Stocks Rally on Strength in Apple and Energy Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +1.19%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.98%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.27%. 

Stocks this morning are moderately higher, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 all posting 2-week highs.  Apple is up more than +2% today to lift technology stocks as pre-order data for the latest versions of its iPhone point to strong interest and demand.  Also, a jump of more than +2% in crude oil prices today is lifting energy stocks and boosting the overall market.

Optimism that inflation has peaked is giving stock index futures a boost today.  Expectations are for Tuesday’s U.S. August CPI report to slow to 8.0% y/y from 8.5% in July.

In a note to clients today, Goldman Sachs said, "despite concerns that investors have about the U.S. equity market, we believe it offers greater absolute and risk-adjusted return potential than recession-plagued European markets."

Today’s stock movers…

Energy stocks and energy service providers are climbing today, with the price of WTI crude up more than +2%.   Devon Energy (DVN) is up more than +4%.  Marathon Oil (MRO), Phillips 66 (PSX), and Diamondback Energy (FANG) are up more than +3%.  Occidental Petroleum (OXY), Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP), and Valero Energy (VLO) are up more than +2% 

Apple (AAPL) is up more than +2% today to lead gainers in the Dow Jones Industrials as pre-order data for the latest versions of its iPhone point to strong interest and demand.

Bristol Myers Squibb (BMY) is up more than +5% today after its drug “deucravatinib” received approval from the FDA for the treatment of moderate-to-severe psoriasis with no “black box” warnings.

APA Corp (APA) is up more than +6% today to lead gainers in the S&P 500 after Citigroup upgraded the stock to buy from neutral.

Gilead Sciences (GILD) is up more than +3% today after the company said it had entered into agreements with generic manufacturers Lupin Ltd, Apotex Inc, Macleods Pharma Ltd, Hetero Labs Ltd, and Cipla Ltd to resolve the litigation and patent challenges associated with the Descovy, Vemlidy, and Odefsey drugs. 

Lucid Group (LCID) is up more than +5% today to lead gainers in the Nasdaq 100 after R.F. Lafferty & Co initiated coverage of the stock with a buy rating.

Agricultural stocks are falling today as grain exports from Ukraine continue to ramp up, and additional ships have been authorized to depart in recent days.  As a result, Mosaic (MOS) is down more than -5% to lead losers in the S&P 500.  CF Industries (CF) and Intrepid Potash (IPI) are down more than -4%.  Archer-Daniels-Midland (ADM) is down more than -3%.

Amgen (AMGN) is down more than -2% today to lead losers in the Dow Jones Industrials and Nasdaq 100 after Mizuho Securities said “lukewarm” data on Amgen’s drug and the approval of Bristol Meyers Squibb’s Sotyktu are “potential headwinds” for Amgen.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +13 ticks, and the 10-year T-note yield is down -2.9 bp at 3.281%.  Dec T-notes this morning are moderately higher on positive carry-over from strength in European government bond markets.  T-note are also seeing support from expectations that Tuesday’s U.S. Aug CPI report will ease to 8.0% y/y from 8.5% y/y in July.  Further strength in T-notes today may be limited by supply pressures as the Treasury will auction $41 billion of 3-year T-notes and $32 billion of 10-year T-notes later this afternoon.

The dollar index (DXY00) this morning is down -0.61% and posted a 2-week low. Lower T-note yields today are undercutting the dollar.  Also, a rally in stocks today has reduced the liquidity demand for the dollar.  In addition, strength in the euro is weighing on the dollar after hawkish ECB comments today pushed EUR/USD up to a 3-1/2 week high. 

EUR/USD (^EURUSD) today is up +0.68% at a 3-1/2 week high.  The euro today is moderately higher and garnered support on hawkish comments from ECB Governing Council member and Bundesbank President Nagel and ECB Executive Board member Elderson.  Also, an easing of energy crisis concerns is bullish for EUR/USD, with European nat-gas prices down more than -6% today at a 1-month low.

ECB Governing Council member and Bundesbank President Nagel said the ECB would be required to continue raising interest rates if the current trend in consumer prices continues.

ECB Executive Board member Elderson said that more interest rate hikes by the ECB will come "as it's very important that the expectations that the people have on how inflation will develop in the medium to long term will not become de-anchored." 

Italy's July industrial production rose +0.4% m/m, stronger than expectations of unchanged.

USD/JPY (^USDJPY) today is up +0.18%.  The yen is modestly lower today against the dollar on central bank divergence, with the Fed in the middle of raising interest rates while the BOJ maintains QE and record-low interest rates.  Losses in the yen were limited by lower T-note yields, along with today’s report from Nikkei that Japan is making arrangements to end its daily limit on arrivals from overseas by October and will also consider removing other remaining barriers to foreign tourism.

October gold (GCV22) is up +6.7 (+0.39%), and December silver (SIZ22) is up +0.768 (+4.12%).  Precious metals this morning are moderately higher, with gold at a 1-1/2 week high and silver climbing to a 3-week high.  A slump in the dollar index today to a 2-week low is bullish for metals prices.  Gold has also found support today from lower global bond yields.  Lower T-note yields today are also supportive of gold prices.  However, gains in gold are limited by continued long liquidation pressure after long gold positions in ETFs fell to a 7-month low last Friday.

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