What you need to know…
The S&P 500 Index ($SPX) (SPY) this morning is down -0.65%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.39%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.07%.
Stocks this morning are moderately lower and extended Wednesday’s losses. The S&P 500 and Nasdaq 100 today fell to 2-1/4 month lows and the Dow Jones Industrials fell to a 3-month low. Higher interest rates are undercutting technology stocks today and weighing on the overall market after the 10-year T-note yield jumped to a new 11-year high of 3.690%.
Other global central banks raised interest rates today, which also soured market sentiment as the Swiss National Bank (SNB) raised rates by 75 bp, and the Bank of England (BOE) and Bank of Norway raised rates by 50 bp. The Bank of Japan (BOJ), however, maintained record low-interest rates after its policy meeting.
Stocks have negative carry-over from Wednesday when the FOMC raised interest rates by 75 bp for the third consecutive meeting and suggested another such increase was likely in November. Also, comments from Fed Chair Powell dashed hopes the Fed would soften its approach to monetary policy and increased fears of a U.S. recession.
U.S. weekly initial unemployment claims rose +5,000 to 213,000, showing a stronger labor market than expectations of 217,000.
U.S. Aug leading indicators fell -0.3% m/m, weaker than expectations of -0.1% m/m.
Today’s stock movers…
Soaring interest rates are weighing on technology stocks after the 10-year T-note yield today rose to a new 11-year high. Nvidia (NVDA), Advanced Micro Devices (AMD), Marvell Technology (MRVL), and Zscaler (ZS) are down more than -3%. Also, Tesla (TSLA), Applied Materials (AMAT), Microchip Technology (MCHP), Analog Devices (ADI), Palo Alto Networks (PANW), and NXP Semiconductors (NXPI) are down more than -2%.
FactSet Research Systems (FDS) is down more than -7% today to lead losers in the S&P 500 after reporting Q4 adjusted EPS of $3.13, below the consensus of $3.21, and forecasting 2023 adjusted EPS of $14.50-$14.90, the midpoint below the consensus of $14.82.
Etsy (ETSY) is down more than -5% today after Bank of America rated the stock as neutral and said the company’s long-term potential is offset by near-term risk.
Boeing (BA) is down more than -2% today to lead losers in the Dow Jones Industrials after China’s Southern Airlines shunned Boeing and purchased 40 jets from Airbus SE in a deal with around $4.8 billion.
Darden Restaurants (DRI) is down more than -4% today after reporting Q1 comparable same-store sales rose +4.2%, weaker than the consensus of +5.16%, and forecast 2023 EPS from continuing operation of $7.40 to $8.00, the midpoint below the consensus of $7.73.
Eli Lilly (LLY) is up more than +3% to lead gainers in the S&P 500 after the FDA approved its Retevmo drug for adult patients with locally advanced metastatic solid tumors.
Salesforce (CRM) is up more than +2% today to lead gainers in the Dow Jones Industrials after setting out its fiscal year 2026 adjusted operating margin target of more than 25%, alleviating concerns about the company’s growth trajectory.
Lennar (LEN) is up more than +2% today after it forecasted Q4 deliveries of 20,000 to 21,000, the midpoint above the consensus of 20,065.
Activision Blizzard (ATVI) is up more than +1% today to lead gainers in the Nasdaq 100 after Microsoft CEO Nadella said he’s confident Microsoft will gain regulatory approval for its $69 billion purchase of Activision Blizzard.
Across the markets…
Dec 10-year T-notes (ZNZ22) today are down -1-6/32 points, and the 10-year T-note yield is up +15.0 bp at 3.680%. Dec T-notes this morning tumbled to a 13-year nearest-futures low, and the 10-year T-note yield jumped to an 11-year high of 3.690%.
T-notes are falling today on carry-over pressure from Wednesday when the Fed signaled a steeper interest rate hike path. In addition, Fed Chair Powell said the FOMC sees risks to inflation weighted to the upside, and the committee seeks to return to "sufficiently restrictive" interest rates. Also, soaring European government bond yields are undercutting T-note prices as the 10-year German bund yield, and the 10-year UK gilt yield, both rose to new 11-year highs today.
The dollar index (DXY00) this morning is up +0.29% and extended Wednesday’s rally up to a new 20-year high. The outlook for the Fed to maintain its aggressive rate hike stance is underpinning the dollar. Also, a jump in the 10-year T-note yield to a new 11-year high today strengthens the dollar’s interest rate differentials. The dollar fell back from its best levels today after USD/JPY dropped to a 2-week low when Japan intervened in the forex market to support the yen.
EUR/USD (^EURUSD) today is down -0.18% and dropped to a new 20-year low. Comments today from ECB Executive Board member Schnabel weighed on stocks today when she said the ECB must push on with interest rate increases despite the souring outlook for the Eurozone economy. Today’s economic news that showed Eurozone consumer confidence in September fell more than expected to a record low also weighed on EUR/USD.
The Eurozone Sep consumer confidence indicator fell -3.8 to a record low of -28.8, weaker than expectations of -25.5.
ECB Executive Board member Schnabel said inflation in the Eurozone may not have peaked and that the ECB must push on with interest rate increases despite the souring outlook for the Eurozone economy.
USD/JPY (^USDJPY) today is down -1.50%. The yen recovered from a fresh 24-year low today and rallied sharply after Japan intervened in the foreign-exchange market to support the yen. The yen today initially fell to a 24-year low after the BOJ maintained its benchmark rate at a record low, and BOJ Governor Kuroda said there's no prospect for a near-term rate hike. However, the yen rallied after Japan intervened in the forex market, and Masato Kanda, Japan's top currency official, said "the government is concerned about excessive moves in the foreign exchange markets."
As expected, the BOJ, in a 9-0 decision today, kept the policy balance rate at -0.1% and maintained its 10-year JGB yield target at about 0%.
BOJ Governor Kuroda said there's no need for the BOJ to change forward guidance for 2 or 3 years, and there is no prospect for a near-term rate hike.
October gold (GCV2) is up +5.0 (+0.30%), and December silver (SIZ22) is up +0.105 (+0.51%). Precious metals this morning are moderately higher. Metals recovered from early losses and moved higher today after the dollar fell back from its best levels when Japan intervened in the foreign exchange market in support of the yen. Gold prices today initially fell after the dollar index rallied to a 20-year high and after global bond yields rose. Also, fund liquidation of gold is bearish for prices as long positions in gold ETF’s dropped to an 8-month low Wednesday.
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