Stocks See Support as Bond Yields Fall on Powell Comments

The S&P 500 Index ($SPX) (SPY) this morning is up +0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.10%. 

US stocks this morning are slightly higher, with the Nasdaq 100 posting a 1-month high.  Stocks pushed higher as bond yields fell due to dovish comments from Fed Chair Powell, who said he doesn't think it's likely that the Fed's next move would be a rate hike. 

Stock gains are limited after US Apr core producer prices rose more than expected, which bolstered the outlook for the Fed to keep interest rates higher for longer. 

US Apr PPI final demand rose +2.2% y/y, right on expectations.  However, the Apr PPI ex-food and energy rose +2.4% y/y, unchanged from March and slightly stronger than expectations of +2.3% y/y.

Fed Chair Powell said, "Q1 in the US was notable for lack of inflation progress, and that told us we'll need to be patient and let restrictive policy do its work."  He added, "I don't think it's likely that the next move would be a rate hike, but it is more likely that we will hold the policy rate where it is."

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 10% for the June 11-12 FOMC meeting and 32% for the following meeting on July 30-31.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.02%.  China's Shanghai Composite closed down -0.07%.  Japan's Nikkei Stock Index closed up +0.46%. 

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +4 ticks.  The 10-year T-note yield is down -2.0 bp at 4.467%.  June T-notes recovered from a 1-week low, and the 10-year T-note yield fell back from a 1-week high of 4.528%.  T-notes saw support on dovish comments from Fed Chair Powell, who said he doesn't think it's likely that the next move by the Fed would be a rate hike.  T-notes initially came under pressure after the US core Apr PPI rose more than expected, which was a hawkish factor for Fed policy. 

European government bond yields today are mixed.  The 10-year German bund yield rose to a 1-week high of 2.555% and is up +2.2 bp at 2.532%.  The 10-year UK gilt yield fell back from a 1-week high of 4.207% and is down -1.5 bp at 4.159%.

The German May ZEW survey expectations of economic growth index rose +4.2 to a 2-1/4 year high of 47.1, stronger than expectations of 46.4.

ECB Governing Council member Wunsch said the ECB shouldn't rush into further interest rate cuts after a likely first cut in June as "wage pressures still persist, which is keeping inflation high in the services sector."

US Stock Movers

Seagate Technology Holdings Plc (STX) is up more than +3% after Citigroup reinstated coverage on the stock with a recommendation of buy and a price target of $110. 

Super Micro Computer (SMCI) is up more than +2% after CQG Partners reported a new position in the stock in Q1 of 1.31 million shares, or 2.2% of the outstanding shares. 

Charles Schwab (SCHW) is up more than +2% after reporting $10 billion in total net new assets brought to the company by new and existing clients in April.

Tesla (TSLA) is up more than +2% after the Biden administration officially announced it was raising tariffs on a wide range of Chinese imports, including electric vehicles.

On Holding AG (ONON) is up more than +14% after reporting Q1 gross margin of 59.7%, better than the consensus of 59.2%. 

Paysafe (PSFE) is up more than +22% after reporting Q1 revenue of $417.7 million, stronger than the consensus of $408.3 million. 

Stellantis NV (STLA) is up more than +2% after announcing that it will start selling electric vehicles made by Chinese partner Leapmotor in Europe beginning in September. 

Orion Group Holdings (ORN) is up more than +1% after Craig-Hallum Capital Group LLC initiated coverage on the stock with a buy recommendation and a price target of $14.

Marathon Petroleum (MPC) is down more than -4% to lead losers in the S&P 500 after MSCI ESG Research cut the company’s MSCI ESG rating to BBB from A. 

Axon Enterprise (AXON) is down more than -2% on signs of inside selling after an SEC filing showed President Isner and several board members sold $27.3 million of stock. 

Merchants Bancorp (MBIN) is down more than -10% after launching an underwritten public offering of 2.4 million shares of common stock. 

StoneCo (STNE) is down more than -10% after reporting Q1 adjusted Ebitda of 1.51 billion reals, weaker than expectations of 1.62 billion reals.

Home Depot (HD) is down nearly -1% after reporting Q1 comparable sales fell -2.80%, a bigger decline than the consensus of -2.19%. 

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.