Stocks Shake Off Early Losses on Economic Optimism

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.09%.

Stock indexes Monday recovered from early losses and settled mixed.  Last Friday’s stronger-than-expected U.S. March payroll report pushed bond yields higher Monday and weighed on technology stocks.  The stronger-than-expected U.S. payroll report bolstered expectations for another 25 bp Fed rate increase at the May 2-3 FOMC meeting.  Also, Apple fell more than -1% after its personal computer shipments in Q1 plunged by -40.5% y/y. 

However, stocks found support Monday on hopes that strength in the U.S. labor market can prop up consumer spending and prevent the economy from falling into recession. Also, an +8% jump in Micron Technology and Western Digital limited losses in technology stocks as both chipmakers rallied after rival Samsung Electronics said last Friday it would cut memory chip production.

Last Friday’s monthly payroll report showed U.S. March nonfarm payrolls rose +236,000, stronger than expectations of +230,000.  Also, the March unemployment rate unexpectedly fell -0.1 to 3.5%, showing a stronger labor market than expectations of unchanged at 3.6%.

U.S. March average hourly earnings eased to 4.2% y/y from 4.6% y/y in Feb, weaker than expectations of 4.3% and the weakest report in 1-3/4 years.

A quarterly report from the International Data Corporation (IDC) showed global shipments of personal computers (PCs) in Q1 fell -29% y/y to 56.9 million, below levels of early 2019 before the pandemic.   Apple led the losses, with its Q1 PC shipments plunging -40.5% y/y.

Bank of America said, "Investors are too optimistic on rate cuts and not pessimistic on recession," and recommends clients trim their equity allocations as the Federal Reserve edges closer to ending its rate-hiking campaign.

On the positive side for stocks, Pioneer Natural Resources closed up more than +5% after the Wall Street Journal reported that Exxon Mobil had held preliminary talks over a possible acquisition of the company.  Also, Charles Schwab closed up more than +4% after it reported that it took in $53 billion of net new client assets in March, easing liquidity concerns.

The 10-year T-note yield on Monday rose +11.4 bp at 3.419% (versus last Thursday’s close) due to last Friday’s stronger-than-expected U.S. March payroll report.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 was closed Monday for the Easter Monday holiday.  China’s Shanghai Composite closed down -0.37%, and Japan’s Nikkei Stock Index closed up +0.42%. 

Today’s stock movers…

Western Digital (WDC) closed up more than +8% to lead gainers in the S&P 500, and Micron Technology (MU) closed up more than +8% to lead gainers in the Nasdaq 100 in after rival Samsung Electronics said last Friday it would cut memory chip production.

Pioneer Natural Resources (PXD) closed up more than +5% after the Wall Street Journal reported that Exxon Mobil had held preliminary talks over a possible acquisition of the company.

CF Industries (CF) closed up more than +3% after Scotiabank upgraded the stock to sector outperform from sector perform.  Mosaic (MOS) also closed up more than +2% on the news.

Charles Schwab (SCHW) closed up more than +4% after it reported that it took in $53 billion in net new client assets in March.

Catalent (CTLT) closed up more than +3% after Deutsche Bank upgraded the stock to buy from hold with a price target of $88.

NetApp (NTAP) closed up more than +3% after Stifel upgraded the stock to buy from hold with a price target of $75.

Higher T-note yields Monday weighed on mega-cap technology stocks.  Oracle (ORCL) closed down more than -2% to lead losers in the S&P 500.  Also, Alphabet (GOOGL) and Adobe (ADBE) closed down more than -1%. In addition, Intel (INTC) closed down -0.88%, Microsoft (MSFT) closed down -0.76% and Meta Platforms (META) closed down -0.62%. 

Apple (AAPL) closed down more than -1% to lead losers in the Dow Jones Industrials after a report from the International Data Corporation (IDC) showed Apple’s Q1 PC shipments fell -40.5% y/y.

Incyte (INCY) closed down more than -2% after RBC Capital Markets downgraded the stock to sector perform from outperform. 

Block (SQ) closed down more than -2% after Keefe, Bruyette & Woods downgraded the stock to market perform from outperform. 

Across the markets…

June 10-year T-notes (ZNM23) on Monday closed down -1-1/32 points and the 10-year T-note yield rose by +11.4 bp to 3.419%.  June T-notes Monday were weighed down by negative carryover from last Friday’s stronger-than-expected U.S. Mar payrolls report.  Also, supply pressures are bearish for T-notes as the Treasury will auction $90 billion of T-notes and T-bonds this week, beginning with Tuesday’s $40 billion auction of 3-year T-notes.  T-notes extended their losses Monday afternoon when stocks recovered from early losses and moved higher.

Slide In Technology Stocks Leads The Overall Market Lower

Markets Today: Stock Indexes Fall On Weakness In Tech Stocks

Recent Stock News

• Why Investors Need to Be Cautious About Airbnb (ABNB) Now
• Despite a Potential Devon Energy Dividend Cut, Investors Short Its Puts for Income
• Earnings Season Will be a Test for Tech Stock Rally
• Slide in Technology Stocks Leads the Overall Market Lower