What you need to know…
The S&P 500 Index ($SPX) (SPY) this morning is up +0.34%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.04%.
Stocks this morning are mildly higher. Stock indexes recovered from overnight losses on a drop in global bond yields after the Bank of England (BOE) unexpectedly ramped up QE. The 10-year T-note yield today fell from a 14-year high of 4.015% and is down -12.4 bp at 3.822%. The 10-year UK gilt yield fell back from a 14-year high of 4.591% and is down -25.8 bp at 4.049%.
The BOE announced today that it would buy long-dated government bonds beginning Wednesday "to restore orderly market conditions. The bond purchases will be carried out on whatever scale is necessary to effect this outcome." The BOE’s rescue-action action today sparked a rally in global government bond markets as the markets hoped that other key central banks might also question the extent of their tightening regimes.
Health care stocks today are giving the overall market a boost as Biogen surged more than +35% when it said its Lecanemab drug developed with Eisai Co significantly slowed the progression of Alzheimer’s disease.
U.S. stock indexes initially fell in overnight trading on weakness in chip stocks, with Apple down more than -3% today after a Bloomberg report said the company is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize.
The U.S. Aug advance goods trade balance deficit of -$87.3 billion was narrower than expectations of -$89.0 billion and the smallest deficit in 10 months.
U.S. Aug wholesale inventories rose +1.3% m/m, more than expectations of +0.4% m/m. Also, Aug retail inventories rose +1.4% m/m, more than expectations of +1.0% m/m. The buildup of inventories is a negative factor for the economy since it suggests that production will need to slow to match demand.
U.S. Aug pending home sales fell -2.0% m/m, weaker than expectations of -1.5% m/m.
Today’s stock movers…
Biogen (BIIB) is up by more than +35% today to lead gainers in the S&P 500 and Nasdaq 100 after the company reported the drug Lecanemab it is developing with Eisai Co. showed it reduced the pace of cognitive decline in people with early stages of Alzheimer’s disease by 27% over 18 months when compared with a placebo. Eli Lilly (LLY) is also up more than +7% on the news.
Homebuilders are climbing today after the 10-year T-note yield fell sharply by -12.4 bp to 3.822%, which which was positive for mortgage rates. DR Horton (DHI) is up more than +4%. Also, Lennar (LEN), Toll Brothers (TOL), and PulteGroup (PHM) are up more than +3%.
Illumina (ILMN) is up more than +5% today after Evercore ISI upgraded the stock to outperform from in-line.
Netflix (NFLX) is up more than +2% today after Atlantic Equities upgraded the stock to overweight from neutral, citing the outlook for the company’s new ad-supported tier.
Apple (AAPL) is down more than -3% today to lead losers in the S&P 500, Dow Jones Industrials, and the Nasdaq 100 after a Bloomberg report said the company is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize. Suppliers to Apple also fell on the report, with Qualcomm (QCOM) and Skyworks Solutions (SWKS) down nearly -1%.
Lockheed Martin (LMT) is down nearly -1% today after Wells Fargo Securities downgraded the stock to underweight.
Across the markets…
Dec 10-year T-notes (ZNZ22) today are up +1-4/32 points, and the 10-year T-note yield is down -12.4 bp at 3.822%. Dec T-notes this morning recovered from a new 14-year nearest-futures low, and the 10-year T-note yield fell back from a 14-year high of 4.015%.
A plunge in UK government bond yields today sparked some short-covering in T-notes. The 10-year UK gilt yield retreated from a 14-year high today of 4.591% and is down -25.8 bp to 4.049% after the BOE ramped up QE. The BOE said that it will buy long-dated government bonds beginning Wednesday " in whatever quantities needed to restore orderly market conditions.” Supply pressures are a bearish factor for T-notes as the Treasury later today will auction $36 billion of 7-year T-notes and $22 billion of 2-year floating-rate 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 down -0.09% and fell back from a new 20-year high. The dollar gave up overnight gains and turned lower after a fall in T-note yields helped push equity markets higher, which curbed the liquidity demand for the dollar. The dollar today initially climbed to a 20-year high after White House Economic Council Director Deese said he doesn't expect another 1985 Plaza Accord type agreement among major economies to counter the dollar's strength. The dollar also found support from weakness in the Chinese yuan, which fell to a 14-year low today against the dollar, and from weakness in GBP/USD after the BOE ramped up QE.
EUR/USD (^EURUSD) today up +0.20%. EUR/USD today recovered from a 20-year low and is moderately higher. Hawkish comments today from ECB President Lagarde and ECB Governing Council member Kazimir helped the euro recover from overnight losses. EUR/USD today initially fell to a 20-year low after the German Oct GfK consumer confidence fell to a record low of -42.5.
ECB President Lagarde said we're not at the neutral rate yet, and we'll continue hiking rates at the next several ECB meetings.
ECB Governing Council member Kazimir said, "inflation is too high for too long, and we will need to continue in normalization of monetary policy." While ECB officials are data dependent, a 75 bp hike "is a good candidate to continue and keep tightening."
The German Oct GfK consumer confidence fell -5.7 to a record low of -42.5, weaker than expectations of -39.0.
USD/JPY (^USDJPY) today is down -0.19%. A sharp decline in T-note yields today is supporting moderate gains in the yen. Gains in the yen were limited after the minutes of the July BOJ meeting released today stated that BOJ members said they wouldn’t hesitate to add to easing if necessary. Also, weak Japanese economic news is bearish for the yen after the Japan July leading index CI was revised downward by -0.7 to a 20-month low of 98.9.
October gold (GCV2) is up +22.5 (+1.38%), and December silver (SIZ22) is up +0.228 (+1.24%). Precious metals this morning are moderately higher. Gold and silver rebounded from overnight losses and moved higher after global bond yields plunged when the BOE ramped up QE. Also, a weaker dollar today sparked short covering in metals. A bearish factor for gold is continued fund liquidation of gold as long positions in gold ETF’s dropped to a 2-1/4 year low Tuesday.
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