Stocks Stabilize and Recover Some of Monday’s Slump

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +1.04%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.76%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.02%.

US stocks on Tuesday rallied moderately and recovered some of Monday’s sharp losses.  Dip buyers emerged Tuesday to push stocks higher after Monday’s sharp selloff.

Tuesday’s surge in Japanese stocks provided carryover support to US stocks.  Japan’s Nikkei Stock Index rallied more than +10% Tuesday as a weaker yen sparked a rally in Japanese exporters after the Bank of Japan (BOJ) said it was holding a three-way meeting with the Ministry of Finance and the Financial Services Agency met in Tokyo to discuss international markets.  The Nikkei Stock Index plunged by more than -12% on Monday after a rally in the yen to a 7-month high against the dollar caused a further unwinding of the yen carry trade. 

Some positive corporate news on Tuesday also boosted stocks.  Kenvue rose more than +14% after reporting stronger-than-expected Q2 net sales.   Also, Uber Technologies rallied more than +10% after reporting stronger-than-expected Q2 gross bookings.  Molson Coors Beverage closed up more than +5% after reporting better-than-expected Q2 net sales.

The US June trade deficit shrank to -$73.1 billion from a revised -$75.1 billion in May but was larger than expectations of -$72.5 billion and was a negative factor for Q2 GDP.

The market consensus is that Q2 earnings for the S&P 500 companies will rise +9% y/y.  About half of the companies in the S&P 500 have reported thus far.  According to Bloomberg, most reporting companies have beaten their earnings consensus, but only 43% have beaten revenue expectations, the lowest percentage in five years.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 79% for a -50 bp rate cut at that meeting.

Overseas stock markets Tuesday settled higher.  The Euro Stoxx 50 closed up +0.08%.  China's Shanghai Composite recovered from a 5-3/4 month low and closed up +0.23%.  Japan's Nikkei Stock 225 closed up sharply by +10.23%.

Interest Rates

September 10-year T-notes (ZNU24) Tuesday closed down -22 ticks.  The 10-year T-note yield rose +9.4 bp to 3.882%.  Sep T-notes were under pressure Tuesday from a sharp recovery in US equity markets, which curbed safe-haven demand for government debt.  T-notes fell to their lows Tuesday afternoon on slack demand for the Treasury’s $58 billion auction of 3-year T-notes that had a bid-to-cover ratio of 2.55, below the 10-auction average of 2.57. 

European government bond yields Tuesday moved higher.  The 10-year German bund yield rose +1.0 bp to 2.201%.  The 10-year UK gilt yield rose +5.1 bp to 3.920%.

Eurozone June retail sales fell -0.3% m/m, weaker than expectations of -0.1% m/m and the biggest decline in 6 months.

German Jun factory orders rose +3.9% m/m, stronger than expectations of +0.5% m/m and the largest increase in 6 months.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 94% for the September 12 meeting.

US Stock Movers

Kenvue (KVUE) closed up more than +14% to lead gainers in the S&P 500 after reporting Q2 net sales of $4.00 billion, stronger than the consensus of $3.93 billion.

Uber Technologies (UBER) closed up more than +10% after reporting Q2 gross bookings of $39.95 billion, above the consensus of $39.70 billion. 

Nvidia (NVDA) closed up more than +3% after New Street Research upgraded the stock to buy from neutral with a price target of $120. 

Baxter International (BAX) closed up more than +6% after reporting Q2 sales of $3.871 billion, better than the consensus of $3.76 billion, and raising its full-year sales forecast to up +3% from a prior view of up +2%.

Zoetis (ZTS) closed up more than +5% after reporting Q2 revenue of $2.40 billion, stronger than the consensus of $2.31 billion, and raising its full-year revenue forecast to $9.10 billion-$9.25 billion from a prior forecast of $9.05 billion-$9.20 billion. 

Molson Coors Beverage (TAP) closed up more than +5% after reporting Q2 net sales of $3.25 billion, stronger than the consensus of $3.18 billion.

Caterpillar (CAT) closed up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q2 adjusted EPS of $5.99, stronger than the consensus of $5.53 and said it expects full-year adjusted operating profit margin above the top end of its targets.

Cadence Design Systems (CDNS) closed up more than +5% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $318. 

Palantir Technologies (PLTR) closed up more than +10% after reporting Q2 revenue of $678.1 million, better than the consensus of $652.8 million, and raising its full-year revenue forecast to $2.74 billion-$2.75 billion from a previous estimate of $2.68 billion-$2.69 billion, stronger than the consensus of $2.74 billion.

Henry Schein (HSIC) closed down more than -8% to lead losers in the S&P 500 after reporting Q2 net sales of $3.14 billion, weaker than the consensus of $3.26 billion.

Vulcan Materials (VMC) closed down more than -4% after reporting Q2 adjusted Ebitda of $603 million, below the consensus of $615 million, and cutting its full-year adjusted Ebitda forecast to $1.00 billion-$2.15 billion from a previous forecast of $2.15 billion-$2.30 billion, weaker than the consensus of $2.19 billion. 

Expeditors International of Washington (EXPD) closed down more than -4% after reporting Q2 operating income of $223.9 million, weaker than the consensus of $231.2 million.

Warner Bros Discovery (WBD) closed down more than -3% to lead losers in the Nasdaq 100 after the Financial Times reported that Warner Bros Is looking to offload smaller assets in an attempt to avoid a breakup of the company. 

Intel (INTC) closed down more than -1% after Argus Research downgraded the stock to hold from buy, saying the company “faces a long road to recovery.” 

Sempra (SRE) closed down more than -1% after reporting Q2 adjusted EPS of 89 cents, below the consensus of 92 cents, and forecast full-year adjusted EPS of $4.60-$4.90, the midpoint below the consensus of $4.78. 

Teradata (TDC) closed down more than -14% after reporting Q2 revenue of $436 million, below the consensus of $446.9 million.   

Earnings Reports (8/7/2024)

Atmos Energy Corp (ATO), Bio-Techne Corp (TECH), CF Industries Holdings Inc (CF), Charles River Laboratories Int (CRL), Corpay Inc (CPAY), CVS Health Corp (CVS), Emerson Electric Co (EMR), Equinix Inc (EQIX), Global Payments Inc (GPN), Hilton Worldwide Holdings Inc (HLT), Marathon Oil Corp (MRO), McKesson Corp (MCK), Monster Beverage Corp (MNST), NiSource Inc (NI), Occidental Petroleum Corp (OXY), Ralph Lauren Corp (RL), Rockwell Automation Inc (ROK), Walt Disney Co/The (DIS), Warner Bros Discovery Inc (WBD), Zimmer Biomet Holdings Inc (ZBH).

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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.