Stocks Settle Higher on Lower Bond Yields and Improved Risk Sentiment

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed up +1.61%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.04%.

Stock indexes Friday settled moderately higher, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting 2-1/2 week highs.  A decline in bond yields Friday supported a rally in technology stocks as the 10-year T-note yield fell -9.1 bp to 3.965%. Bond yields fell back on carryover support from Thursday when Atlanta Fed President Bostic said the Fed could be in a position to pause rate hikes by mid to late summer. 

Market sentiment also improved as strength in China’s economy sparked a rally in the Shanghai Composite to a 7-1/2 month high Friday that provided carryover support to world equity markets.  The China Feb Caixin services PMI rose +2.1 to 55.0, stronger than expectations of 54.5 and the fastest pace of expansion in 6 months.

Positive corporate news Friday also gave the overall market a boost.  Cooper Cos closed up more than +7% after the company reported better-than-expected Q1 net sales.  Also, Apple closed up more than +3% after Morgan Stanley raised its price target on the stock to $180 from $175 and said the company has five under-appreciated catalysts that can drive a re-rating over the next 12 months.  In addition, Broadcom closed up more than +5% after reporting Q1 adjusted net revenue above estimates and forecasting stronger-than-expected Q2 revenue.

On the negative side, Costco Wholesale Corp closed down more than -2% after reporting Q2 total U.S. comparable store sales that were below the consensus.  Also, Zscaler closed down more than -11% after analysts said they were concerned about the company’s calculated billings growth.  In addition, Marvell Technology closed down more than -4% after forecasting weaker-than-expected Q1 adjusted EPS.

Hawkish comments Friday from Boston Fed President Collins were negative for stocks when she said, "I anticipate that reducing inflation back to target will require additional federal funds rate increases to bring interest rates to a sufficiently restrictive level, and then holding them there for some perhaps extended time."

Friday’s U.S. news showed Feb ISM services index fell -0.1 to 55.1, stronger than expectations of 54.5.

Overseas stock markets Friday settled higher.  The Euro Stoxx 50 closed up +1.28%.  China’s Shanghai Composite stock index closed up +0.54%, and Japan’s Nikkei Stock Index closed up +1.56%. 

Today’s stock movers…

Cooper Cos (COO) closed up more than +7% to lead gainers in the S&P 500 after the company reported Q1 net sales of $858.5 million, above the consensus of $834.9 million.

Apple (AAPL) closed up more than +3% to lead gainers in the Dow Jones Industrials after Morgan Stanley raised its price target on the stock to $180 from $175 and said the company has five under-appreciated catalysts that can drive a re-rating over the next 12 months. 

Broadcom (AVGO) closed up more than +5% after reporting Q1 adjusted net revenue of $8.92 billion, stronger than the consensus of $8.90 billion, and forecasting Q2 revenue of $8.70 billion, above the consensus of $8.58 billion. 

Rivian Automotive (RIVN) closed up more than +7% to lead gainers in the Nasdaq 100 after the company told its employees that production of 62,000 electric vehicles was possible this year, above a forecast last month of 50,000 vehicles.

Meta Platforms (META) closed up more than +6% after CEO Zuckerberg said the company is lowering the prices of two of its virtual reality headsets so more people can get into the space.  Also, regulators in Brazil approved Meta Platform’s WhatsApp for accepting business payments in Brazil.

Tesla (TSLA) closed up more than +3% after preliminary data showed total China Feb vehicle shipments rose +13% m/m to 74,402.

A decline in bond yields Friday gave technology stocks a boost.  Illumina (ILMN) closed up more than +7%.  Also, Atlassian Corp (TEAM) closed up more than +6%.  In addition, Amazon.com (AMZN), Adobe (ADBE), Autodesk (ADSK), and Datadog (DDOG) closed up more than +3%.

Hormel Foods (HRL) closed down more than -2%, adding to Thursday’s -4% fall to lead losers in the S&P 500 after JPMorgan Chase downgraded the stock to underweight from neutral.

Costco Wholesale Corp (COST) closed down more than -2% after reporting Q2 total U.S. comparable store sales rose +5.7%, weaker than the consensus of +6.3%. 

Zscaler (ZS) closed down more than -11% to lead losers in the Nasdaq 100 after analysts said they were concerned about the company’s calculated billings growth.

Marvell Technology (MRVL) closed down more than -4% after forecasting Q1 adjusted EPS of 29 cents, weaker than the consensus of 42 cents. 

HP Enterprise (HPE) closed down more than -1% after reporting an unexpected Q1 negative cash flow from operations of -$829 million versus expectations of a positive cash flow of $1.42 billion. 

Across the markets…

June 10-year T-notes (ZNM23) on Friday closed up +19 ticks, and the 10-year T-note yield fell by -9.1 bp to 3.965%.  T-notes moved higher Friday on carryover support from Thursday when Atlanta Fed President Bostic said he favors a 25 bp rate hike this month and that the Fed could be in a position to pause rate hikes by mid to late summer.  Also, a decline in European government bond yields sparked short-covering in T-notes.  The 10-year German bund yield fell -3.5 bp to 2.715% after Friday’s economic news showed Eurozone Jan producer price pressures eased.  On the negative side, U.S. inflation expectations rose as the 10-year breakeven inflation rate Friday climbed to a 3-3/4 month high of 2.536%.

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