Stocks Settle Mixed Ahead of Mega-Cap Tech Earnings

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.24%.

Stock indexes Monday drifted sideways and settled mixed.  Lower T-note yields on Monday were supportive for stocks.  Also, strength in energy stocks boosted the overall market after WTI crude prices rose more than +1%. 

This week's earnings from mega-cap technology stocks Amazon.com, Microsoft, and Meta Platforms will be parsed for insights into the effect of higher borrowing costs and a struggling economy. 

The U.S. Apr Dallas Fed manufacturing activity index unexpectedly fell -7.7 to a 9-month low of -23.4, weaker than expectations of an increase to -12.0.

Lower T-note yields Monday provided underlying support for stocks. The markets are showing a 92% chance of a 25 bp rate hike by the Federal Reserve at the May 2-3 FOMC meeting and have fully priced in a 25 bp rate hike by the ECB at its May 4 ECB meeting.

Global bond yields were mixed.  The 10-year T-note yield fell -5.7 bp to 3.513%.  The 10-year German bund yield rose +2.7 bp to 2.508%. The 10-year UK gilt yield rose +2.3 bp to 3.781%.

On the positive side for stocks, First Republic Bank closed up more than +12% on short covering ahead of the company’s Q1 earnings results that will be released after Monday’s close.   Also, recently beaten-down managed healthcare stocks rose Monday on bargain hunting.  In addition, Zoom Video Communications closed up more than +2% after the Financial Times reported that Microsoft would no longer force customers who use the Office software to also have Teams video conferencing and messaging app automatically installed on their devices.

On the negative side, Carrier Global closed down more than -7% after Bloomberg reported the company is near a deal to acquire Viessmann GmbH for more than $10 billion, including debt.  Also, Fox Corp closed down more than -2% after Tucker Carlson, host of the company’s top-rated show, announced that he would leave the network immediately.  In addition, U.S.-listed Chinese stocks retreated on rising geopolitical tensions, with President Biden planning an executive order to limit American businesses' investment in parts of China’s economy.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed down -0.15%.  China’s Shanghai Composite closed down -0.78%, and Japan’s Nikkei Stock Index closed up +0.10%. 

Today’s stock movers…

First Republic Bank (FRC) closed up more than +12% to lead gainers in the S&P 500 on short covering ahead of the company’s Q1 earnings results that will be released after Monday’s close. 

Recently beaten-down managed healthcare stocks moved higher Monday on bargain hunting.  Elevance Health (ELV), Humana (HUM), Centene (CNC), and Molina Healthcare (MOH) closed up more than +2%.  Also, Universal Health Services (UHS), HCA Healthcare (HCA), and Cigna Group (CI) closed up more than +1%. 

Medtronic Plc (MDT) closed up more than +4% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $100, saying the FDA’s approval of its insulin pump is a “major milestone” for the firm.

A rally of more than +1% in WTI crude oil Monday supported energy stocks and energy service providers.  Haliburton (HAL) closed up more than +3%. Also, Marathon Oil (MRO) and Marathon Petroleum (MPC) closed up more than +2%. In addition, Exxon Mobil (XOM), Baker Hughes (BKR), Diamondback Energy (FANG), Chevron (CVX), and Devon Energy (DVN) closed up more than +1%.

Zoom Video Communications (ZM) closed up more than +2% to lead gainers in the Nasdaq 100 after the Financial Times reported that Microsoft will no longer force customers who use the Office software to also have Teams video conferencing and messaging app automatically installed on their devices.

Crinetics Pharmaceuticals (CRNX) closed up more than +6% after Piper Sandler initiated coverage of the stock with an overweight rating and a price target of $56. 

Carrier Global (CARR) closed down more than -7% to lead losers in the S&P 500 after Bloomberg reported the company is near a deal to acquire Viessmann GmbH for more than $10 billion, including debt. 

Fox Corp (FOX) closed down more than -3% after Tucker Carlson, host of the company’s top-rated show, announced that he would leave the network immediately.

KeyCorp (KEY) closed down more than -3% after Moody’s Investors Service late Friday cut its outlook on the stock to negative from stable.  Other regional bank stocks fell on the news, with Zions Bancorp (ZION) closing down more than -3% and Comerica (CMA), US Bancorp (USB), and Huntington Bancshares (HBAN) closing down more than -2%. 

Micron Technology (MU) closed down more than -2% after the Financial Times reported that the U.S. asked South Korea to urge Samsung Electronics and SK Hynix to resist boosting chip sales to China if the Chinese government bans Micron from selling there. Last year, Micron generated 25% of its revenue from sales to mainland China and Hong Kong.

Viatris (VTRS) closed down more than -3% after Barclays downgraded the stock to equal weight from overweight.

U.S.-listed Chinese stocks retreated Monday on rising geopolitical tensions, with President Biden planning an executive order to limit investment in parts of China’s economy by American businesses.  PDD Holdings (PDD) closed down more than -3% to lead losers in the Nasdaq 100.  Also, JD.com (JD) closed down more than -2%.  In addition, Alibaba Group Holding (BABA) and Baidu (BIDU) closed down by more than -1%.

Tesla (TSLA) closed down more than -1% after raising its 2023 capex forecast to $7 billion-$9 billion from a January forecast of $6 billion-$8 billion. 

Across the markets…

June 10-year T-notes (ZNM23) on Monday closed up +13 ticks, and the 10-year T-note yield fell by -5.7 bp to 3.513%.  June T-notes Monday moved moderately higher on the weaker-than-expected Dallas Fed report.  Also, short-covering gave T-notes a boost as last Friday’s Weekly Commitment of Traders (COT) data showed that hedge funds boosted their net short positions on 10-year Treasury note futures to a record 1.29 million contracts the week ending April 18.  

Limiting gains in T-notes is an increase in supply pressures, with the Treasury scheduled to auction $144 billion of T-notes and floating-rate notes this week, beginning with Tuesday’s $42 billion auction of 2-year T-notes.

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