Stocks Climb on Strength in Tech Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.31%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.18%.  

Stocks this morning recovered from early losses and are moderately higher on strength in technology stocks.  Adobe is up more than +3% on earnings optimism, and Amazon.com is up more than +1% after settling European Union antitrust investigations over how it allegedly abused rivals’ sales data to unfairly favor its own products.

On the negative side, General Mills is down more than -4% after several analysts cited concern over continued volume declines reported in the company’s Q2 earnings release.  Also, Tesla fell more than -2% to a new 2-year low after Evercore ISI and Mizuho Securities cut their price targets on the stock, citing concerns about demand. 

Stocks this morning initially opened lower after global bond yields surged when the Bank of Japan (BOJ) unexpectedly raised the upper limit of its 10-year JGB bond yield range to 0.50% from 0.25%, a hawkish move that raises expectations the BOJ may be close to ending its ultra-easy policies and joining other central banks in raising interest rates.

Today’s action by the BOJ to widen its 10-year yield target range pushed the 10-year Japan JGB bond yield to a 7-year high of 0.444%.  Also, the 10-year German bund yield rose to a 6-week high of 2.302%, and the 10-year UK gilt yield rose to a 6-week high of 3.642%.  In addition, the 10-year T-note yield climbed to a 2-1/2 week high of 3.707%. 

Today’s U.S. housing news was mixed for stocks.   Nov housing starts fell -0.5% m/m to 1.427 million, stronger than expectations of a decline to 1.400 million.  However, Nov building permits, a proxy for future construction, tumbled -11.2% m/m to a 2-1/2 year low of 1.342 million, weaker than expectations of 1.480 million.

Today’s stock movers…

Moderna (MRNA) is up more than +4% to lead gainers in the S&P 500 after data from Bloomberg showed the Franklin Biotechnology Discovery Fund boosted its holdings of Moderna by 27% to 124,315 shares. 

Lucid Group (LCID) is up more than +5% to lead gainers in the Nasdaq 100 after it said it had completed its stock sale program and successfully raised about $1.5 billion. 

Trade Desk (TTD) is up more than +4% after Piper Sandler initiated coverage of the stock with a recommendation of overweight and a price target of $60.

Adobe (ADBE) is up more than +3% on increased earnings optimism after 13 analysts raised their price targets on the stock by an average of 8.6% since Adobe reported earnings last Thursday.

Amazon.com (AMZN) is up more than +1% after it said it settled European Union antitrust investigations over how it allegedly abused rivals’ sales data to unfairly favor its own products. 

Ciena (CIEN) is up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral.

General Mills (GIS) is down more than -4% to lead losers in the S&P 500 after several analysts cited concern over continued volume declines reported in the company’s Q2 earnings release. 

Gilead Sciences (GILD) is down more than -3% to lead losers in the Nasdaq 100 after it reported disappointing data from a mid-stage study of drug cocktails in fighting lung cancer.

Tesla (TSLA) is down more than -2% at a 2-year low after Evercore ISI and Mizuho Securities cut their price targets on the stock, citing concerns about demand. 

Norfolk Southern (NSC) is down more than -1% after Evercore ISI downgraded the stock to inline form outperform. 

Across the markets…

March 10-year T-notes (ZNH23) today are down -20 ticks, and the 10-year T-note yield is up +9.2 bp at 3.677%.  March T-notes today fell to a 2-1/2 week low, and the 10-year T-note yield jumped to a 2-1/2 week high of 3.707% as global bond yields soared after the BOJ unexpectedly widened its 10-year yield target rage, a hawkish development.  The 10-year Japan JGB bond yield surged to a 7-year high of 0.444%, and the 10-year German bund and 10-year UK gilt yields rose to 6-week highs.  T-notes found some support on today’s news that U.S. Nov building permits fell more than expected to a 2-1/2-year low.

The dollar index (DXY00) this morning is down by -0.52%.  The dollar this morning is under pressure on strength in the yen, which climbed to a 4-month high against the dollar after the BOJ unexpectedly widened its yield-curve control program.  Also, hawkish ECB comments today strengthened EUR/USD and undercut the dollar.   Also, strength in EUR/USD today is undercutting the dollar after hawkish ECB comments boosted the euro. 

EUR/USD (^EURUSD) today is up by +0.12%.  The euro today is moderately higher on dollar weakness and hawkish comments from ECB Governing Council members Nagel, Muller, and Vasle, who all said they support a further tightening of ECB policy.  EUR/USD also garnered support on today’s news that showed the Eurozone Dec consumer confidence indicator rose +1.7 to a 7-month high of -22.2.

German Nov PPI rose +28.2% y/y, weaker than expectations of +31.1% y/y and the weakest report in 9 months.

The Eurozone Dec consumer confidence indicator rose +1.7 to a 7-month high of -22.2, slightly weaker than expectations of -22.0.

ECB Governing Council member Muller said, "we've given a clear message that in the next ECB meetings, interest rates need to continue to be raised significantly and at a steady pace, meaning that we should not reduce the speed of rate hikes."

ECB Governing Council member and Bundesbank President Nagel said the ECB remains "a long way" from achieving its goal of inflation of 2% over the medium term and that last week's 50 bp rate hike from the ECB was "robust" and "won't be the last." 

ECB Governing Council member Vasle said an economic slowdown expected in 2023 won't significantly lower Eurozone inflation and bring it close to the 2% target soon, and that quantitative tightening and further interest rate hikes will be needed.

USD/JPY (^USDJPY) this morning is down sharply by -3.35%.  The yen today surged to a 4-1/4 month high against the dollar after the BOJ unexpectedly widened its upper target range on the 10-year JGB yield, a hawkish development.  The yen gave up some of its advances today as T-note yields rose.

The BOJ, as expected, maintained its policy balance rate at -0.10% but unexpectedly widened its 10-year yield target range to 0.50% from the previous upper limit of 0.25%.

BOJ Governor Kuroda said it is too early for the BOJ to consider an exit from easing or for a policy review, and today's measures focus on market functionality.

February gold (GCG3) this morning is up +24.4 (+1.368%), and March silver (SIH23) is up +0.911 (+3.93%).  Precious metals prices this morning are sharply higher due to a weaker dollar.  However, higher global bond yields today are limiting gains in gold. 

• Markets Today: Stocks Move Higher Despite Bank of Japan's Surprising Bond Yield Shift
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