Stocks Close Little Changed on Caution Ahead of US Inflation Reports

The S&P 500 Index ($SPX) (SPY) Monday closed down -0.02%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.21%. 

US stocks on Monday settled mixed.  Higher inflation expectations weighed on stocks Monday after the New York Fed Apr 1-year inflation expectations rose +26 bp to a 5-month high of 3.26% from 3.00% in March.  Also, hawkish comments Monday from Fed Vice Chair Jefferson weighed on stocks when he said, "In light of the attenuation in progress, in terms of getting inflation down to our target, it is appropriate that we maintain the policy rate in restrictive territory." 

Stocks found some support Monday from lower bond yields and positive corporate news.  Incyte Corp rose more than +8 % after announcing that its board approved a share repurchase authorization of $2 billion.  Also, Walgreens Boots Alliance closed up more than +5% after Bloomberg reported that the company was reaching out to potential buyers for its Boots drugstore chain in the UK.  In addition, Intel closed up more than +2% after the Wall Street Journal reported the company is in advanced talks for a deal in which Apollo Global Management would provide more than $11 billion to help the company build a chip plant in Ireland.

The markets will focus on US inflation reports this week.  On Tuesday, the April core PPI is expected to ease to +2.3% y/y from +2.4% y/y in March. On Wednesday, April core CPI is expected to ease to +3.6% y/y from +3.8% y/y in March.

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 25% for the following meeting on July 30-31.

Overseas stock markets Monday settled lower.  The Euro Stoxx 50 closed down -0.12%.  China's Shanghai Composite closed down -0.21%.  Japan's Nikkei Stock Index fell to a 1-week low and closed down -0.13%. 

Interest Rates

June 10-year T-notes (ZNM24) on Monday closed up +4 ticks.  The 10-year T-note yield fell -1.1 bp to 4.485%.  T-note prices Monday had carryover support from strength in European government bonds.  T-note prices also had support from speculation that this week’s US PPI and CPI reports will show a slight moderation of price pressures.  Monday’s hawkish comments from Fed Vice Chair Jefferson were negative for T-notes when he said the Fed should hold interest rates steady until there is additional evidence that inflation will return to the Fed’s 2% target.

European government bond yields on Monday were mixed.  The 10-year German bund yield fell -0.7 bp to 2.510%.  The 10-year UK gilt yield rose +0.9 bp to 4.174%.

US Stock Movers

Incyte Corp (INCY) closed up more than +8% to lead gainers in the S&P 500 after announcing that its board approved a share repurchase authorization of $2 billion.

Walgreens Boots Alliance (WBA) closed up more than +5% after Bloomberg reported the company is reaching out to potential buyers for its Boots drugstore chain in the UK. 

Apple (AAPL) closed up more than +2% after it was reported the company is closing in on an agreement to use OpenAI’s technology in Apple’s upcoming iOS 18 mobile operating system.

Intel (INTC) closed up more than +2% to lead gainers in the Dow Jones Industrials after the Wall Street Journal reported the company is in advanced talks for a deal in which Apollo Global Management would provide more than $11 billion to help the company build a chip plant in Ireland.

Gaming stocks exposed to Macau moved higher Monday after China added eight mainland cities eligible for “individual travel” to Hong Kong and Macau from May 27.  As a result, Wynn Resorts International (WYNN), Las Vegas Sands (LVS), and MGM Resorts International (MGM) closed up more than +1%.

Squarespace (SQSP) closed up more than +13% after entering into a definitive agreement to go private by Permira in a deal valued at approximately $6.9 billion, where stockholders will receive $44 per share in cash. 

BioLife Solutions (BLFS) closed up more than +6% after Benchmark Company LC upgraded the stock to buy from hold with a price target of $25. 

United Airlines Holdings (UAL) and American Airlines Group (AAL) closed up more than +3% after HSBC initiated coverage on the stocks with buy recommendations.

Home Depot (HD) closed down more than -1% to lead losers in the Dow Jones Industrials on expectations that Tuesday’s Q1 comparable sales fell -2.19%. 

Meta Platforms (META) closed down more than -1% after a research arm of the UAE government released Falcon 2 11B, a more powerful AI model that will challenge Meta Platforms' open-source AI model. 

MKS Instruments (MKSI) closed down more than -9% after announcing that it plans to offer $1.0 billion of convertible senior notes due 2030.

Insulet (PODD) closed down more than -2% on falling price targets as analysts cut their stock price targets by an average of -2.5% since the company reported earnings last Thursday.

Booking Holdings (BKNG) closed down more than -1% after the European Union (EU) said the company has six months to comply with a raft of measures under the EU’s Digital Markets Act to prevent competition abuses.

Applied Materials (AMAT) closed down more than -1% after Jeffries downgraded the stock to hold from buy.

Earnings Reports (5/14/2024)

Arcutis Biotherapeutics Inc (ARQT), Atea Pharmaceuticals Inc (AVIR), Bakkt Holdings Inc (BKKT), BioAtla Inc (BCAB), Boot Barn Holdings Inc (BOOT), DHT Holdings Inc (DHT), Dragonfly Energy Holdings Corp (DFLI), Eos Energy Enterprises Inc (EOSE), Fennec Pharmaceuticals Inc (FRX), Home Depot Inc/The (HD), Infinera Corp (INFN), International Game Technology  (IGT), Jack in the Box Inc (JACK), Liquidia Corp (LQDA), NEXTracker Inc (NXT), NU Holdings Ltd/Cayman Islands (NU), OptimizeRx Corp (OPRX), Origin Materials Inc (ORGN), Precigen Inc (PGEN), Prestige Consumer Healthcare Inc (PBH), Sagimet Biosciences Inc (SGMT), scPharmaceuticals Inc (SCPH), Seadrill Ltd (SDRL), SFL Corp Ltd (SFL), SKYX Platforms Corp (SKYX), SoundThinking Inc (SSTI), Terran Orbital Corp (LLAP), Turnstone Biologics Corp (TSBX), VOXX International Corp (VOXX).

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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.