What you need to know…
The S&P 500 Index ($SPX) (SPY) this morning is down -0.93%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.4%.
Stocks this morning are mostly lower. However, there is a rally in casino stocks with operations in Macau after the Macau government said tour groups from mainland China could resume as early as November.
Stocks are being undercut by concern that the Fed’s resolve to fight inflation will push the economy into recession. Higher bond yields are also weighing on stocks today, with the 10-year T-note yield up +6.8 bp to 3.753%, modestly below last Friday’s 12-year high of 3.825%.
This morning’s U.S. economic news was weaker than expected and bearish for stocks. The Aug Chicago Fed national activity index fell -0.29 to 0.0, weaker than expectations of a decline to 0.23. Also, the Sep Dallas Fed manufacturing outlook level of general business activity unexpectedly fell -4.3 to -17.2, weaker than expectations of an increase to -9.0.
Hawkish comments from Boston Fed President Collins were bearish for stocks when she said, "returning inflation to target will require further tightening of monetary policy, as signaled in the recent FOMC projections."
Today’s stock movers…
A rally in technology stocks today on bargain hunting is lifting the overall market. Amazon.com (AMZN), Tesla (TSLA), Netflix (NFLX), Crowdstrike Holdings (CRWD), Palo Alto Networks (PANW), Datadog (DDOG), and Zscaler (ZS) are all up more than +2%. Finally, Apple (AAPL) is up more than +2% to lead gainers in the S&P 500.
U.S.-listed casino stocks with operations in Macau are sharply higher this morning after the Macau government said tour groups from mainland China could resume as early as November. Wynn Resorts (WYNN) is up more than +12% to lead gainers in the S&P 500. Also, Las Vegas Sands (LVS) is up more than +11%, and MGM Resorts International (MGM) is up more than +3%.
Generac Holdings (GNRC) is up more than +5% today after a weekend article in Barron’s said the prospect of even more power outages across the U.S. would benefit the company.
Planet Fitness (PLNT) is up more than +4% today after Raymond James upgraded the stock to strong buy from market perform with a price target of $70.
PG&E Corp (PCG) is up more than +3% today after it was announced after last Friday’s close that the company would join the S&P 500 Index before trading opens on October 3.
Real estate stocks and property managers are falling today as interest rates continue to rise with expectations of further Fed tightening. Everest Re Group Ltd (RE) and Duke Realty (DRE) are down more than -2%. Also, Healthpeak Properties (PEAK), Kimco Realty (KIM), Vornado Realty Trust (VNO), Simon Property Group (SPG), Boston Properties (BXP), and Alexandria Real Estate Equities (ARE) are down more than -1%.
Prologis (PLD), which owns Duke Realty, is down more than -2% to lead losers in the S&P 500 after it was announced last Friday after the close that Duke Realty will be removed from the S&P 500 Index on October 3.
Across the markets…
Dec 10-year T-notes (ZNZ22) today are down -13 ticks, and the 10-year T-note yield is up +6.8 bp at 3.753%. Dec T-notes are holding just above last Friday’s 13-year nearest-futures low, and the 10-year T-note yield is just below last Friday’s 12-year high of 3.825%.
T-note prices this morning are under pressure from soaring European government bond yields as the 10-year UK gilt yield today rose to a 12-year high of 4.195%, and the 10-year German bund yield rose to a 10-year high of 2.130%. Also, supply pressures are weighing on T-notes as the Treasury today will auction $43 billion of 2-year T-notes as part of this week’s $145 billion auction package of T-notes and floating-rate notes.
The dollar index (DXY00) this morning is up +0.10%. The dollar today rose to a new 20-year high and is modestly higher. Higher T-note yields today have strengthened the dollar’s interest rate differentials. The dollar fell back from its best levels today after the British pound recovered from a record low on speculation the BOE will take action to stem the plunge ion the pound.
EUR/USD (^EURUSD) today is down -0.20% and posted a fresh 20-year low. Dollar strength today is weighing on EUR/USD, along with the decline in German business confidence to a 2-1/4 year low. Also, political risks in Italy are bearish for the euro after right-wing candidate Meloni won a majority in Sunday's election. There are fears that Meloni will reverse the market reforms put into place by outgoing Italian prime minister Draghi. EUR/USD recovered from its worst levels on hawkish ECB comments.
ECB Vice President Guindos said the Eurozone economy will slow significantly in the third and fourth quarters this year, and "reducing inflation is the main contribution we can have to improve the economic situation."
ECB Governing Council member Simkus said "inflation trends are intensifying," and the ECB will raise interest rates by at least 50 bp at the October meeting.
The German Sep IFO business climate index fell -4.3 to a 2-1/4 year low of 84.3, weaker than expectations of 87.0.
USD/JPY (^USDJPY) today is up +0.55%. The yen today is moderately lower due to higher T-note yields. Also, weak Japanese economic news today and dovish comments from BOJ Governor Kuroda weighed on the yen.
BOJ Governor Kuroda said uncertainties surrounding the Japanese economy are very high, and he believes BOJ monetary easing will continue in 2023 and 2024.
The Japan Sep Jibun Bank manufacturing PMI fell -0.5 to 51.0, the slowest pace of expansion in 20 months.
October gold (GCV2) is down -2.9 (-0.18%), and December silver (SIZ22) is up +0.020 (+0.11%). Precious metals this morning are mixed, with gold posting a more than 2-year low. Today's rally in the dollar index to a new 20-year high is bearish for metals. Also, rising global bond yields are bearish for gold, with the UK 10-year gilt yield rising to a 12-year high and the German bund climbing to a 10-year high. In addition, fund liquidation of gold is bearish for prices as long positions in gold ETF’s dropped to an 8-month low last Friday. A slide in global equity markets today has boosted the safe-haven demand for precious metals and limited losses in gold.
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