Stocks Post Modest Gains as Regional Bank Stocks Rally

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.245%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.01%.

Stock indexes Tuesday rose modestly as strength in regional bank stocks supported the overall market.  Higher bond yields Tuesday limited stock gains 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 on Tuesday were mixed.  The 10-year T-note yield rose +1.0 bp to 3.693%.  The 10-year German bund yield fell -0.8 bp to 2.372%, and the UK 10-year gilt yield fell -0.1 bp to 4.207%.

On the bullish side of stocks, regional bank stocks moved higher to lift the overall market.  Also, Intel closed up more than +3% after it said it would sell part of its stake in Mobileye to raise $1.48 billion.  In addition, U.S.-listed Chinese stocks rallied Tuesday after Bloomberg reported that U.S. Secretary of State Blinken plans to visit China in the coming weeks for talks with top Chinese officials.

On the bearish side, Merck & Co closed down more than -2% to lead pharmaceutical stocks lower after it sued the U.S. government over a law that will allow the government to negotiate prescription drug prices directly with pharmaceutical companies.  Also, Fastenal closed down more than -1% on concern demand is slowing after the company reported May sales well below April's.  In addition, JM Smucker closed down more than -1% after forecasting 2024 free cash flow well below consensus. 

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.05%.  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 rallied Tuesday.  Comerica (CMA) closed up more than +7% to lead gainers in the S&P 500.  Also, Fifth Third Bancorp (FITB), KeyCorp (KEY), and Zions Bancorp (ZION) closed up more than +5%.  In addition, US Bancorp (USB), Huntington Bancshares (HBAN), and Truist Financial (TFC) closed up more than +4%.  Finally, Citizens Financial Group (CFG) and M&T Bank (MTB) closed up more than +3%. 

Intel (INTC) closed 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. 

U.S.-listed Chinese stocks rallied Tuesday after Bloomberg reported that U.S. Secretary of State Blinken plans to visit China in the coming weeks for talks with top Chinese officials.   PDD Holdings (PDD) closed up more than +6% to lead gainers in the Nasdaq 100.  Also, NetEase (NTES) closed up more than +4%, and JD.com (JD) and Baidu (BIDU) closed up more than +3%.  In addition, Baba Group Holding (BABA) closed up more than +2%. 

Advanced Micro Devices (AMD) closed up more than +5% after Piper Sandler raised its price target on the stock to $150 from $110.

Thor Industries (THO) closed up more than +17% after reporting Q3 net sales of $2.93 billion, better than the consensus of $2.82 billion.

HealthEquity (HQY) closed up more than +11% 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) closed up more than +1% after Bank of America double-upgraded the stock to buy from underperform. 

Merck & Co (MRK) closed down more than -2% to lead losers in the Dow Jones Industrials after it sued the U.S. government over a law that will allow the government to negotiate prescription drug prices directly with pharmaceutical companies.  Other pharmaceutical stocks fell on the news, with Gilead Sciences (GILD), Baxter International (BAX), McKesson (MCK), and Vertex Pharmaceuticals (VRTX) closing down more than -1%.

Managed-care stocks retreated Tuesday, giving back some of their sharp gains seen over the past week.  Elevance Health (ELV) closed down more than -3%.  Also, Humana (HUM), UnitedHealth Group (UNH), and Molina Healthcare (MOH) closed down more than -2%.

Fastenal (FAST) closed down more than -2% on concern demand is slowing after the company reported May sales rose only 5.2% following a 7.8% increase in April. 

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

Arista Networks (ANET) closed 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) closed down more than -1% after Erste Group downgraded the stock to hold from buy. 

Across the markets…

September 10-year T-notes (ZNU23) on Tuesday closed down -3.5 ticks, and the 10-year T-note yield rose by +1.0 bp to 3.693%.  Sep T-notes Tuesday closed modestly lower on hawkish comments from former Fed Vice Chair Clarida, who said the Fed would likely raise interest rates again in this cycle.  T-note prices were also undercut by the World Bank’s hike in its 2023 global GDP forecast. In addition, strength in stocks Tuesday curbed the safe-haven demand for T-notes.  Losses in T-notes were limited by strength in German bunds after the ECB's monthly consumer inflation expectations survey fell significantly.

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