Stocks Rally as Weak Economic News Bolsters Hopes that Fed’s Rate-Hike Regime is Nearly Over

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed up +1.33%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.03%.

Stock indexes Thursday closed moderately higher, with the S&P 500 and Dow Jones Industrials posting 2-month highs and the Nasdaq 100 posting a 1-week high.  Stocks rallied Thursday on hopes the Fed may be approaching the end of its interest rate hike campaign after Thursday’s U.S. weekly jobless claims and monthly producer price reports were softer than expected. 

The U.S. Mar final-demand PPI eased to +2.7% y/y from +3.9% y/y in Feb, weaker than expectations of +3.0% y/y and the weakest report in more than two years.  Mar PPI ex-food and energy eased to +3.4% y/y from +4.8% y/y, right on expectations and the weakest report in two years.

U.S. weekly initial unemployment claims rose +11,000 to 239,000, showing a weaker labor market than expectations of 235,000.  However, weekly continuing claims unexpectedly fell -13,000 to 1.810 million, showing a stronger labor market than expectations of an increase to 1.833 million.

Stocks are awaiting Q1 earnings reporting season, which kicks off Friday with earnings results from big U.S. banks, including Citigroup, JPMorgan Chase, and Wells Fargo. 

On the bullish side for stocks, hopes that the Fed was close to ending its rake-hike campaign sparked a rally in mega-cap technology stocks that supported the overall market.  Also, mining stocks moving higher after the price of gold Thursday climbed to a 13-month high. 

On the bearish side, Progressive closed down more than -6% after reporting below-consensus Q1 net premiums earned.  Also, industrial stocks were under pressure after Fastenal reported March daily sales growth that was weaker than in previous months.  In addition, Sportsman’s Warehouse Holdings closed down more than -13% after reporting weaker-than-expected Q4 net sales and forecasting Q1 net sales below consensus.

Global bond yields Thursday moved higher.  The 10-year T-note yield rose +6.1 bp to 3.452%.  The 10-year German bund yield rose +0.2 bp at 2.372%, and the 10-year UK gilt yield rose +0.4 bp at 3.575%.

Overseas stock markets on Thursday settled mixed.  The Euro Stoxx 50 closed up +0.67%.  China’s Shanghai Composite closed down -0.27%, and Japan’s Nikkei Stock Index closed up +0.26%. 

Today’s stock movers…

Hopes that the Fed was close to ending its interest-rate hike campaign sparked a rally in mega-cap technology stocks.  Amazon.com (AMZN) and Netflix (NFLX) closed up more than +4%. Also, Apple (AAPL) closed up more than +3% to lead gainers in the Dow Jones Industrials.  In addition, Alphabet (GOOGL), Meta Platforms (META), and Tesla (TSLA) closed up more than +2%. 

Mining stocks rallied Thursday after the price of gold climbed to a 13-month high.  Freeport-McMoRan (FCX) closed up more than +5% Newmont (NEM) closed up more than +3%. 

Wynn Resorts (WYNN) closed up more than +4% after Wells Fargo Securities named the stock its top pick in the hotel and casino sector.

Booking Holdings (BKNG) closed up more than +3% after Argus Research raised its price target on the stock to $3,000 from $2,800.

Crispr Therapeutics (CRSP) closed up more than +16% after Cantor Fitzgerald initiated coverage of the stock with a recommendation of overweight. 

Progressive (PGR) closed down more than -6% to lead losers in the S&P 500 after reporting Q1 net premiums earned of $13.53 billion, below the consensus of $13.58 billion.

Western Digital (WDC) closed down more than -2% after TechCrunch reported that hackers were seeking a ransom of at least $10 million in exchange for not releasing about ten terabytes of data, including customer information, that they stole from the company on March 26.

Industrial stocks moved lower after Fastenal, a distributor of manufacturing and building supplies, whose results are a bellwether for the sector, reported March daily sales growth of 6.8%, weaker than previous months.  Old Dominion Freight Line (ODFL) closed down more than -2% to lead losers in the Nasdaq 100.  Also, Parker-Hannifin (PH) and WW Grainger (GWW) closed down by more than -1%. In addition, Ingersoll Rand (IR) closed down -0.8%, and Fastenal (FAST) close down -0.4%.

Sportsman’s Warehouse Holdings (SPWH) closed down more than -13% after reporting Q4 net sales of $379.3 million, weaker than the consensus of $379.8 million, and forecasting Q1 net sales of $265 million-$270 million, well below the consensus of $324.5 million.

LyondellBasell Industries (LYB) closed down more than -1% after Jeffries downgraded the stock to hold from buy.

Across the markets…

June 10-year T-notes (ZNM23) on Thursday closed down -8 ticks, and the 10-year T-note yield rose by +6.1 bp to 3.452%.  June T-notes Thursday gave up an early advance and closed moderately lower.  A rally in stocks Thursday sparked long liquidation in T-notes.  Also, a jump in UK gilt yields Thursday weighed on T-note prices after the 10-year UK gilt yield rose to a 1-month high of 3.608%. 

T-notes Thursday initially moved higher after U.S. Mar producer prices rose less than expected and weekly U.S. initial jobless claims rose more than expected.  Demand for the Treasury’s $18 billion 30-year T-bond auction was decent and was supportive of T-note prices as the auction had a bid-to-cover ratio of 2.36, matching the 10-auction average.   

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