Stocks Rally Broadly as Bond Yields Fall

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed up +1.75%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.54%.

Stocks on Thursday settled moderately higher, with the S&P 500 posting a 1-week high.  Strength in technology stocks Thursday lifted the overall market.  Tesla rose more than +8% 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 climbed more than +5% after CFRA upgraded the stock to buy from sell. In addition, lower T-note yields Thursday gave 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 fell -4.6 bp to 3.837%.

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 Thursday were mixed.  The Euro Stoxx 50 index closed up +1.08%.  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) closed up more than +8% Thursday to lead gainers in the 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. 

Mega-cap technology stocks moved higher today and supported gains in the broader market.  Meta Platforms (META) closed up more than +4%. Also, Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOGL), and Microsoft (MSFT) closed up more than +2%.

Chip stocks rallied due to lower bond yields and boosted the overall market.  Nvidia (NVDA), ON Semiconductor (ON), Marvell Technology (MRVL), NXP Semiconductors NV (NXPI), and Lam Research (LRCX) closed up more than +4%. Also, Microchip Technology (MCHP), KLA Corp (KLA), Micron Technology (MU), Advanced Micro Devices (AMD), Applied Materials (AMAT), and ASML Holding NV (ASML)  closed up more than +3%.

Netflix (NFLX) closed up more than +5% after CFRA upgraded the stock to buy from sell with a price target of $310.

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

Cal-Maine Foods (CALM) closed down more than -14% after reporting Q2 EPS of $4.07, weaker than the consensus of $4.24. 

AmerisourceBergen (ABC) closed down -0.78% Thursday after the U.S. sued it for failing to report suspicious orders for controlled substances to the Drug Enforcement Administration since 2014.

Across the markets…

March 10-year T-notes (ZNH23) on Thursday closed up +8 ticks, and the 10-year T-note yield fell by -4.6 bp to 3.837%.  T-notes moved higher Thursday on news that showed weekly continuing unemployment claims rose to a 10-1/2 month high, which is dovish for Fed policy.  T-notes also had support on anticipation of buying by bond fund managers of longer-term U.S. Treasury securities tied to Friday’s month-end index rebalancing.

On the negative side for T-notes was Thursday’s rally in stocks, which reduced safe-haven demand for government debt.  Also, slack demand for the Treasury’s $35 billion auction of 7-year T-notes was negative for T-note prices as the auction had a bid-to-cover ratio of 2.45, below the 10-auction average of 2.50.  

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