  Also, mixed U.S. economic news today weighed on stocks after Mar retail sales and Mar manufacturing production fell more than expected, although Mar core retail sales and the University of Michigan U.S. Apr consumer sentiment were stronger than expected.

Stock indexes this morning initially moved higher, with the S&P 500 posting a 2-1/4 month high, the Dow Jones Industrials posting a 2-month high, and the Nasdaq 100 posting a 1-week high on better-than-expected bank earnings results.

U.S. March retail sales fell -1.0% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 4 months.  However, Mar core retail sales (ex-autos and gasoline) fell -0.3% m/m, a smaller decline than expectations of -0.6% m/m.

U.S. Mar import price index ex-petroleum fell -0.6% m/m, the biggest decline in 8 months and better than expectations of no change.

The University of Michigan U.S. Apr consumer sentiment rose +1.5 to 63.5, stronger than expectations of 62.1.

Fed Governor Waller said, "Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further."

On the negative side for stocks, Catalent is down more than -22% after it said high costs and production restraints at three of its plants are expected to “materially and adversely impact” Q3 earnings results.  Also, Boeing is down more than -7% after it said it was pausing delivery of some 737 Max jets over a parts issue, a development that analysts said could result in a slowdown of deliveries and was negative for the stock.  In addition, Lucid Group is down more than -7% after reporting Q1 vehicle deliveries below consensus.

On the positive side, better-than-expected quarterly earnings results are boosting bank stocks, with JPMorgan Chase up more than +7%, Citigroup up more than +3%, and Wells Fargo up more than +2%.  Also, VF Corp is up more than +3% after Goldman Sachs double-upgraded the stock to buy from sell.

Global bond yields are higher.  The 10-year T-note yield rose to a 1-1/2 week high of 3.532% and is up +5.7 bp at 3.502%.  The 10-year German bund yield rose to a 1-month high of 2.428% and is up +5.5 bp at 2.437%, and the 10-year UK gilt yield rose to a 5-week high of 3.636% and is up +5.9 bp at 3.633%.

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.50%.  China’s Shanghai Composite closed up +0.60%, and Japan’s Nikkei Stock Index closed up +1.20%. 

Today’s stock movers…

Catalent (CTLT) is down more than -22% to lead losers in the S&P 500 after it said high costs and production restraints at three of its plants are expected to “materially and adversely impact” Q3 earnings results.

Boeing (BA) is down more than -7% to lead losers in the Dow Jones Industrials after it said it was pausing delivery of some 737 Max jets over a parts issue, a development that analysts said could result in a slowdown of deliveries and was negative for the stock.

Lucid Group (LCID) dropped more than -8% to lead losers in the Nasdaq 100 after reporting Q1 vehicle deliveries of 1,406, below the consensus of 1,835. 

PNC Financial Services Group (PNC) erased pre-market gains and is down more than -2% after forecasting Q2 revenue would fall about -3%.

Rivian Automotive (RIVN) is down more than -4% after Piper Sandler downgraded the stock to neutral from overweight.

Hartford Financial Services Group (HIG) is down more than -3% after reporting Q1 preliminary net investment income of $515 million, weaker than the consensus of $528.7 million.

A rally in bank stocks today is giving the overall market a boost.  JPMorgan Chase (JPM) is up more than +6% to lead gainers in the S&P 500 and Dow Jones Industrials after boosting its full-year net interest income forecast to $81 billion from $73 billion.  BlackRock (BLK) is up more than +3% after reporting Q1 net inflows of $110.32 billion, well above the consensus of $83.6 billion.  Citigroup (C) is up more than +2% after reporting Q1 FICC sales and trading revenue of $4.45 billion, better than the consensus of $4.02 billion.  Bank of America (BAC) is also up more than +2%, and Goldman Sachs (GS) is up more than +1%.

VF Corp (VFC) is up more than +3% after Goldman Sachs double-upgraded the stock to buy from sell.

CarMax (KMX) is up more than +2% after Oppenheimer raised its price target on the stock to $85 from $75.

Across the markets…

June 10-year T-notes (ZNM23) today are down -16 ticks, and the 10-year T-note yield is up +5.7 bp at 3.502%.  Jun T-notes dropped to a 1-1/2 week low today, and the 10-year T-note yield climbed to a 1-1/2 week high of 3.532%.  A smaller-than-expected decline in U.S Mar core retail sales pressured T-note prices.  Losses in T-notes accelerated on hawkish comments today from Fed Governor Waller, who said, "Because financial conditions have not significantly tightened, monetary policy needs to be tightened further.”

The dollar index (DXY00) today is up by +0.25%.  The dollar today recovered from an 11-1/2 month low and is moderately higher.  A jump in the 10-year T-note yield to a 1-1/2 week high today sparked short covering in the dollar.  Dollar gains accelerated this morning on hawkish comments from Fed Governor Waller, who said the Fed needs to keep raising interest rates.

EUR/USD (^EURUSD) today is down by -0.19%.  The euro fell back from a 1-year high today and is moderately lower.  A rebound in the dollar today sparked long liquidation in EUR/USD.  The euro today initially moved higher after the 10-year German bund yield climbed to a 1-month high on hawkish comments from ECB President Lagarde, who said “underlying inflationary pressures remain strong."

The German Mar wholesale price index eased to +2.0% y/y from +8.9% y/y in Feb, the slowest pace of increase in more than 2 years.

ECB President Lagarde said, "Resilient labor markets and strong wage growth, especially in advanced economies, suggest that underlying inflationary pressures remain strong."

USD/JPY (^USDJPY) today is up by +0.38%.  The yen today gave up overnight gains and turned lower after hawkish Fed comments pushed the 10-year T-note yield up to a 1-1/2 week high.  The yen also slipped after BOJ Governor Ueda said the BOJ would maintain monetary easing to reach its CPI goal. 

June gold (GCM3) this morning is down -16.8 (-0.82%), and May silver (SIK23) is up +0.100 (+0.39%).  Precious metals prices this morning are mixed, with silver prices posting an 11-3/4 month high.  A rebound in the dollar today from an 11-1/2 month low is pressuring metals prices.  Metals were also undercut today by higher global bond yields.  Hawkish comments today from Fed Governor Waller weighed on gold prices when he said the Fed needs to keep raising interest rates.  However, silver prices are climbing today on carryover support from a rally in copper prices to a 1-1/2 month high.  Gold has support on strong demand from fund buying as gold holdings in exchange-traded funds (ETFs) rose to a 2-1/2 month high Thursday. 

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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.