Stocks Advance on Hopes for Debt Ceiling Progress

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.28%.

U.S. stocks this morning are moderately higher on hopes for some progress in debt ceiling negotiations.  The talks have shifted to a narrower group of staff-level negotiators in hopes of yielding a deal to avert a U.S. default.  House Speaker McCarthy, after his meeting with President Biden on Tuesday, said that the two sides are “far apart” but that a deal was still possible by the end of the week.  President Biden today is leaving today for the G-7 summit in Japan but is cutting his 7-day trip short to return to Washington to work on the debt ceiling.

Stock index futures maintained moderate gains on mixed U.S. housing news after Apr housing starts unexpectedly rose +2.2% to 1.401 million, stronger than expectations of a decline to 1.400 million.  However, Apr building permits, a proxy for future construction, fell -1.5% m/m to 1.416 million, weaker than expectations of 1.430 million.

Global bond yields are mixed.  The 10-year T-note yield is up +1.1 bp at 3.545%.  The 10-year German bund yield is down -2.6 bp at 2.327%, and the UK 10-year gilt yield is up +0.6 bp at 3.822%.

On the bullish side for stocks, regional bank stocks are rallying today, led by a +10% jump in Western Alliance after it reported Q2 deposit growth of +$2 billion as of May 12.   Also, airline stocks are climbing today on signs of stronger demand for air travel.  In addition, Keysight Technologies is up more than +7% after reporting stronger-than-expected Q1 adjusted EPS and forecasting Q3 adjusted EPS above consensus.

On the bearish side, Intapp is down more than -9% after the company offered 2 million shares and selling stockholders offered 4.25 million shares via Bank of America Securities and Barclays.  Also, On Holding is down more than -7% after Williams Trading downgraded the stock to sell.  In addition, Doximity is down more than -6% after forecasting Q1 revenue well below consensus.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.11%.  China’s Shanghai Composite closed down -0.21%, and Japan’s Nikkei Stock Index closed up +0.84%. 

Today’s stock movers…

Regional bank stocks are rallying today, led by a +10% jump in Western Alliance (WAL) after it reported Q2 deposit growth of +$2 billion as of May 12.  Other regional bank stocks rose on the news, with Comerica (CMA) up more than +9%, leading gainers in the S&P 500.  Also, PacWest (PACW) is up more than +6%, and Zions Bancorp (ZION) is up more than +5%.  In addition, KeyCorp (KEY) is up more than +4%, Lincoln National (LNC), Citizens Financial Group (CFG), Truist Financial (TFC), Huntington Bancshares (HBAN), and Fifth Third Bancorp (FITB) are up more than +3%.

Airline stocks are climbing today on signs of stronger demand for air travel after the International Air Transport Association reported forward bookings for the May-September period are +35% higher than in the same period in 2022.  As a result, United Airlines Holdings (UAL) and Delta Air Lines (DAL) are up more than +3%.  Also, American Airlines Group (AAL), Alaska Air Group (ALK), and Southwest Airlines (LUV) are up more than +1%.   

Keysight Technologies (KEYS) is up more than +7% after reporting Q1 adjusted EPS of $2.12, stronger than the consensus of $1.95, and forecast Q3 adjusted EPS of $2.00-$2.06, above the consensus of $1.96. 

Wynn Resorts (WYNN) is up more than +6% after Barclays upgraded the stock to overweight from equal weight with a price target of $135. 

Tesla (TSLA) is up more than +3% to lead gainers in the Nasdaq 100 after CEO Musk said the company would start advertising, a major shift for the company that has shunned traditional marketing to sell its vehicles. 

Progressive Corp (PGR) is up more than +3% after it reported April net premiums written were $6.08 billion, up +26% y/y.

Intapp (INTA) is down more than -9% after the company offered 2 million shares and selling stockholders offered 4.25 million shares via Bank of America Securities and Barclays.

On Holding (ONON) is down more than -7% after Williams Trading downgraded the stock to sell from hold.

Doximity (DOCS) is down more than -6% after forecasting Q1 revenue of $106.5 million-$107.5 million, weaker than the consensus of $111.8 million.

Everest re Group (RE) is down more than -2% after it offered 3 million shares via Citigroup Global Markets and Goldman Sachs. 

Across the markets…

June 10-year T-notes (ZNM23) today are down -2 ticks, and the 10-year T-note yield is up +1.1 bp at 3.547%.  Jun T-notes this morning gave up early gains and are slightly lower on reduced safe-haven demand as stocks rallied on hopes U.S. lawmakers will agree to raise the debt ceiling.  Also, supply pressures are weighing on T-notes ahead of today’s Treasury auction of $15 billion in 20-year T-bonds.

The dollar index (DXY00) today is up +0.41% and posted a 7-week high.  The dollar this morning is climbing on hopes for progress in the debt ceiling negotiations.  Also, weakness in the yuan is bullish for the dollar after the yuan sank to a 5-1/2 month low today against the dollar.  However, strength in stocks today has curbed liquidity demand for the dollar and is limiting the dollar’s upside.

EUR/USD (^EURUSD) today is down by -0.37% and posted a 6-week low.  The euro today is under pressure from a stronger dollar.  However, losses in EUR/USD are limited by hawkish comments from ECB Governing Council member Rehn who said et ECB should continue raising interest rates until core inflation declines. 

Eurozone Apr new car registrations rose +17.2% y/y to 803,000; the ninth consecutive month registrations have increased.

ECB Governing Council member Rehn said, "We need to see that core inflation is clearly and sustainably on a downward trend before we stop tightening monetary policy."

USD/JPY (^USDJPY) today is up by +0.76%.  The yen today extended this week’s decline and dropped to a 2-week low against the dollar.  Today’s rally in the Nikkei Stock Index to a 19-month high has curbed the safe-haven demand for the yen.  Also, hopes that U.S. lawmakers will soon agree to raise the debt ceiling has reduced safe-haven demand for the yen.

Today’s Japanese economic news was bullish for the yen.  Japan's Q1 GDP rose +1.6% (q/q annualized), stronger than expectations of +0.8%.  Also, the Q1 deflator rose +2.0%, the largest increase in 8 years.  In addition, Mar industrial production was revised upward to +1.1% m/m from the initially reported +0.8% m/m.

June gold (GCM3) this morning is down -12.5 (-0.63%), and July silver (SIN23) is down -0.088 (-0.37%).  Precious metals prices this morning are moderately lower, with gold falling to a 6-week low and silver dropping to a 1-1/2 month low.  A rally in the dollar index today to a 7-week high is undercutting metals prices. Also, hopes that U.S. lawmakers will soon agree to raise the debt ceiling have curbed the safe-haven demand for precious metals.  Concerns about industrial metals demand are also pressuring silver prices after today’s U.S. housing news showed Apr building permits, a proxy for future construction, fell -1.5% m/m to 1.416 million, weaker than expectations of 1.430 million.

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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.