Strength in Regional Bank Stocks Leads the Overall Market Higher

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.04%.

U.S. stocks this morning are modestly higher.  A rally in regional bank stocks today is providing support to the overall market.  Higher bond yields today are limiting gains in the overall market after former Fed Vice Chair Clarida said the Fed was unlikely to cut interest rates until 2024.

The World Bank today raised its 2023 global GDP forecast to 2.1% from 1.7% in January but cut its 2024 global GDP forecast to 2.4% from 2.7% and said, "Global growth is projected to slow significantly in the second half of the year, with weakness continuing in 2024."

The Reserve Bank of Australia today unexpectedly raised its cash rate by +25 bp to 4.10% from 3.85% and said recent data indicate upside risks to CPI and “some further tightening of monetary policy may be required.”

Former Fed Vice Chair Clarida said the Fed would likely raise interest rates again in this cycle and is "unlikely" to start cutting rates until 2024.

Global bond yields are higher.  The 10-year T-note yield is up +3.3 bp at 3.716%.  The 10-year German bund yield is up +0.3 bp at 2.384%, and the UK 10-year gilt yield is up +1.3 bp at 4.221%.

On the bullish side of stocks, regional bank stocks are moving higher today to lift the overall market.  Also, Intel is up more than +3% after it said it would sell part of its stake in Mobileye to raise $1.48 billion.  In addition, Thor Industries is up more than +14% after reporting stronger-than-expected Q3 net sales. 

On the bearish side, JM Smucker is down more than -1% after forecasting 2024 free cash flow well below consensus.  Also, Fastenal is down more than -1% on concern demand is slowing after the company reported May sales well below April's.  In addition,  Arista Networks is down more than -1% on signs of insider selling after an SEC filing showed CFO Brennan sold $1.58 million of shares on June 1. 

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.03%.  China’s Shanghai Composite closed down -1.15%, and Japan’s Nikkei Stock Index closed up +0.90%. 

Today’s stock movers…

Regional bank stocks are climbing today.  Zions Bancorp (ZION) is up more than +5% to lead gainers in the S&P 500.  Also, Comerica (CMA) is up more than +5%, and KeyCorp (KEY) and M&T Bank (MTB) are up more than +4%.  In addition, US Bancorp (USB), Fifth Third Bancorp (FITB), Citizens Financial Group (CFG), Huntington Bancshares (HBAN), and Truist Financial (TFC) are up more than +3%.   

Intel (INTC) is up more than +3% to lead gainers in the Dow Jones Industrials after it said it would sell part of its stake in Mobileye to raise $1.48 billion. 

Advanced Micro Devices (AMD) is up more than +3% to lead gainers in the Nasdaq 100 after Piper Sandler raised its price target on the stock to $150 from $110.

Thor Industries (THO) is up more than +14% after reporting Q3 net sales of $2.93 billion, better than the consensus of $2.82 billion.

HealthEquity (HQY) is up more than +12% after reporting Q1 revenue of $244.4 million, above the consensus of $239.3 million, and raising its 2024 revenue forecast to $975 million-$985 million from a prior estimate of $960 million-$975 million, stronger than the consensus of $967.4 million. 

McCormick & Co (MKC) is up more than +2% after Bank of America double-upgraded the stock to buy from underperform. 

UnitedHealth Group (UNH) is down more than -1% to lead losers in the Dow Jones Industrials after Amedisys said it received an unsolicited $3.26 billion takeover proposal from a unit of UnitedHealth Group. 

JM Smucker (SJM) is down more than -1% after forecasting 2024 free cash flow of $650 million, well below the consensus of $881.6 million.  

Arista Networks (ANET) is down more than -1% on signs of insider selling after an SEC filing showed CFO Brennan sold $1.58 million of shares on June 1. 

Starbucks (SBUX) is down more than -1% after Erste Group downgraded the stock to hold from buy. 

Fastenal (FAST) is down more than -1% on concern demand is slowing after the company reported May sales rose only 5.2% following a 7.8% increase in April. 

Mobileye Global (MBLY) is down more than -1% after Intel announced it would sell 35 million shares of its Mobileye stake with an option to sell 5.25 million more shares. 

Across the markets…

September 10-year T-notes (ZNU23) today are down -6 ticks, and the 10-year T-note yield is up +3.3 bp at 3.716%.  Sep T-notes this morning are moderately lower on hawkish comments from former Fed Vice Chair Clarida, who said the Fed would likely raise interest rates again in this cycle.  Today’s action by the World Bank to raise its 2023 global GDP forecast is also weighing on T-note prices.

The dollar index (DXY00) this morning is up +0.25%.  Higher T-note yields today have strengthened the dollar’s interest rate differentials.  Also, weaker-than-expected Eurozone economic news today is weighing on EUR/USD to benefit the dollar.  In addition, hawkish comments from former Fed Vice Chair Clarida were bullish for the dollar.

EUR/USD (^EURUSD) today is down by -0.36%.  The euro is under pressure after today’s Eurozone economic reports on Eurozone Apr retail sales and German Apr factory orders were weaker than expected.  Also, a decline in the ECB's monthly consumer inflation expectations survey is dovish for ECB policy and bearish for the euro. 

Eurozone Apr retail sales were unchanged m/m, weaker than expectations of +0.2% m/m.

German Apr factory orders unexpectedly fell -0.4% m/m, weaker than expectations of +2.8% m/m.

The ECB's monthly consumer inflation expectations for the next 12 months fell to 4.1% in Apr from 5.0% in Mar, and for the next three years ahead fell to 2.5% in Apr from 2.9% in Mar.

USD/JPY (^USDJPY) today is up by +0.24%.  The yen is under pressure today from weaker-than-expected Japanese economic news on Apr household spending and Apr labor cash earnings, which are dovish for BOJ policy.  Also, higher T-note yields today are undercutting the yen.  In addition, today’s rally in the Nikkei Stock Index to a 32-year high has curbed safe-haven demand for the yen. 

Weaker-than-expected Japanese economic news today is bearish for the yen.  Apr household spending fell -4.4% y/y, weaker than expectations of -2.4% y/y and the biggest decline in over two years.  Also, Apr labor cash earnings rose +1.0% y/y, weaker than expectations of +1.8% y/y.

August gold (GCQ3) this morning is down -1.6 (-0.08%), and July silver (SIN23) is down -0.165 (-0.70%).  Precious metals prices this morning are moderately lower.  A stronger dollar today is weighing on metals prices along with higher bond yields.  Siler prices are also under pressure on industrial metals demand concerns after Eurozone Apr retail sales and German Apr factory orders were weaker than expected. Losses in gold were limited after today’s ECB monthly consumer inflation expectations survey declined, which is dovish for ECB policy.

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