Stocks Settle Higher on Trump Speculation

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.53%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.27%.

Stock indexes rallied Monday, with the S&P 500 and Dow Jones Industrials posting new record highs.  Stocks rose after Saturday’s attempted assassination of US presidential candidate Donald Trump galvanized support and sympathy for Trump and bolstered speculation he would win the election in November.  Stocks have support on anticipation that a Trump win would lead to tax cuts, tariffs, and looser regulations that could boost domestic corporate profits.  Stocks maintained their gains Monday after dovish comments from Fed Chair Powell.

Monday’s July Empire manufacturing survey general business conditions index fell -0.6 to -6.6, stronger than expectations of -7.6.

Comments from Fed Chair Powell on Monday were slightly dovish and supportive for stocks when he said Q2 US economic data had provided policymakers greater confidence that inflation is headed down to the Fed's 2% goal, possibly paving the way for near-term interest rate cuts.

The price of Bitcoin (^BTCUSD) surged more than +10% Monday to a 4-week high on speculation that a win in November’s US presidential election by Donald Trump, who has cast himself as crypto-friendly, would be favorable for Bitcoin.

Weak economic news from China boosted concern that a slowdown in China’s economy will undercut global growth prospects, a negative factor for stocks.  China's Q2 GDP rose +0.6% q/q and +5.0% y/y, weaker than expectations of +0.9% q/q and +5.2% y/y.  Also, China's June retail sales rose +2.0% y/y, weaker than expectations of +3.4% y/y and the smallest increase in 14 months.  In addition, China's June new home prices fell -0.67% m/m, the thirteenth consecutive month home prices have declined.

The markets are discounting the chances for a -25 bp rate cut at 9% for the next FOMC meeting on July 30-31 and 100% for the following meeting on September 17-18.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed down -1.19%.  China's Shanghai Composite closed up +0.09%.  Japan's Nikkei Stock 225 Index was closed Monday for the Marine Day holiday.

Interest Rates

September 10-year T-notes (ZNU24) Monday closed down -6.5 ticks.  The 10-year T-note yield rose by +4.8 bp to 4.231%.  Sep T-notes Monday fell back on speculation about higher odds of Donald Trump winning the presidential election in November, which could boost inflation if he pursues tax cuts and a stimulative fiscal policy.  T-notes remained lower on Monday’s stronger-than-expected July Empire manufacturing survey report. Also, Monday’s rally in the S&P 500 to a new record high curbed safe-haven demand for T-notes.

Monday's strength in European government bonds provided some carryover support for T-note prices.  Also, comments from Fed Chair Powell were bullish for T-notes when he said policymakers have greater confidence that inflation is headed down to the Fed's 2% goal.

European government bond yields Monday moved lower.  The 10-year German bund yield fell -2.3 bp at 2.472%.  The 10-year UK gilt yield fell -0.8 bp to 4.101%.

Eurozone May industrial production fell -0.6% m/m, the biggest decline in 4 months but better than expectations of -0.7% m/m. 

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 4% for the July 18 meeting and 82% for the September 12 meeting.

US Stock Movers

Apple (AAPL) closed up more than +1% at a record high after Morgan Stanley named the stock as a “top pick” with a price target of $273. 

Oil service companies rose Monday on speculation a Trump win in November’s presidential election will lead to reduced regulation in US oil drilling. As a result, APA Corp (APA) closed up more than +4%.  Also, Halliburton (HAL), Baker Hughes (BKR), Schlumberger (SLB), Diamondback Energy (FANG), and Devon Energy (DVN) closed up more than +3%.   

Financial stocks gained Monday on speculation a win by Donald Trump in November’s US presidential election will lead to reduced banking regulations.  As a result, Discover Financial Services (DFS) and Capital One Financial (COF) closed up more than +4%.  Also, Synchrony Financial (SYF) closed up more than +3%.  In addition, JPMorgan Chase (JPM), American Express (AXP), and Wells Fargo (WFC) closed up more than +2%.

Private prison companies and firearm-related companies climbed as a failed assassination attempt on former President Trump over the weekend possibly boosted his chances of winning the presidential election in November.  As a result, GEO Group (GEO) and CoreCivic (CXW) closed up more than +8%.  Also, Smith & Wesson Brands (SWBI) and Sturm Ruger & Co (RGR) closed up more than +5%. 

Cryptocurrency-related stocks rallied Monday after the price of Bitcoin (^BTCUSD) surged more than +10% to a 4-week high on speculation that a win in November’s US presidential election by Donald Trump, who has cast himself as crypto-friendly, would be favorable for Bitcoin.  As a result, Coinbase Global (COIN), Marathon Digital Holdings (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) closed up more than +11%.

Goldman Sachs (GS) closed up more than +2% after reporting Q2 net revenue of $12.73 billion, stronger than the consensus of $12.39 billion.

KKR & Co (KKR) closed up more than +2% after Citigroup raised its price target on the stock to $130 from $115. 

Defensive utility stocks moved lower Monday after the S&P 500 climbed to a new record high.  As a result, AES Corp (AES) closed down more than -10% to lead losers in the S&P 500.  Also, CenterPoint Energy (CNP) closed down more than -6%, and NRG Energy (NRG) closed down more than -5%.  In addition, PG&E Corp (PCG), Edison International (EIX), and Consolidated Edison (ED) closed down more than -2%. 

Macy’s (M) closed down more than -11% after it ended buyout discussions with Arkhouse Management and Brigade Capital Management.

Ulta Beauty (ULTA) closed down -4% after Oppenheimer removed the stock from its “top pick” and said its “aggressive” promotions over the past weeks suggest ongoing challenges and potential risks to fiscal year 2024 guidance.

Baxter International (BAX) closed down more than -3% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $30.

Davita (DVA) closed down more than -3% after Politico reported Saturday that the US Federal Trade Commission is probing the company over allegations they made it hard for physicians to leave for rivals and start new businesses.

SBAC Communications Corp (SBAC) closed down more than -1% after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Trump Media & Technology Group (DJT) closed up more than +31% after a failed assassination attempt over the weekend possibly increased the former US president’s chances of becoming president. 

Earnings Reports (7/16/2024)

Bank of America Corp (BAC), Charles Schwab Corp/The (SCHW), JB Hunt Transport Services Inc (JBHT), Morgan Stanley (MS), Omnicom Group Inc (OMC), PNC Financial Services Group Inc (PNC), Progressive Corp/The (PGR), State Street Corp (STT), UnitedHealth Group Inc (UNH).

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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.