Favorable CPI Report Sparks a Rally in Technology Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.23%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.99%.

U.S. stocks this morning are mixed, with the S&P 500 posting a 1-week high and the Nasdaq 100 climbing to an 8-1/2 month high.

The broader market rallied this morning, led by strength in mega-cap technology stocks, as bond yields fell after U.S. consumer prices eased in April.  The easing of price pressures in the Apr CPI report has bolstered speculation the Fed may pause its rate-hike campaign.

The U.S. Apr CPI eased to a 2-year low of 4.9% y/y from 5.0% y/y in Mar, better than expectations of unchanged at 5.0% y/y.  Apr CPI ex-food and energy eased to 5.5% y/y from 5.6% y/y in Mar, right on expectations.

U.S. debt ceiling talks Tuesday yielded little results, but White House officials and Republican leaders pledged additional negotiations. On Friday, President Biden will meet again with congressional leaders, including House Speaker McCarthy.  Treasury Secretary Yellen said that the Treasury Department may run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised.

Global bond yields are lower.  The 10-year T-note yield is down -6.8 bp at 3.450%.  The 10-year German bund yield is down -6.2 bp at 2.288%, and the UK 10-year gilt yield is down -5.9 bp at 3.796%.

On the bullish side for stocks, mega-cap technology stocks and chips stocks are rallying today as bond yields decline on the dovish Apr CPI report.  Also, Rivian Automotive is up more than +12% after reporting a Q1 adjusted loss per share that was smaller than expected.  In addition, Syneos Health is up more than +8% after a consortium that includes Elliot Investment Management, Patient Square Capital, and Veritas Capital were said to be in advanced talks to acquire the company.

On the bearish side, Airbnb is down more than -10% after forecasting Q2 revenue below consensus.  Also, Twilio is down more than -15% after forecasting Q2 revenue well below consensus. In addition, Coherent Corp is down more than -10% after reporting Q3 revenue below consensus and cutting its full-year revenue estimate.

Overseas stock markets are lower.  The Euro Stoxx 50 is down -0.40%.  China’s Shanghai Composite closed down -1.15%, and Japan’s Nikkei Stock Index closed down -0.41%. 

Today’s stock movers…

Lower bond yields today sparked a rally in mega-cap technology stocks.  Amazon.com (AMZN), Alphabet (GOOGL), and Tesla (TSLA) are up more than +2%.  Also, Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), and Qualcomm (QCOM) are up more than +1%.   

Akamai Technologies (AKAM) is up more than +8% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $1.40, stronger than the consensus of $1.32, and forecast full-year adjusted EPS of $5.69-$5.84, well above the consensus of $5.48. 

A rally in chip stocks is supportive of the overall market.  Advanced Micro Devices (AMD) is up more than +3%.  Also, ASML Holding NV (ASML), Lam Research (LRCX), KLA Corp (KLAC), GlobalFoundries (GFS), and ON Semiconductor (ON) are up more than +2%.  In addition,  Applied Materials (AMAT), Microchip Technology (MCHP), and NXP Semiconductor NV (NXPI) are up more than +1%. 

Rivian Automotive (RIVN) is up more than +12% to lead gainers in the Nasdaq 100 after reporting a Q1 adjusted loss per share of -$1.25, narrower than the consensus of -$1.43. 

Exact Sciences (EXAS) is up more than +9% after reporting Q1 revenue of $602.5 million, better than the consensus of $543.1 million, and raising its full-year revenue forecast to $2.38 billion-$2.42 billion from a previous forecast of $2.27 billion-$2.32 billion, above the consensus of $2.30 billion. 

Syneos Health (SYNH) is up more than +8% after a consortium that includes Elliot Investment Management, Patient Square Capital, and Veritas Capital were said to be in advanced talks to acquire the company. 

Lincoln National (LNC) is down more than -10% after reporting Q1 adjusted operating revenue of $3.81 billion, well below the consensus of $4.59 billion. 

Airbnb (ABNB) is down more than -10% to lead losers in the Nasdaq 100 after forecasting Q2 revenue of $2.35 billion-$2.45 billion, with the midpoint below the consensus of $2.42 billion. 

Twilio (TWLO) is down more than -15% after forecasting Q2 revenue of $980 million-$990 million, weaker than the consensus of $1.05 billion.

Coherent Corp (COHR) is down more than -8% after reporting Q3 revenue of $1.24 billion, weaker than the consensus of $1.34 billion, and cutting its full-year revenue estimate to $5.08 billion-$5.15 billion from a previous estimate of $5.35 billion-$5.50 billion, well below the consensus of $5.39 billion.

Southern Copper (SCCO) is down more than -4% after Goldman Sachs downgraded the stock to sell from neutral.

Occidental Petroleum (OXY) is down more than -3% after reporting Q1 adjusted EPS of $1.09, below the consensus of $1.23.

Marriott International (MAR) is down more than -3% on signs of insider selling after President and CEO Capuano sold $2.85 million of shares.

Across the markets…

June 10-year T-notes (ZNM23) today are up +14 ticks, and the 10-year T-note yield is down -5.1 bp at 3.4671%.  Jun T-notes this morning are moderately higher. T-notes rallied after today’s report that the U.S. Apr CPI eased to a 2-year low of +4.9% y/y, which was dovish for Fed policy.  Supply pressures may limit further upside in T-note prices today as the Treasury will auction $35 billion of 10-year T-notes later today as part of this week’s May quarterly refunding, where the Treasury will auction $96 billion of T-notes and T-bonds. 

The dollar index (DXY00) today is down by -0.15%.  The dollar today is moderately lower after the dovish U.S. Apr CPI report. Also, strength in EUR/USD is weighing on the dollar as the euro rose on hawkish ECB comments.

EUR/USD (^EURUSD) today is up by +0.14%.  A weaker dollar today is boosting the euro.  Also, hawkish comments from ECB President Lagarde and Executive ECB Board member Schnabel gave the euro a boost when they said they favored additional ECB rate hikes.  Gains in the euro were limited by Eurozone economic concerns after Italy Mar industrial production unexpectedly fell.

ECB President Lagarde said the inflation outlook could face "significant upside risks," and the ECB still has "more ground to cover."

ECB Executive Board member Schnabel said the ECB will continue lifting borrowing costs "with full determination until there are signs that core inflation is also falling on a sustained basis."

Italy Mar industrial production unexpectedly fell -0.6% m/m, weaker than expectations of +0.3% m/m and the biggest decline in 5 months.

USD/JPY (^USDJPY) today is down by -0.62%.  The yen today is moderately higher on dollar weakness and after T-note yields fell on the dovish U.S Apr CPI report.  The yen also has support on safe-haven demand from the impasse in the U.S. debt ceiling. 

Today’s economic news was bearish for the yen after the Japan Mar leading index CI fell -0.7 to 97.5, weaker than expectations of 97.9.

June gold (GCM3) this morning is up +0.5 (+0.02%), and July silver (SIN23) is up +0.022 (+0.08%).  Precious metals prices this morning are slightly higher.  A weaker dollar today is supportive of metals prices.  Also, lower global bond yields are bullish for precious. In addition, concern about the health of the U.S. banking system and the U.S. debt limit impasse has boosted safe-haven demand for precious metals.  That has led to strong fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to a 4-month high on Tuesday.  Metals prices fell back from their best levels as stocks rallied, which curbed some safe-haven demand for precious metals.  Also, hawkish ECB comments today from ECB President Lagarde and ECB Executive Board member Schnabel weighed on metals when they said they favored additional ECB rate hikes.

• Here’s Why TrueCar (TRUE) Faces a Tough Consumer Headwind
• Markets Today: Stocks Rally as U.S. CPI Eases
• AAPL Max Pain Sitting at $160 - Consider This Butterfly Spread
• Stock Index Futures Move Lower Ahead of U.S. Inflation Data, Debt Ceiling Worries Weigh