Stocks Jump on Lower Bond Yields and Strength in Bank and Tech Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +2.82%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.98%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +3.41%. 

Stocks this morning are sharply higher on strong quarterly bank earnings and lower bond yields.  Gains in bank stocks are positive for the overall market this morning after Bank of America and Bank of New York Mellon reported stronger-than-expected quarterly revenue. Also, support from a rally in European stocks and government bonds boosted U.S. stock indexes after UK Chancellor of the Exchequer Hunt announced that UK Prime Minister Truss’s package of unfunded tax cuts would be unwound.

Gains in technology stocks today are bullish for the overall market as lower bond yields are underpinning technology stocks.  The 10-year T-note yield is down 5.3 bp to 3.965% on positive carry-over support from a rally in European government bonds.  Also, T-note yields are moving lower after today’s economic news showed the U.S. U.S. Oct Empire manufacturing survey general business conditions contracted more than expected.

The U.S. Oct Empire manufacturing survey general business conditions fell -7.6 to -9.1, weaker than expectations of -4.3.

Today’s stock movers…

News Corp (NWSA) is up more than +7% today to lead gainers in the S&P 500 after the New York Times reported that activist investor Irenic Capital Management has a $150 million stake in the company and wants it to explore separation of its digital media and digital real estate assets. 

Bank of America (BAC) is up more than +5% in pre-market trading after reporting Q3 trading revenue of $4.1 billion, above the consensus of $3.8 billion. 

Bank of New York Mellon (BK) is up more than +6% today after reporting Q3 revenue of $4.28 billion, above the consensus of $4.20 billion.

Salesforce (CRM) is up more than +4% today to lead gainers in the Dow Jones Industrials after Northland Securities reinstated coverage of eth stock with a recommendation of market perform and a price target of $150.

A decline in T-note yields today is giving technology stocks a boost.  Atlassian Corp (TEAM) and Okta (OKTA) are up more than +6%. Also, Tesla (TSLA), Amazon.com (AMZN), Marvel Technology (MRVL), and Intuit (INTU) are up more than +5%.  In addition, Alphabet (GOOGL), Nvidia (NVDA), Microsoft (MSFT), and Align Technology (ALGN) are up more than +4%. 

Splunk (SPLK) is up more than +5% today after the Wall Street Journal reported that activist investor Starboard Value had built up a nearly 5% stake in the company.

U.S.-listed Chinese stocks rose in pre-market trading after President Xi Jinping reiterated that economic development is the party’s top priority.  Pinduoduo (PDD) is up more than +8%.  Also, JD.com (JD) and Alibaba (BABA) are up more than +5%.  In addition, NetEase (NTES) is up more than +4% and Baidu (BIDU) is up more than +2%. 

Fox Corp (FOXA) is down more than -6% today to lead losers in the S&P 500 after Loop Capital downgraded the stock to hold from buy. 

Kroger (KR) is down more than -2% today after MJM partners cut its price target on the stock to $50 from $55. 

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up by +14 ticks, and the 10-year T-note yield is down -5.3 bp at 3.965%.  Dec T-note prices this morning are moving higher on the heels of a rally in UK gilts.  The 10-year UK gilt yield fell bp today after UK Chancellor of the Exchequer Hunt announced that UK Prime Minister Truss’s package of unfunded tax cuts would be unwound. Today’s weaker-than-expected U.S. economic news on Oct Empire manufacturing survey general business also gave T-note prices a boost.   Rising inflation expectations, however, may limit further gains in T-notes after the 10-year breakeven inflation rate today rose to a 3-week high of 2.431%. 

The dollar index (DXY00) this morning is down by -0.70%.   A rally in stocks this morning has curbed the liquidity demand for the dollar.  Also, lower T-note yield this morning have weakened the dollar’s interest rate differentials.  Today’s weaker-than-expected U.S. economic news on Oct Empire manufacturing survey general business also weighed on the dollar.

EUR/USD (^EURUSD) today is up by +0.7-%.  Dollar weakness today has sparked short-covering in EUR/USD.  Also, hawkish comments from ECB Governing Council member and Bundesbank President Nagel gave the euro a boost when he said ECB Interest rate increases must continue after October.  In addition, an easing of energy crisis concerns is supportive for EUR/USD after European nat-gas prices tumbled to a 3-1/2 month low today

ECB Governing Council member and Bundesbank President Nagel said ECB Interest rate increases must continue after October.  He added that due to tensions in energy markets, there are "significant upside risks" to the inflation outlook.

USD/JPY (^USDJPY) today is up +0.03%.  The yen today fell to a new 32-year low against the dollar on comments from BOJ Governor Kuroda, who told the Japanese parliament today that it’s appropriate for the BOJ to continue with monetary easing.  However, the yen recovered nearly all of its losses today as T-note yields declined.  Better-than-expected Japanese economic news today was also bullish for the yen. 

The Japan Aug tertiary industry index rose +0.7% m/m, stronger than expectations of +0.3% m/m.

Japan Aug industrial production was revised upward by +0.7 to +3.4% m/m from the previously reported +2.7% m/m.

December gold (GCZ2) is up +22.8 (+1.38%), and December silver (SIZ22) is up +0.759 (+4.20%).  Precious metals this morning are sharply higher.  Dollar weakness today is bullish for metals prices.  Also, lower global government bond yields today are supportive of gold. A jump in inflation expectations is also boosting demand for precious metals as an inflation hedge after the 10-year breakeven inflation rate today rose to a 3-week high.   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 last Friday. 

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