Stocks Rebound as Bank Stocks Stabilize

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +1.08%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.78%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.87%.

U.S. stock indexes this morning are moderately higher as bank stocks recover from Wednesday’s rout.  U.S. bank stocks tumbled Wednesday after Treasury Secretary Yellen told lawmakers that the government wasn’t considering “blanket” deposit insurance to stabilize the U.S. banking system.

Some positive corporate news today was also positive for stock index futures.  Netflix is up more than +8%, with analysts upbeat on the stock.  Also, Accenture is up more than +7% after reporting better-than-expected Q2 revenue.  In addition, Homebuilders are climbing today after U.S Feb new home sales unexpectedly rose to a 6-month high.

On the negative side, Factset Research Systems is down more than -5% after reporting weaker-than-expected Q2 revenue and cutting its full-year revenue estimate.  Also, Genuine Parts is down more than -2% after forecasting full-year adjusted EPS below consensus.  In addition, Block is down more than -13% after Hindenburg Research said it took a short position in the company and that Block facilitated fraudsters who took advantage of government stimulus programs during the pandemic.

Global bond yields are mixed.  The 10-year T-note yield today is up +3.0 bp at 3.464% after U.S> weekly jobless claims unexpectedly fell, a sign of labor market strength.  However, the 10-year German bund yield is down -9.8 bp at 2.231%, and the 10-year UK gilt yield is down -5.4 bp at 3.397%.

U.S. weekly initial unemployment claims unexpectedly fell -1,000 to 191,000, showing a stronger labor market than expectations of an increase to 197,000.

The U.S. Feb Chicago Fed national activity index fell -0.42 to -0.19, weaker than expectations of 0.10.

U.S. Feb new home sales unexpectedly rose +1.1% to a 6-month high of 640,000, although weaker than expectations of 650,000.

The BOE, as expected, raised its key rate by 25 bp to 4.25% and said signs of inflation persistence would require more rate hikes.  Also, the Swiss National Bank raised interest rates by 50 bp today and said “it cannot rule out additional rate increases to ensure price stability,” and the Bank of Norway raised rates by 25 bp today and signaled another rate hike in May.   

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +0.22%.  China’s Shanghai Composite stock index closed up +0.64%, and Japan’s Nikkei Stock Index closed down -0.17%. 

Today’s stock movers…

A rebound in bank stocks this morning following Wednesday’s rout is boosting the overall market.  First Republic Bank (FRC) and Western Alliance Bancorp (WAL) are up +6% or more.  Also, Truist Financial (TFC) is up more than +3%, and Lincoln National (LNC) and Huntington Bancshares (HBAN) are up more than +2%. 

Netflix (NFLX) is up more than +8% to lead gainers in the S&P 500 and Nasdaq 100, with analysts upbeat on the stock as JPMorgan Chase recommends buying on weakness despite concerns over user trends, and CFA recently upgraded the stock to outperform.

Accenture (ACN) is up more than +7% after reporting Q2 revenue of $15.81 billion, above the consensus of $15.56 billion.

Regeneron Pharmaceuticals (REGN) is up more than +6% after collaborator Sanofi said its Dupixent drug to treat chronic obstructive pulmonary disease (COPD) met the primary endpoint in a Phase 3 trial. 

Homebuilders are climbing today after U.S Feb new home sales unexpectedly rose to a 6-month high.  DR Horton (DHI), PulteGroup (PHM), Lennar (LEN), and Toll Brothers (TOL) are up more than +2%.

Factset Research Systems (FDS) is down more than -5% to lead losers in the S&P 500 after reporting Q2 revenue of $515.1 million, below the consensus of $515.7 million, and cutting its full-year revenue estimate to $2.08 billion-$2.10 billion from a prior estimate of $2.10 billion-$2.12 billion. 

Block (SQ) is down more than -13% after Hindenburg Research said it took a short position in the company and that Block facilitated fraudsters who took advantage of government stimulus programs during the pandemic. 

Genuine Parts (GPC) is down more than -2% after forecasting full-year adjusted EPS of $8.80 to $8.95, the midpoint below the consensus of $8.92. 

Coinbase Global (COIN) is down more than -11% after it said it received a notice from the SEC that it plans to bring an enforcement action against the company for violating securities laws. 

Chewy (CHWY) is down more than -5% after forecasting 2024 sales growth of 10% to 12%, down from 13.6% growth in fiscal 2022.

Across the markets…

June 10-year T-notes (ZNM23) today are up +10 ticks, and the 10-year T-note yield is up +3.0 bp at 3.464%.  A rebound in stocks this morning is reducing safe-haven demand for government debt and is weighing on T-note prices.  Also, today’s weekly U.S. jobless claims report showed an unexpected decline, which signals strength in the labor market that is hawkish for Fed policy and bearish for T-note prices.  In addition, supply pressures are bearish for T-notes as the Treasury will auction $15 billion of 10-year TIPS later today.   

The dollar index (DXY00) today is down by -0.10%.  The dollar today extended this week’s losses and posted a 6-week low. Strength in stocks today is curbing the liquidity demand for the dollar.  Also, GBP/USD today climbed to a 7-week high and undercut the dollar after the BOE raised its key rate by 25 bp to 4.25% and said signs of inflation persistence would require more rate hikes.

EUR/USD (^EURUSD) today is up by +0.26%.  The euro today extended its week-long rally to a 6-week high.  Dollar weakness today is supporting moderate gains in the euro.  Also, hawkish comments today from ECB Governing Council members Knot and Holzmann gave the euro a boost when they said they expect the ECB to keep raising interest rates.

ECB Governing Council member Knot said, "with the risks to the inflation outlook so strongly tilted to the upside, I expect the ECB to hike rates again in May."

ECB Governing Council member Holzmann said from today's point of view, the ECB will "probably have to add" to its recent increases in interest rates when officials next meet in May.

USD/JPY (^USDJPY) today is down by -0.17%.  The yen today extended Wednesday’s rally to a 1-1/2 month high against the dollar.  Speculation the Fed was getting close to the end of its rate-hike cycle has weakened the dollar and boosted the yen.  The Fed’s new dot plot released Wednesday shows policymakers are only expecting one more 25 bp rate hike this year.

April gold (GCJ3) this morning is up +30.8 (+1.58%), and May silver (SIK23) is up +0.289 (+1.27%).  Precious metals prices this morning are moderately higher.  Dollar weakness is bullish for metals after the dollar index fell to a 6-week low today.  Also, speculation the Fed was close to ending its rate-hike cycle is bullish for metals. In addition, the recent banking turmoil has sparked fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to a 5-week high Wednesday.

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