Stocks Finish Higher on Support From Chip Stock Rebound

The S&P 500 Index ($SPX) (SPY) Monday closed up +1.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.30%.

Stocks on Monday posted moderate gains on some dip buying following last Friday’s sharp sell-off.  Also, the strength in chip stocks on Monday boosted the broader market.  In addition, some positive corporate news on Monday gave stocks a lift.  Palantir Technologies closed up more than +13%, and Dell Technologies closed up more than +3%, following the news that both companies will join the S&P 500 as part of the latest quarterly change to the index before the opening of trading on Sep 23.  Boeing also closed up more than +3% on optimism that a labor deal with its largest union will avoid a strike at its Seattle-area factories.

Monday’s US economic news was supportive for stocks. Jul wholesale trade sales rose +1.1% m/m, stronger than expectations of +0.3% m/m and the largest increase in 5 months. Also, Jul consumer credit rose +$25.452 billion, stronger than expectations of +$10.400 billion and the most in 1-1/2 years.

The markets are looking ahead to US consumer price news on Wednesday to see if inflation falls by enough to allow the Fed to ease monetary policy aggressively.  The consensus is for Aug CPI to ease to +2.6% y/y from +2.9% y/y in July and for the Aug core CPI to be unchanged from July at +3.2% y/y. 

Weakness in China’s CPI and PPI reports fueled concern about deflation and signaled slack consumer demand, which was negative for global growth prospects and bearish for global stocks. China’s Aug CPI rose +0.6% y/y, slightly weaker than expectations of +0.7% y/y.  Also, Aug PPI fell -1.8% y/y, weaker than expectations of -1.5% y/y. 

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 31% for a -50 bp rate cut at that meeting.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed up +0.86%.  China's Shanghai Composite fell to a 7-month low and closed down -1.06%.  Japan's Nikkei Stock 225 dropped to a 1-month low and closed down by -0.48%.

Interest Rates

December 10-year T-notes (ZNZ24) Monday closed up +1 tick.  The 10-year T-note yield fell -1.1 bp to 3.697%.  Dec T-notes Monday recovered from early losses and settled slightly higher.  T-notes found carryover support Monday from a rally in European government bonds. T-notes Monday initially opened lower as a rebound in stocks reduced safe-haven demand for T-notes.  Also, supply pressures are undercutting T-notes as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with Tuesday’s auction of $58 billion of 3-year T-notes. 

European government bond yields on Monday finished lower.  The 10-year German bund yield fell -0.4 bp to 2.168%.  The 10-year UK gilt yield fell -3.0 bp to 3.856%.

The Eurozone Sep Sentix investor confidence index unexpectedly fell -1.5 to an 8-month low of -15.4, weaker than expectations of an increase to -12.2.

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

US Stock Movers

Chip stocks rallied Monday and gave the overall market a boost.  ARM Holdings Plc (ARM) closed up more than +6% to lead gainers in the Nasdaq 100 after the Financial Times reported that Apple’s iPhone 16 will include a next-generation chip based on ARM’s “newest design architecture.” Also, Nvidia (NVDA) and Marvell Technology (MRVL) closed up more than +3%.  In addition, Analog Devices (ADI), Broadcom (AVGO), and Advanced Micro Devices (AMD) closed up more than +2%.  Finally, Applied Materials (AMAT), ON Semiconductor (ON), Texas Instruments (TXN), Microchip Technology (MCHP), and Qualcomm (QCOM) closed up more than +1%.

Shares of health insurers with Medicare Advantage plans retreated Monday after Leerink Partners published a report saying those plans might have a tougher time earning high-quality “star ratings” that drive bonus payments.  As a result, Humana (HUM) closed down more than -3%, and CVS Health Corp (CVS) closed down more than -2%.  Also, Molina Healthcare (MOH) and Universal Health Services (UHS) closed down more than -1%.  In addition, HCA Healthcare (HCA) closed down -0.95%, and UnitedHealth Group (UNH) close down -0.61%.

Palantir Technologies (PLTR) closed up more than +13%, and Dell Technologies (DELL) closed up more than +3% following news that both companies will join the S&P 500 as part of the latest quarterly change to the index before the opening of trading on Sep 23.

Verizon Communications (VZ) closed up more than +3% to lead gainers in the Dow Jones Industrials after CEO Vestberg said he sees 50% of the consumer base on the premium My Plan by year-end.

Boeing (BA) closed up more than +3% on optimism that a labor deal with its largest union will avoid a strike at its Seattle-area factories.

Moderna (MRNA) closed up more than +4% after the UK’s Medicines and Healthcare Products Regulatory Agency authorized Moderna’s updated Covid vaccine targeting the JN.1 variant.

Summit Therapeutics (SMMT) closed up more than +55% after the latest data from trials of its lung cancer drug ivonescimab developed in partnership with Akeso, showed “statistically significant improvement” in progression-free survival compared to Merk & Co’s Keytruda. 

MarineMax (HZO) closed up more than +4% after Citigroup upgraded the stock to buy from neutral with a price target of $44.   

United States Steel (X) closed up more than +4% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $42. 

Merck & Co (MRK) closed down more than -2% to lead losers in the Dow Jones industrials after the latest data from trials of Summit Therapeutics lung cancer drug ivonescimab showed “statistically significant improvement” in progression-free survival compared to Merk & Co’s Keytruda. 

Bio-Rad Laboratories (BIO) closed down more than -2%, and Etsy (ETSY) closed down more than -1% following news that both companies will leave the S&P 500 as part of the latest quarterly change to the index before the opening of trading on Sep 23.

Invitation Homes (INVH) closed down -0.72% after RBC Capital Markets downgraded the stock to sector perform from outperform.

Colgate-Palmolive (CL) closed down -0.84% after Deutsche Bank downgraded the stock to hold from buy.

Earnings Reports (9/10/2024)

Academy Sports & Outdoors Inc (ASO), Cantaloupe Inc (CTLP), Critical Metals Corp (CRML), Dave & Buster's Entertainment (PLAY), Evolution Petroleum Corp (EPM), GameStop Corp (GME), Innovage Holding Corp (INNV), Mama's Creations Inc (MAMA), Petco Health & Wellness Co Inc (WOOF).

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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.