Stocks Undercut as US Core Inflation Fails to Decline

The S&P 500 Index ($SPX) (SPY) today is down by -0.60%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -1.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.19%.

Stocks are under pressure today, with the Dow Jones Industrials falling to a 4-week low.  Today’s as-expected US consumer price report is weighing on stocks after US core consumer prices in August rose +3.2% y/y, unchanged from July and well above the Fed’s +2.0% target.  The stickiness of core prices boosted T-note yields and knocked the chances of a 50 bp rate cut at next week’s FOMC meeting down to 17% from 50% after the release of last Friday’s US payroll report.  The strength of chip stocks today is limiting losses in the Nasdaq 100.

US MBA mortgage applications rose +1.4% in the week ended September 6, with the purchase mortgage sub-index up +1.8% and the refinancing mortgage sub-index up +0.9%.  The average 30-year fixed rate mortgage fell -14 bp to a 19-month low of 6.29% from 6.43% in the prior week.

US Aug CPI eased to +2.5% y/y from +2.9% y/y in July, right on expectations and the smallest increase in 3-1/2 years.  However, Aug CPI ex-food and energy was unchanged from July at +3.2% y/y, right on expectations.

In the wake of last night’s debate, the odds on the betting website PredictIt of Vice President Harris winning the presidency rose to 56% from 53% before the debate. 

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

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.42%.  China's Shanghai Composite fell to a 7-month low and closed down -0.82%.  Japan's Nikkei Stock 225 closed down by -1.49%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down by -6 ticks.  The 10-year T-note yield is up +0.4 bp at 3.646%.  Dec T-notes today fell back from a 15-month high and are mildly lower, and the 10-year T-note yield rebounded from a 15-month low of 3.603%.  T-notes gave up an early advance and turned lower after the US Aug core CPI rose +3.2% y/y, right on expectations but well above the Fed’s 2.0% price target.  The core CPI report knocked the chances of a 50 bp rate cut at next week’s FOMC meeting down to 17% from 50% last Friday.  Supply pressures are also negative for T-notes as the Treasury will auction $39 billion 10-year T-notes later today. Losses in T-notes are limited due to carryover support from strength in European government bonds. 

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 5-week low of 2.107% and is down -2.1 bp at 2.110%.  The 10-year UK gilt fell to a 5-week low of 3.756% and is down -5.1 bp at 3.768%.

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

US Stock Movers

Strength in chip stocks today is supportive for the overall market. Nvidia (NVDA) is up more than +3% to lead gainers in the Nasdaq 100.  Also, ASML Holding NV (ASML) and ARM Holdings Plc (ARM) are up more than +2%.  In addition, Marvell Technology (MRVL), Micron Technology (MU), Advanced Micro Devices (AMD), and Applied Materials (AMAT) are up more than +1%.

Trump Media & Technology (DJT) is down more than -16% following last night’s Harris-Trump debate as the odds on the betting website PredictIt of Vice President Harris winning the presidency rose to 56% from 53% before the debate. 

GameStop (GME) is down more than -12% after reporting Q2 net sales of $798.3 million, weaker than the consensus of $895.5 million.   

Palantir Technologies (PLTR) is down more than -2% after a trading update showed exchange-traded funds managed by Cathie Wood’s Ark Investment Management sold 124,626 shares of Palantir. 

Rollins Inc (ROL) is down more than -3% on negative carryover from a -20% plunge in peer Rentokil after it issued a surprise downgrade to its full-year growth estimates. 

Morgan Stanley (MS) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy. 

Viridian Therapeutics (VRDN) is down more than -2% after announcing an underwritten public offering of $150 million of shares of its common stock and series B preferred stock.

Albemarle (ALB) is up more than +13% to lead gainers in the S&P 500 as lithium stocks rallied after UBS said CATL curtailed lithium production at its Jiangxi operation. 

Dave & Buster’s Entertainment (PLAY) is up more than +6% after reporting Q2 adjusted EPS of $1.12, stronger than the consensus of 84 cents. 

AES Corp (AES) is up more than +4% after Jeffries initiated coverage on the stock with a recommendation of buy and a price target of $20. 

Viking Therapeutics (VKTX) is up more than +3% after JPMorgan Chase initiated coverage on the stock with a recommendation of overweight and a price target of $80.

William-Sonoma (WSM) is up more than +2% after Jeffries upgraded the stock to buy from hold with a price target of $156.   

Earnings Reports (9/11/2024)

Designer Brands Inc (DBI), Oxford Industries Inc (OXM), Vera Bradley Inc (VRA).

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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.