Strong Earnings Results Boost Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.83%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.80%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.65%.

Stock indexes Friday posted moderate gains, with the S&P 500 climbing to a 1-1/2 week high, the Dow Jones Industrials rising to a 2-1/2 month high, and Nasdaq 100 climbing to an 8-1/4 month high.  Better-than-expected corporate earnings results fueled a rally in stocks Friday.  Also, bond yields fell as inflation concerns eased after the U.S. Mar PCE core deflator, the Fed's preferred inflation gauge, eased to +4.6% y/y, right on expectations.

The markets are showing an 84% 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 Friday moved lower.  The 10-year T-note yield fell -7.5 bp to 3.445%.  The 10-year German bund yield fell -14.7 bp at 2.313%.  The 10-year UK gilt yield fell -7.5 bp at 3.719%.

Concerns about the health of the U.S. banking system remain a negative factor for stocks after First Republic Bank tumbled more than -43% to a record low after CNBC reported that the FDIC is talking to a number of banks regarding a solution for the fate of First Republic that would include receivership.

Federal Reserve data showed emergency loans outstanding to financial institutions through two backstop lending facilities rose to $155.2 billion in the week through April 26 from $143.9 billion the previous week.

U.S. Mar personal spending was unchanged m/m, stronger than expectations of -0.1% m/m.  Mar personal income rose +0.3% m/m, stronger than expectations of +0.2% m/m.

The U.S. Q1 employment cost index rose +1.2% (q/q annualized), stronger than expectations of +1.1% 

The U.S. Mar PCE core deflator, the Fed's preferred inflation gauge, eased to +4.6% y/y from +4.7% y/y in Mar, right on expectations.

The U.S. MNI Apr Chicago PMI unexpectedly rose +4.8 to an 8-month high of 48.6, stronger than expectations of a decline to 43.6. 

The University of Michigan U.S. Apr consumer sentiment index was left unrevised at 63.5, right on expectations.

On the bullish side for stocks, Charter Communications closed up more than +7% after reporting Q1 adjusted Ebitda above consensus.  Also, Mohawk Industries closed up more than +7% after reporting better-than-expected Q1 adjusted EPS.   In addition, Intel closed up more than +4% after reporting better-than-expected Q1 adjusted revenue and projecting a return to free cash flow in the second half of the year.

On the negative side, First Republic Bank closed down more than -43% at a record low after reports FDIC receivership is the most likely outcome for the bank.  Also, Amazon.com gave up a +12% surge in pre-market trading and closed down more than -3% after the company highlighted weakness in Amazon Web Services, its most profitable division.  In addition, Cloudflare closed down more than -21% to drag cybersecurity stocks lower after cutting its full-year revenue forecast.

Overseas stock markets Friday settled higher.  The Euro Stoxx 50 closed up +0.03%.  China’s Shanghai Composite closed up +1.14%, and Japan’s Nikkei Stock Index closed up +1.40%. 

Today’s stock movers…

Charter Communications (CHTR) closed up more than +7% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q1 adjusted Ebitda of $5.40 billion, better than expectations of $5.36 billion.

Mohawk Industries (MHK) closed up more than +7% after reporting Q1 net sales of $2.80 billion, stronger than the consensus of $2.73 billion.

ResMed (RMD) closed up more than +6% after reporting Q3 adjusted EPS of $1.68, stronger than the consensus of $1.61.

Royal Caribbean (RCL) closed up more than +6% after JPMorgan Chase initiated coverage of the stock with a recommendation of overweight and a price target of $94.

Intel (INTC) closed up more than +4% to lead gainers in the Dow Jones Industrials after reporting Q1 adjusted revenue of $11.72 billion, stronger than the consensus of $11.1 billion, and projected a return to free cash flow in the second half of the year.

Eastman Chemical (EMN) closed up more than +4% after reporting Q1 adjusted EPS of $1.63, well above the consensus of $1.25. 

Mondelez International (MDLZ) closed up more than +3% after reporting Q1 adjusted EPS of 89 cents, above the consensus of 80 cents.

First Republic Bank (FRC) closed down more than -43% at a record low to lead losers in the S&P 500 after CNBC reported that the FDIC is talking to a number of banks regarding a solution for the fate of First Republic that would include receivership.

T-Mobile US (TMUS) closed down more than -4% after reporting Q1 revenue of $19.63 billion, weaker than the consensus of $19.84 billion. 

Amazon.com (AMZN) closed down more than -3% after the company highlighted weakness in Amazon Web Services, its most profitable division.

Cybersecurity stocks sold off Friday, with Cloudflare (NET) closing down more than 21% after cutting its full-year revenue forecast to $1.28 billion from $1.33 billion-$1.34 billion, below the consensus of $1.34 billion.  Also, Crowdstrike Holdings (CRWD) closed down more than -4% to lead losers in the Nasdaq 100, and SentinelOne (S) closed down more than -5%.  In addition, Zscaler (ZS) closed down by more than -2%, and Palo Alto Networks (PANW) closed down by more than -1%. 

Snap (SNAP) closed down more than -17% after reporting Q1 revenue of $988.6 million, weaker than the consensus of $1.01 billion.

Pinterest (PINS) closed down more than -15% after reporting a Q1 net loss of -$209 million, wider than the consensus of -$131.1 million.

AON Plc (AON) closed down more than -2% after reporting Q1 adjusted EPS of $5.17 billion, weaker than the consensus of $5.31.

Across the markets…

June 10-year T-notes (ZNM23) on Friday closed up +15 ticks, and the 10-year T-note yield fell by -7.5 bp to 3.445%.  June T-notes Friday opened higher on carryover support from a rally in 10-year German bunds.  T-notes extended their gains after the U.S. Mar PCE core deflator, the Fed's preferred inflation gauge, eased to +4.6% y/y, right on expectations.  In addition, a decline in inflation expectations boosted T-note prices after the 10-year breakeven inflation rate fell to a 5-week low Friday at 2.186%.  T-notes maintained their gains despite a rally in stocks.

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