Strength in Tech Stocks Leads the Overall Market Higher

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +1.47%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.98%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +2.08%.

Strength in technology stocks is lifting stock indexes this morning.  Tesla is up more than +7% after Morgan Stanley reiterated its overweight rating on the stock and said the recent slump in the stock had created a buying opportunity. Also, Netflix is up more than +4% after CFRA upgraded the stock to buy from sell. In addition, lower T-note yields today are giving high-valued chip stocks a boost.

Stock indexes extended their gains on this morning’s U.S. economic news that showed weekly continuing unemployment claims jumped to a 10-1/2 month high.  That was dovish for Fed policy and knocked T-note yields lower, which were bullish factors for stocks.  The 10-year T-note yield is down -2.3 bp at 3.860%.

A negative factor for stocks is concern that there could be a global resurgence of Covid after China ended its Covid Zero policies and reopened its borders.  The U.S. and Italy announced Wednesday that all air passengers from China would be required to test for Covid after almost half of the passengers on two flights from China to Milan were found to be infected with the virus. 

U.S. weekly initial unemployment claims rose +9,000 to 225,000, right on expectations.  However, weekly continuing claims rose +41,000 to a 10-1/2 month high of 1.71 million, showing a weaker labor market than expectations of 1.69 million.

Overseas markets today are mixed.  The Euro Stoxx 50 index today is up +0.98%.  The Shanghai Composite index closed down -0.44%, and Japan’s Nikkei Stock index closed down by -0.94%.

Today’s stock movers…

Tesla (TSLA) is up more than +7% today to lead gainers in the S&P 500 and Nasdaq 100 after Morgan Stanley reiterated its overweight rating on the stock and said the recent slump in the stock had created a buying opportunity. 

Chip stocks are moving higher today due to lower bond yields and are boosting the overall market.  ON Semiconductor (ON), Marvell Technology (MRVL), NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), and Lam Research (LRCX) are up more than +3%.  Also, Intel (INTC), Nvidia (NVDA), Broadcom (AVGO), Micron Technology (MU), Advanced Micro Devices (AMD), Applied Materials (AMAT), and Texas Instruments (TXN) are up more than +2%.

Netflix (NFLX) is up more than +4% after CFRA upgraded the stock to buy from sell with a price target of $310.

Recent beaten-down media stocks are moving higher today.  Warner Bros Discovery (WBD) is up more than +6%.  Also, Paramount Global (PARA) is up more than +4%.  In addition, Walt Disney (DIS) is up more than +3% to lead gainers in the Dow Jones Industrials.

Cal-Maine Foods (CALM) is down more than -11% after reporting Q2 EPS of $4.07, weaker than the consensus of $4.24. 

Across the markets…

March 10-year T-notes (ZNH23) today are up +3 ticks, and the 10-year T-note yield is down -2.3 bp at 3.860%.  T-notes moved higher today after this morning’s U.S. economic news showed weekly continuing unemployment claims rose to a 10-1/2 month high, which is dovish for Fed policy.  Supply pressures limit gains in T-note prices as the Treasury will auction $35 billion of 7-year T-notes later this afternoon. 

The dollar index (DXY00) today is down by -0.42%.  The dollar this morning is moderately lower on lower T-note yields. Also, strength in stocks today has curbed liquidity demand for the dollar.  In addition, strength in the yen weighs on the dollar as Japanese exporters and institutional investors are repatriating the yen back home ahead of the new year.

EUR/USD (^EURUSD) today is up by +0.51%.  The euro is moderately higher today and just below Wednesday’s 1-1/2 week high.   A weaker dollar today has sparked short covering in the euro.  Also, today’s news that showed a slower-than-expected pace in the Eurozone money supply was supportive of the euro.

Eurozone Nov M3 money supply rose +4.8% y/y, below expectations of +5.0% y/y and the slowest pace of increase in 3-1/2 years.

USD/JPY (^USDJPY) today is down by -1.12%.  The yen is climbing today on a decline in T-note yields. Also, speculation that the BOJ will end its negative-rate policy and raise interest rates next year has fueled short covering in the yen.  The yen rose against the dollar today even after the BOJ announced additional bond purchases.

The BOJ boosted QE today after it offered to buy unlimited amounts of two- and five-year notes at a fixed yield, along with 600 billion yen ($4.5 billion) of 1 to 10-year bonds. 

February gold (GCG3) this morning is up +7.2 (+0.40%), and March silver (SIH23) is up +0.420 (+1.76%).  Precious metals prices this morning are moderately higher.  A weaker dollar today is supporting gains in metals prices.  Also, lower T-note yields today are bullish for precious metals.  In addition, gold garnered support today on increased demand as a store of value after the BOJ boosted QE and announced additional bond purchases.

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