Stocks Surge on Strength in Bank and Tech Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday closed up +2.65%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.86%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +3.46%.

Stocks on Monday rallied sharply on strong quarterly bank earnings and lower bond yields.  Gains in bank stocks were positive for the overall market Monday 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 were bullish for the overall market. Lower bond yields Monday supported gains in technology stocks.  The 10-year T-note yield fell -0.5 bp to 4.013% on positive carry-over support from a rally in European government bonds.  The 10-year T-note yield moved back above 4% late Monday as inflation expectations increased after the 10-year breakeven inflation rate jumped to a 1-month high.   

Monday’s U.S. economic news was negative for stocks after the Oct Empire manufacturing survey general business conditions fell -7.6 to -9.1, weaker than expectations of -4.3.

Today’s stock movers…

A broad rally in technology stocks Monday gave the entire market a boost.  Atlassian Corp (TEAM) closed up more than +8% and Tesla (TSLA) closed up more than +7%.  Also, Amazon.com (AMZN), Netflix (NFLX), and Intuit (INTU) closed up more than +6%.  In addition, Nvidia (NVDA), Okta (OKTA), and Meta Platforms (META) closed up more than +5%. 

JPMorgan Chase (JPM) closed up more than +4% Monday to lead gainers in the Dow Jones Industrials after BMO Capital Markets raised their price target on the stock to $158 from $149.

Bank of America (BAC) closed up more than +6% Monday after reporting Q3 trading revenue of $4.1 billion, above the consensus of $3.8 billion. 

Bank of New York Mellon (BK) closed up more than +5% Monday after reporting Q3 revenue of $4.28 billion, above the consensus of $4.20 billion.

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

Fox Corp (FOXA) closed down more than -9% Monday to lead losers in the S&P 500 after Loop Capital downgraded the stock to hold from buy. 

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

Charles Schwab (SCHW) closed down more than -2% Monday after reporting Q3 new brokerage accounts rose 897,000, below the consensus of 933,656.  Also, Q3 total client assets fell -13% y/y to $6.64 trillion, below the consensus of $6.76 trillion.

Across the markets…

Dec 10-year T-notes (ZNZ22) on Monday closed up +3.5 ticks, and the 10-year T-note yield fell -0.5 bp to 4.013%.  Dec T-note prices Monday moved higher on the heels of a rally in UK gilts.  The 10-year UK gilt yield fell -3.6 bp Monday to 3.977% after UK Chancellor of the Exchequer Hunt announced that UK Prime Minister Truss’s package of unfunded tax cuts would be unwound.  Monday’s weaker-than-expected U.S. economic news on Oct Empire manufacturing survey general business also gave T-note prices a boost.  However, T-note prices fell back from their best levels after the 10-year breakeven inflation rate Monday rose to a 1-month high of 2.476%. 

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