Stocks Mixed as Microsoft Leads Tech Higher and First Republic Weighs on Banks

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.02%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.96%.

U.S. stock indexes this morning are mixed, with the S&P 500 falling to a 3-1/2 week low and the Dow Jones Industrials dropping to a 2-week low.  Concerns about the health of the U.S. banking system are weighing on regional bank stocks and the overall market after First Republic Bank sank more than -27% to a new record low on a report that advisers have reportedly lined up buyers of new stock as part of a rescue plan.

Strength in software stocks is boosting the technology sector and lifting the Nasdaq 100, with Microsoft up more than +7% after reporting better-than-expected quarterly earnings results late Tuesday.

U.S. Mar capital goods new orders nondefense ex-aircraft and parts fell -0.4% m/m, weaker than expectations of -0.1% m/m.

U.S. Mar wholesale inventories rose +0.1% m/m, right on expectations.  However, Mar retail inventories rose +0.7% m/m, above expectations of +0.2% m/m.

The markets are showing a 77% 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 are mixed.  The 10-year T-note yield is up +0.4 bp at 3.403%.  The 10-year German bund yield fell to a 2-week low of 2.311% and is down -2.0 bp at 2.364%.  The 10-year UK gilt yield fell to a 1-week low of 3.653% and is down -0.6 bp at 3.689%.

On the bearish side for stocks, First Republic Bank is down more than -27% to a new record low after CNBC reported that advisers have lined up potential buyers of new stock as part of a rescue plan for the bank. Also, Activision Blizzard is down more than -10% the UK’s Competition and Markets Authority blocked Microsoft’s takeover of the company.  In addition, Juniper Networks is down more than -3% after forecasting Q2 adjusted operating margin below consensus.

On the bullish side, Microsoft is up more than +7% after reporting better-than-expected Q3 revenue.  Also, Chipotle Mexican Grill is up more than +14% after reporting Q1 comparable sales above consensus.  In addition, Allegion Plc is up more than +6% after reporting better-than-expected Q1 net revenue.

Overseas stock markets are lower.  The Euro Stoxx 50 is down -0.93%.  China’s Shanghai Composite closed down -0.02%, and Japan’s Nikkei Stock Index closed down -0.71%. 

Today’s stock movers…

First Republic Bank (FRC) is down more than -27% at a record low to lead losers in the S&P 500 after CNBC reported that advisers have lined up potential buyers of new stock as part of a rescue plan for the bank. 

Activision Blizzard (ATVI) is down more than -10% after the UK’s Competition and Markets Authority blocked Microsoft’s takeover of the company.

Old Dominion Freight Line (ODFL) is down more than -1% after reporting Q1 revenue of $1.44 billion, weaker than the consensus of $1.48 billion. 

Illumina (ILMN) is down more than -5% after reporting Q1 cash and cash equivalents of $1.49 billion, well below the consensus of $2.11 billion. 

Tesla (TSLA) is down more than -3% after Jeffries downgraded the stock to hold from buy, saying lower returns will drag on the stock until earnings upgrades begin to emerge. 

Texas Instruments (TXN) is down more than -3% after forecasting Q2 revenue of $4.17 billion-$4.54 billion, the midpoint below the consensus of $4.44 billion. 

Chipotle Mexican Grill (CMG) is up more than +14% to lead gainers in the S&P 500 after reporting Q1 comparable sales rose +10.9%y/y, stronger than the consensus of +8.51% y/y. 

Microsoft (MSFT) is up more than +7% to lead gainers in the Dow Jones Industrials after reporting Q3 revenue of $52.86 billion, better than expectations of $51.03 billion.  Other software stocks rose on the news, with Datadog (DDOG) up more than +12% to lead gainers in the Nasdaq 100.  Also, Snowflake (SNOW) is up more than +8%, Atlassian Corp (TEAM) is up more than +4%, and Workday (WDAY) and ServiceNow (NOW) are up more than +2%. 

Allegion Plc (ALLE) is up more than +6% after reporting Q1 net revenue of $923.0 million, well above the consensus of $845.6 million.

Masco (MAS) is up more than +6% after reporting Q1 net sales of $1.98 billion, stronger than the consensus of $1.90 billion.

CoStar Group (CSGP) is up more than +4% after reporting Q1 revenue of $584.4 million, above the consensus of $579.8 million, and raising the lower end of its full-year revenue forecast to $2.47 billion-$2.48 billion from $2.46 billion-$2.48 billion. 

Across the markets…

June 10-year T-notes (ZNM23) today are down -2 ticks, and the 10-year T-note yield is up +0.4 bp at 3.403%.  Jun T-notes this morning fell back from a 1-1/2 week high, and the 10-year T-note yield recovered from a 1-1/2 week low of 3.373%.  T-notes gave up an early advance and are slightly lower on supply pressures, with the Treasury scheduled to auction $24 billion auction of 2-year floating-rate notes and $43 billion of 5-year T-notes later today as part of this week's $144 billion auction package of T-notes and floating-rate notes. 

T-notes this morning initially moved higher as banking turmoil boosted safe-haven demand for T-notes when trading was halted temporarily in First Republic Bank after the stock plunged more than 20% to a new record low when CNBC reported that adviser lined up potential buyers of First Republic stock if they can fix the bank’s balance sheet.

The dollar index (DXY00) today is down by -0.52%.  The dollar this morning fell to a 1-1/2 week low on concerns that U.S. banking turmoil will prompt the Fed to stop raising interest rates. Also, lower T-note yields today are undercutting the dollar.

EUR/USD (^EURUSD) today is up by +0.63% and posted a 1-year high. A slump in the dollar today is bullish for the euro.  EUR/USD also garnered support on positive comments from ECB Vice President Guindos, who said the Eurozone looks to avoid a recession.  In addition, an increase in German May GfK consumer confidence to a 13-month high is supportive of the euro.

The German Economy Ministry raised its 2023 German GDP forecast to +0.4% from a January forecast of +0.1%.

ECB Vice President Guindos said, "Growth in Q1, according to leading indicators, is going to be possible," and the Eurozone looks to avoid a recession that had been expected as recently as late last year. 

ECB Governing Council member Vujcic said the ECB "has no choice but to continue raising interest rates as inflation is falling, but core inflation is stubbornly high."

The German May GfK consumer confidence index rose +3.6 to a 13-month high of -25.7, stronger than expectations of -28.0.

USD/JPY (^USDJPY) today is down by -0.39%.  The yen today climbed to a 1-1/2 week high against the dollar. A decline in T-note yields is supportive of the yen.  Also, the U.S. banking turmoil had boosted the safe-haven demand for the yen after trading in First Republic Bank was halted when the stock plunged to a record low.

June gold (GCM3) this morning is up +4.5 (+0.22%), and May silver (SIK23) is up +0.188 (+0.76%).  Precious metals prices this morning are moderately higher.  A fall in the dollar index today to a 1-1/2 week low is bullish for metals prices.  Also, lower global bond yields today are supportive of metals.  In addition, U.S. banking turmoil has boosted safe-haven demand for precious metals.  Silver also rose on signs of improvement in industrial metals demand after the German Economy Ministry raised its German 2023 GDP forecast and after ECB Vice President Guindos said the Eurozone looks to avoid a recession.

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