Rally in Tech Stocks Leads the Overall Market Higher

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.30%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.29%.

Stock indexes Thursday posted moderate gains, led by a rally in technology stocks.  A decline in bond yields was supportive of the technology sector.   

However, stock indexes fell back from their best levels as bank stocks sold off again.  Treasury Secretary Yellen told lawmakers that regulators “would be prepared to take additional actions if warranted” to protect deposits.  However, bank stocks remained on the defensive from Wednesday when Treasury Secretary Yellen said U.S. regulators aren’t looking to provide “blanket” deposit insurance to stabilize the U.S. banking system.

Some positive corporate news Thursday was positive for stock index futures.  Netflix rose more than +9%, with analysts upbeat on the stock.  Also, Accenture rose more than +7% after reporting Q2 revenue above consensus.  In addition, General Mills closed up more than +2% after reporting better-than-expected Q3 net sales and raising its full-year organic net sales outlook.

On the negative side, Factset Research Systems fell more than -5% after reporting weaker-than-expected Q2 revenue and cutting its full-year revenue estimate.  Also, Coinbase Global fell more than -14% 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.  In addition,  Block fell more than -14% 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 Thursday moved lower and were supportive for stocks.  The 10-year T-note yield fell -4.1 bp to 3.393%.  Also, the 10-year German bund yield fell -13.3 bp at 2.195%, and the 10-year UK gilt yield fell -91.1 bp at 3.350%.

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 Thursday and said “it cannot rule out additional rate increases to ensure price stability,” and the Bank of Norway raised rates by 25 bp and signaled another rate hike in May.   

Overseas stock markets Thursday settled mixed.  The Euro Stoxx 50 today closed up +0.27%.  China’s Shanghai Composite stock index closed up +0.64%, and Japan’s Nikkei Stock Index closed down -0.17%. 

Today’s stock movers…

Lower bond yields on Thursday prompted a rally in technology stocks. Micron Technology (MU) and Marvell Technology (MRVL) closed up more than +5%. Also, Intuit (INTU) closed up more than +4%. Lam Research (LRCX), Applied Materials (AMAT), NXP Semiconductors (NXPI), and ASML Holding NV (ASML) closed up more than +3%.

Netflix (NFLX) closed up more than +9% 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 about user trends.  CFRA recently upgraded Netflix to outperform.

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

Regeneron Pharmaceuticals (REGN) closed 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.

Intel (INTC) closed up more than +3% to lead gainers in the Dow Jones Industrials after the Patent Trial and Appeal Board sided with Intel and ruled that Qualcomm’s U.S. patent No. 8.838.849 is invalid because its purported innovations are obvious in light of prior art, ending a five-year-long court battle.

General Mills (GIS) closed up more than +2% after reporting Q3 net sales of $5.10 billion, better than the consensus of $4.96 billion, and raising its full-year organic net sales outlook to +10% to +11% from a prior estimate of about +10%.

Bank stocks sold off Thursday despite Treasury Secretary Yellen telling regulators “would be prepared to take additional actions if warranted” to protect deposits.  Zions Bancorp (ZION) closed down more than -8% to lead losers in the S&P 500.  Also, Comerica (CMA) closed down more than -8%, and KeyCorp (KEY) and First Republic Bank (FRC) closed down more than -6%. In addition, M&T Bank (MTB) closed down more than -4%, and Citizens Financial Group (CFG) and Synchrony Financial (SYF) closed down more than -3%. 

Factset Research Systems (FDS) closed down more than -5% 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) closed down more than -14% 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) closed down more than -4% after forecasting full-year adjusted EPS of $8.80 to $8.95, the midpoint below the consensus of $8.92. 

Coinbase Global (COIN) closed down more than -14% 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) closed down more than -7% after forecasting 2024 sales growth of 10% to 12%, down from 13.6% sales growth in fiscal 2022.

Across the markets…

June 10-year T-notes (ZNM23) on Thursday closed up +28.5 ticks, and the 10-year T-note yield fell by -4.1 bp to 3.393%.  T-note prices Thursday recovered from early losses and moved higher after a selloff in bank stocks renewed concerns about the U.S. banking system and sparked a flight to safety in T-notes.  T-notes initially moved lower after Thursday’s U.S. reports on weekly jobless claims and Feb new home sales were stronger than expected.

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