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Inflation Report Sparks Mixed Market Reaction
The S&P 500 Index ($SPX) (SPY) today is down by +0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.45%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.36%.
Stocks today are mixed, with the Dow Jones Industrials climbing to a new record high. Today’s US personal spending and income reports were weaker-than-expected and Fed-friendly. Also, the Aug core PCE price index, the Fed’s preferred inflation gauge, came in right on expectations, knocking T-note yields lower and supporting stocks. An upward revision to the University of Michigan US Sep consumer sentiment index to a 5-month high supported stocks. However, chip stocks turned lower today, weighing on the Nasdaq 100.
US Aug personal spending rose +0.2% m/m, slightly weaker than expectations of +0.3% m/m. Aug personal income rose +0.2% m/m, weaker than expectations of +0.4% m/m.
The US Aug core PCE price index rose +2.7% y/y, which was right on expectations.
The University of Michigan’s Sep US consumer sentiment index was revised upward by +1.1 to a 5-month high of 70.1, stronger than expectations of 69.4.
Global equity markets have carryover support from today’s +2% rally in Chinese stocks to a 3-1/2 month high. China's Shanghai Composite has rallied more than +12% this week after government leaders boosted stimulus measures and pledged to support fiscal spending and revive economic growth.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 54% for a -50 bp rate cut at that meeting.
Overseas stock markets today are moving higher. The Euro Stoxx 50 rallied to a 3-1/2 month high and is up +0.65%. China's Shanghai Composite climbed to a 3-1/2 month high and closed up by +2.88%. Japan's Nikkei Stock 225 rose to a 2-month high and closed up +2.32%.
Interest Rates
December 10-year T-notes (ZNZ24) today are up +4 ticks. The 10-year T-note yield is down -3.4 bp at 3.762%. T-note prices are climbing on positive carryover from today’s rally in 10-year German bunds to a 1-1/2 week high. Also, today’s weaker-than-expected US Aug personal spending and income reports were bullish for T-notes. In addition, the US Aug core PCE price index came in right on expectations, a dovish factor for Fed policy. T-note prices fell back from their best levels after the University of Michigan’s Sep US consumer sentiment index was revised upward to a 5-month high.
European government bond yields today are moving lower. The 10-year German bund yield fell to a 1-1/2 week low of 2.109% and is down -5.0 bp at 2.133%. The 10-year UK gilt yield is down -3.0 bp at 3.980%.
The Eurozone Sep economic confidence indicator fell -0.3 to 96.2, weaker than expectations of 96.5.
The ECB's Eurozone Aug 1-year inflation expectations eased to a 3-year low of +2.7% from +2.8% in July, right on expectations. The Aug 3-year inflation expectations eased to +2.3% from +2.4% in July, right on expectations.
The French Sep CPI (EU harmonized) eased to +1.5% y/y from +2.2% y/y in Aug, better than expectations of +1.9% and the smallest increase in 3 years.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 84% for the October 17 meeting.
US Stock Movers
Chip stocks gave up early gains today and turned lower, weighing on the Nasdaq 100. Marvell Technology (MRVL) is down more than -3% to lead losers in the Nasdaq 100. Also, Nvidia (NVDA) and Broadcom (AVGO) are down more than -2%. In addition, KLA Corp (KLAC), Lam Research (LRCX), Micron Technology (MU), and ASML Holding NV (ASML) are down more than -1%.
Wynn Resorts (WYNN) is up more than +5% to lead gainers in the S&P 500 after Mogan Stanley upgraded the stock to overweight from equal weight with a price target of $104.
Generac Holdings (GNRC) is up more than +3% after Hurricane Helene knocked out power to more than 4 million people in the southeastern US, likely boosting the company’s generator sales.
Biomea Fusion (BMEA) is up more than +3% after Truist Securities upgraded the stock to buy from hold with a price target of $54.
Establishment Labs Holdings (ESTA) is up more than +18% after it received FDA approval for its Motiva breast implants.
TransMedics Group (TMDX) is up more than +10% after S&P Dow Jones Indices said the company would replace Ensign Group in the S&P SmallCap 600 before the opening of trading on October 1.
Bristol Myers Squibb (BMY) is up more than +2% after gaining FDA approval for its Cobenfy drug to treat patients with schizophrenia.
Amgen (AMGN) is up more than +1% after Cantor Fitzgerald initiated coverage on the stock with a recommendation of overweight with a price target of $405.
HP Inc (HPQ) is down more than -3% after Bank of America downgraded the stock to neutral from buy.
Costco Wholesale (COST) is down more than -1% after reporting Q4 net sales of $78.19 billion, below the consensus of $78.59 billion.
Cassava Sciences (SAVA) is down more than -13% after the company said two of its former executives agreed to pay more than $40 million to settle SEC charges that they made misleading statements about the results of an Alzheimer’s drug trial.
Intuit (INTU) is down more than -1% after forecasting full-year adjusted EPS of $19.16-$19.36, with a mid-point below the consensus of $19.34.
Summit Therapeutics (SMMT) is down more than -7% after Citigroup downgraded the stock to neutral from buy.
Earnings Reports (9/27/2024)
NANO Nuclear Energy Inc (NNE) and Spire Global Inc (SPIR).
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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.
