What you need to know…
The S&P 500 Index ($SPX) (SPY) this morning is down -1.37%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.77%.
Stocks this morning are moderately lower. Stronger than expected U.S. economic news on Sep ADP employment change and Sep ISM services index pushed T-note yields sharply higher and dampened optimism that the Fed will pivot to a more dovish policy. The 10-year T-note yield is up +14.6 bp today at 3.779%.
Stocks were also under pressure today after Citigroup sent a note to clients late Tuesday saying, "we are still in the early stage of positioning for recession," and there's "more downside risk for the market and the earnings season.”
The U.S. Sep ADP employment change rose +208,000, stronger than expectations of +200,000. Also, the Aug ADP employment change was revised upward to +185,000 from the previous reported +132,000.
The U.S. Aug trade deficit shrank to -$67.4 billion from a revised -$70.5 billion in July, narrower than expectations of -$67.7 billion and the smallest deficit in 15 months.
The U.S. Sep ISM services index fell -0.2 to 56.7, stronger than expectations of 56.0.
Today’s stock movers…
Higher T-note yields today are weighing on technology stocks. Tesla (TSLA), Advanced Micro Devices (AMD), and DocuSign (DOCU) are down more than -3%. Also, Nvidia (NVDA), Lam Research (LRCX), Applied Materials (AMAT), Intel (INTC), Marvell Technology (MRVL), Micron Technology (MU), and Meta Platforms (META) are all down more than -2%.
Lumen Technologies (LUMN) is down more than -9% today to lead losers in the S&P 500 after the company’s long-term credit rating was downgraded by S&P to BB- from BB, and Wells Fargo cut its recommendation on the stock to equal weight from overweight.
Goldman Sachs (GS) is down more than -3% today after Atlantic Equities downgraded the stock to underweight from neutral.
Morgan Stanley (MS) is down more than -2% today after Atlantic Equities downgraded the stock to neutral from overweight.
Helen of Troy Ltd (HELE) is down more than -6% today after the company cut its full-year adjusted EPS forecast to $9.00-$9.40 from a previous estimate of $9.85-$10.35, weaker than the consensus of $10.06.
Exxon Mobil (XOM) is up more than +1% today after the company said it expects a positive impact from natural gas prices of up to $2.2 billion in Q3, which prompted Citigroup to say the company’s Q3 guidance implies a quarterly result beat when it reports earnings late this month.
Lamb Weston Holdings (LW) is up more than +2% today to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of 75 cents, stronger than the consensus of 50 cents.
Across the markets…
Dec 10-year T-notes (ZNZ22) today are down -1-4/32 points, and the 10-year T-note yield is up +14.6 bp at 3.779%. Weakness in European government bond markets today is weighing on T-note prices. Losses in T-notes accelerated after this morning’s U.S. economic news showed the Sep ADP employment change and Sep ISM services index were stronger-than-expected, a hawkish factor for Fed policy.
The dollar index (DXY00) this morning is up by +0.98%. A retreat in equity markets today has boosted the liquidity demand for the dollar. Also, climbing T-note yields today strengthened the dollar’s interest rate differentials. In addition, this morning’s U.S. economic news on Sep ADP employment change and the Aug trade balance was supportive for the dollar.
EUR/USD (^EURUSD) today is down -1.08%. A stronger dollar today is weighing on the euro. Also, weaker-than-expected Eurozone economic news is bearish for EUR/USD after the Eurozone Sep S&P Global composite PMI was revised downward to its steepest pace of contraction in 20 months.
The Eurozone Sep S&P Global composite PMI was revised downward by -0.1 to 48.1 from the originally reported 48.2, the steepest pace of contraction in 20 months.
USD/JPY (^USDJPY) today is up +0.28%. The yen today fell back from a 1-week high in overnight trade and is moderately lower. Higher T-note yields today are weighing on the yen. USD/JPY today initially fell t a 1-week low as the yen strengthened after today’s economic news showed the Japan Sep Jibun Bank services PMI was revised higher.
The Japan Sep Jibun Bank services PMI was revised upward by +0.3 to 52.2 from the previously reported 51.9.
December gold (GCZ2) is down -11.1 (-0.64%), and December silver (SIZ22) is down -0.804 (-3.81%). Precious metals this morning are moderately lower. A stronger dollar today is weighing on metals prices. Also, higher global bond yields today are undercutting gold prices. Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/4 year low Tuesday.
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