Stocks Climb as Nasdaq 100 Posts a New Record High on Falling Bond Yields

The S&P 500 Index ($SPX) (SPY) today is up +0.11%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.09%.

Stock indexes today are moderately higher in this holiday-shortened session, with the Nasdaq 100 posting a new record high.  Stock indexes will end trading at 1 pm EST and close Thursday for the July 4 holiday.  Today’s decline in T-note yields supports stocks after weaker-than-expected US labor market news showed the June ADP employment change rose less than expected and weekly continuing unemployment claims rose to a 2-1/2 year high, a dovish factor for Fed policy. 

A bearish factor for stocks was today’s news that showed the US May trade deficit widened to a 19-month high, a negative factor for Q2 GDP.

US MBA mortgage applications fell -2.6% in the week ended June 28, with the purchase mortgage sub-index falling -3.3% and the refinancing mortgage sub-index falling-1.5%.  The average 30-year fixed rate mortgage rose +10 bp to 7.03% from 6.93% in the prior week.

The US Jun ADP employment change rose +150,000, weaker than expectations of +165,000.

US weekly initial unemployment claims rose +4,000 to 238,000, showing a weaker labor market than expectations of 235,000.  Weekly continuing claims rose +26,000 to a 2-1/2 year high of 1.858 million, showing a weaker labor market than expectations of 1.840 million.

The US May trade deficit widened to a 19-month high of -$75.1 billion from -$74.5 billion in April.

The markets are discounting the chances for a -25 bp rate cut at 7% for the next FOMC meeting on July 30-31 and 65% for the following meeting on September 17-18.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +1.20%.  China's Shanghai Composite closed down -0.49%.  Japan's Nikkei Stock 225 Index climbed to a 3-month high and closed up +1.26%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +6 ticks.  The 10-year T-note yield is down -2.8 bp to 4.404%.  Sep T-notes today are moderately higher on weaker-than-expected US labor market news, a dovish factor for Fed policy. The June ADP employment change rose less than expected, and weekly continuing unemployment claims climbed to a 2-1/2 year high.  Limiting the upside in T-notes is the weakness in 10-year German bunds, which fell to a 3-week low today. 

European government bond yields today are mixed.  The 10-year German bund yield rose to a 3-week high of 2.642% and is up +1.2 bp at 2.615%.  The 10-year UK gilt yield is down -4.4 bp at 4.204%.

Eurozone May PPI fell -0.2% m/m and -4.2% y/y, weaker than expectations of -0.1% m/m and -4.1% y/y.

The Eurozone Jun S&P composite PMI was revised upward by +0.1 to 50.9 from the previously reported 50.8.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 7% for the July 18 meeting and 65% for the September 12 meeting.

US Stock Movers

Paramount Global (PARA) is up more than +10% to lead gainers in the S&P 500 after Bloomberg News reported that Skydance Media had reached a preliminary agreement to buy National Amusements and merge with Paramount. 

Tesla (TSLA) is up more than +3% to lead gainers in the Nasdaq 100 after Bank of America Global Research raised its price target on the stock to $260 from $220.

Mining stocks are climbing today, with gold, silver, and copper prices rising to 1-1/2 week highs.  As a result, Freeport McMoRan (FCX) is up more than +3%, and Newmont (NEM) is up more than +2%.

Casino stocks are moving higher today after BTIG LLC initiated coverage on MGM Resorts International with a buy rating and a price target of $52. As a result, MGM Resorts International (MGM), Caesars Entertainment (CZR), and Wynn Resorts Ltd (WYNN) are up more than +2%.

Quest Diagnostics (DGX) is up more than +1% after agreeing to buy LifeLabs from Omers for about C$1.35 billion, including net debt. 

Dell Technologies (DELL) is up more than +1% after Bank of America added the stock to its US number 1 list. 

Permian Resources (PR) is up nearly +1% after BMO Capital Markets upgraded the stock to outperform from market perform with a price target of $21. 

Cryptocurrency-related stocks are under pressure today, with the price of Bitcoin (^BTCUSD) down more than -2% at a 1-week low.  As a result, Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are down more than -1%. 

Simulations Plus (SLP) is down more than -11% after cutting its 2024 diluted EPS estimate to 46 cents-48 cents from a June estimate of 54 cents-56 cents, and after the company’s Board of Directors said it is discontinuing its quarterly cash dividend.

Azek Co. (AZEK) is down more than -3% after D.A. Davidson downgraded the stock to neutral from buy.

Charter Communications (CHTR) is down more than -1% after Citigroup downgraded the stock to sell from neutral with a price target of $255.

Earnings Reports (7/3/2024)

Constellation Brands Inc (STZ), Dakota Gold Corp (DC), Lifecore Biomedical Inc (LFCR), Simulations Plus Inc (SLP).

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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.