Stocks Post Modest Gains in Choppy Trade

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +0.18%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.36%. 

Stocks this morning are slightly higher.  Gains in consumer staples stocks support the overall market today after PepsiCo reported stronger-than-expected Q3 revenue.  Also, a +9% jump in Moderna today is positive for the overall market after Merck & Co exercised its option to develop and commercialize a cancer vaccine with Moderna jointly.

Weighing on stocks today is this morning’s economic news showed U.S. Sep producer prices rose more than expected.  The markets are awaiting this afternoon’s minutes from the Sep 20-21 FOMC meeting for clues to Fed policy intentions.

U.S. Sep PPI final demand rose +0.4% m/m and +8.5% y/y, stronger than expectations of +0.2% m/m and +8.4% y/y.  Sep PPI ex-food & energy was up +7.2% y/y, slightly lower than expectations of +7.3% y/y.

Minneapolis Fed President Kashkari said the Fed is working hard to get inflation back down to 2%, and it must "walk the walk" to validate market expectations.

Today’s stock movers…

Moderna (MRNA) is up more than +9% today to lead gainers in the S&P 500 and Nasdaq 100 after Merck said it would pay Moderna $250 million in Q3 after it exercised its option to jointly develop and commercialize personalized cancer vaccine mRna-4157/V940 with Moderna.

PepsiCo (PEP) is up more than +3% today after reporting Q3 organic revenue up +16%, well above the consensus of +9.1%, and raised its full-year organic revenue forecast to up +12% from a prior view of up +10%, stronger than the consensus of +9.92%. Other consumer staples stocks rallied on the Pepsi news, with Coca-Cola (KO) up more than +2% to lead gainers in the Dow Jones Industrials.  Also, Molson Coors Beverage (TAP) and Mondelez International (MDLZ) are up more than +2%.  In addition, Kraft Heinz (KHC) and Kellogg (K) are up more than +1%. 

Norwegian Cruise Line Holdings (NCLH) is up more than +2% today after UBS upgraded the stock to buy from neutral, citing material improvement in the company’s Q3 preview. 

Trucking companies are climbing today on signs of stronger demand as Truckstop’s Market Demand Index showed relative demand in North America’s spot trucking market rose +8.3% in the week ended Oct 7, the second weekly increase.  Knight-Swift Transportation Holdings (KNX) is up more than +3%.  Also, JB Hunt Transport Services (JBHT) and Old Dominion Freight Line (ODFL) are up more than 2%. 

American International Group (AIG) is up more than +2% today after Jeffries upgraded the stock to buy from hold with a price target of $64. 

T Rowe Price Group (TROW) is down more than -4% to lead losers in the S&P 500 after reporting September assets under management of $1.23 trillion, a -24% decline versus the same period last year. 

Boeing (BA) is down more than -1% today to lead losers in the Dow Jones Industrials after Credit Suisse initiated coverage on the stock with a recommendation of underperform. 

Stanley Black & Decker (SWK) is down more than -1% today after Morgan Stanley downgraded the stock to equal weight from overweight.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +2 ticks, and the 10-year T-note yield is down -1.4 bp at 3.933%.  T-note prices this morning are slightly higher after U.S. Sep PPI ex-food and energy rose less than expected.  However, gains are limited due to higher European government bond yields after the 10-year UK gilt yield jumped t a 14-year high today at 4.635%, and the 10-year German bund yield rose to an 11-year high of 2.419%. Supply pressures are also weighing on T-notes as the Treasury will auction $32 billion 10-year T-notes later today as part of this week’s $90 billion auctions of T-note and T-bonds.  In addition, an increase in inflation expectations is bearish for T-notes after the 10-year breakeven inflation rate today rose to a 2-week high of 2.364%.

The dollar index (DXY00) this morning is up by +0.09% at a 1-1/2 week high.  The dollar garnered support from this morning’s news that showed U.S Sep producer prices rose more than expected, which is hawkish for Fed policy. Also, weakness in the yen is supportive of the dollar after the yen tumbled today to a new 24-year low against the dollar. 

EUR/USD (^EURUSD) today is down by -0.14%.  A stronger dollar today is weighing in the euro.  Also, today’s action by the German Economy Ministry to cut its German 2022 and 2023 GDP forecasts is bearish for EUR/USD.  However, losses in the euro were limited after today’s economic news showed Eurozone Aug industrial production rose more than expected at the strongest pace in 9 months.

Germany's Economy Ministry today cut its German 2022 GDP forecast to 1.4% from an April estimate of 2.2% and cut its German 2023 GDP forecast to a contraction of -0.4% from an April forecast of +2.5% expansion, citing soaring power costs that will crimp industrial output and dampen consumer spending.

Eurozone Aug industrial production rose +1.5% m/m, stronger than expectations of +0.7% m/m and the biggest increase in 9 months.

USD/JPY (^USDJPY) today is up +0.67% and posted a new 24-year high. The yen tumbled today after BOJ Governor Kuroda pledged to maintain monetary easing to support Japan’s economy that‘s still recovering from the pandemic.  Also, today’s news showed Japan’s Aug core machine orders fell more than expected, a negative for the yen.

BOJ Governor Kuroda said the BOJ certainly must continue with monetary easing to ensure price stability.

Japan Aug core machine orders fell -5.8% m/m, weaker than expectations of -2.8% m/m and the biggest decline in 6 months.

December gold (GCZ2) is down -7.8 (-0.46%), and December silver (SIZ22) is down -0.387 (-1.99%).  Precious metals this morning are moderately lower, with silver falling to a 1-1/2 week low. A rally in the dollar index today to a 1-1/2 week high is weighing on metals prices.  A jump in the 10-year UK gilt yield to a 14-year high today and the jump in the 10-year German bund yield to an 11-yer high is bearish for gold prices.  Silver is also under pressure after the German Economy Ministry cut its German 2022 and 2023 GDP forecasts, which is negative for industrial metals demand.  Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/4 year low Tuesday. 

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