Stocks Move Higher as Bond Yields Fall

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.60%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.08%. 

Stocks this morning recovered from early losses and are moderately higher. Stocks rebounded today after bond yields declined.  The 10-year T-note yield fell back from a 15-year high of 4.335% today and is down -0.5 bp at 4.223%.  T-note yields fell on speculation the Fed may slow the pace of its rate hikes after a Wall Street Journal article today said the Fed is set to raise interest rates by 75 bp at the November FOMC meeting and then debate the size of future rate hikes.

Stocks this morning initially opened lower on higher bond yields and on a decline in American Express by more than -6% after it set aside more than expected for bad loans.  Also, weakness in healthcare stocks weighed on the overall market after HCA Healthcare and Tenet Healthcare reported weaker-than-expected Q3 earnings.

Today’s stock movers…

Bank stocks are climbing today.  Huntington Bancshares (HBAN) is up more than +7% today to lead gainers in the S&P 500 after reporting Q3 EPS of 39 cents versus +22 cents y/y.  Also, Fifth Third Bancorp (FITB) is up more than +4%.  In addition, JPMorgan Chase (JPM) is up more than +3% to lead gainers in the Dow Jones Industrials, and Regions Financial Corp (RF) and Comerica (CMA) are up more than +3%.   

Schlumberger (SLB) is up more than +6% today after reporting Q3 adjusted Ebitda of $1.76 billion, higher than the consensus of $1.63 billion. Haliburton is also up more than +4% on the news.

Moderna (MRNA) is up more than +6% today to lead gainers in the Nasdaq 100 after SVB upgraded the stock to market perform from underperform, saying Pfizer’s comment earlier this week signals “meaningful higher-than-expected” pricing for its Covid-19 vaccine.  Pfizer (PFE) is also up more than +4%.

Juniper Networks (JNPR) is up more than +4% today after Raymond James upgraded the stock to strong buy from outperform with a price target of $37. 

Netflix (NFLX) is up more than +2% today after Argus Research raised its price target on the stock to $340 from $300.

Applied Materials (AMAT) is up more than +2% today after New Steet Research upgraded the stock to buy from neutral.

SVB Financial Group (SIVB) is down more than -18% today to lead losers in the S&P 500 after lowering its full-year net interest income estimate to growth in the low-40s percentage range from a previous estimate of growth in the mid-40s percentage range.

HCA Healthcare (HCA) is down more than -13% today after reporting Q3 revenue of $14.97 billion, below the consensus of $15.02 billion.

Tenet Healthcare (THC) sank more than -28% today after narrowing its full-year net operating revenue estimate to $19.00 billion-$19.20 billion from a prior estimate of $19.00 billion-$19.40 billion, below the consensus of $19.34 billion.

Robert Half International (RHI) is down more than -9% today after reporting Q3 revenue of $1.83 billion, weaker than the consensus of$1.92 billion. 

American Express (AXP) is down more than -6% today to lead losers in the Dow Jones Industrials after reporting Q3 network volume of $394.40 billion, below the consensus of $401.74 billion.  The company said it expects its full-year EPS guidance range will be above its original range of $9.25-$9.65, still below the consensus of $9.90.

Verizon Communications (VZ) is down more than -5% today after reporting it added only 8,000 monthly wireless phone subscribers in Q3, well below the consensus of 38,500. 

U.S.-listed Chinese stocks are falling today on concern expanding pandemic restrictions will undercut economic growth after China locked down parts of the central city of Xi’an, confining some of the city’s 13 million people to their homes for at least a week.   NetEase (NTES) is down more than -4%.  Also, Baidu (BIDU) is up more than +3%.  In addition, JD.com (JD) is down more than -2%, and Alibaba Group Holding (BABA) is down more than -1%.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up by +2 ticks, and the 10-year T-note yield is down -0.5 bp at 4.223%.  Dec T-note prices this morning rebounded from a new 15-year nearest-futures low and are slightly higher.  The 10-year T-note yield fell back from a nearly 15-year high of 4.335% on speculation the Fed may slow the pace of its rate hikes after a Wall Street Journal article today said the Fed is set to raise interest rates by 75 bp at the November FOMC meeting and then debate the size of future rate hikes.

T-notes this morning initially moved lower on negative carryover from a jump in European government bond yields after the 10-year German bund yield climbed to an 11-year high of 2.532%.  Also, rising U.S. inflation expectations weighed on T-notes after the 10-year breakeven inflation rate today rose to a 7-week high of 2.583%.

The dollar index (DXY00) this morning is up by +0.11% at a 3-week high.  A jump in the 10-year T-note yield today to a 15-year high is supporting gains in the dollar. Also, weakness in stocks is boosting liquidity demand for the dollar.  In addition, the dollar is also garnering support from weakness in the Chinese yuan, which fell to a 14-year low against the dollar today, and a fall in the Japanese yen to a new 32-year low.   

EUR/USD (^EURUSD) today is up by +0.10%.  The euro today recovered from a 1-week low and is modestly higher.  Today’s economic news showed an unexpected increase in Eurozone Oct consumer confidence, which sparked some short covering in the euro.  EUR/USD today initially moved lower after today’s monthly report from the Bundesbank said, “the German economy is likely on the cusp of a recession.” Also, the euro found support after the 10-year German bund yield today climbed to an 11-year high.

USD/JPY (^USDJPY) today is up by +0.85%.  The yen today tumbled to a new 32-year low against the dollar. Higher T-note yields are undercutting the yen after the 10-year T-note yield today rose to a nearly 15-year high. Also, comments today from BOJ Governor Kuroda weighed on the yen when he said the BOJ would keep conducting monetary easing to support the economy and sustainably and stably achieve its price target. 

Japan’s Sep national CPI rose +3.0% y/y, slightly stronger than expectations of +2.9% y/y and the biggest increase in 8 years.  Also, Japan Sep national CPI ex-food & energy rose +1.8% y/y, right on expectations and the fastest pace of increase in 7-1/2 years.

December gold (GCZ2) is up +7.9 (+0.48%), and December silver (SIZ22) is up +0.066 (+0.35%).  Precious metals this morning recovered from early losses and are modestly higher, with gold rebounding from a 3-week low.  Gold prices erased early losses and rose on speculation the Fed may slow the pace of its rate hikes after a Wall Street Journal article today said the Fed is set to raise interest rates by 75 bp at the November FOMC meeting and then debate the size of future rate hikes.  Precious metals today initially moved lower after the dollar index rallied to a 3-week high and after global bond yields rose.  Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low Thursday. 

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