What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.77%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.88%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.73%.
U.S. stocks this morning are moderately lower. U.S. stocks are seeing negative carryover from disappointment that China’s State Council didn’t mention specific economic support measures and that the Chinese central bank cut lending rates less than expected. U.S. housing news today was stronger-than-expected and hawkish for Fed policy.
Long liquidation pressures also undercut stock indexes ahead of Wednesday’s semi-annual report to Congress from Fed Chair Powell. Markets are concerned that Powell may take a hawkish tone after the FOMC last week warned of additional interest rate hikes this year.
U.S. May housing starts unexpectedly surged +21.7% m/m to a 13-month high of 1.631 million, stronger than expectations of a decline to 1.400 million. May building permits, a proxy for future construction, rose +5.2% m/m to a 7-month high of 1.491 million, stronger than expectations of 1.425 million.
The U.S. Jun NAHB housing market index, released on Monday’s holiday, rose +5 to an 11-month high of 55, stronger than expectations of 51.
Market odds for the Fed to raise the fed funds target range by +25 bp at the July 25-26 FOMC meeting rose to 72% today from 69% last Friday.
Global bond yields are lower. The 10-year T-note yield is down -5.0 bp at 3.711%. The 10-year German bund yield is down -11.1 bp at 2.406%, and the UK 10-year gilt yield fell to a 1-week low of 4.324% and is down -15.8 bp at 4.333%.
On the bearish side for stocks, energy stocks are falling today, with WTI crude down more than -2%. Also, Nike is down more than -3% after Morgan Stanley said inventory problems could weigh on the company’s margins in Q4. In addition, U.S.-listed Chinese stocks are falling after China’s State Council failed to issue specific economic support measures and the PBOC cut lending rates less than expected.
On the bullish side, homebuilders are climbing today after U.S. May housing starts and building permits rose more than expected, and the June NAHB housing market index climbed to an 11-month high. Also, PayPal Holdings is up more than +2% after KKR agreed to buy 40 billion euros of PayPal’s pay-later loans. In addition, Dice Therapeutics is up more than +37% after Eli Lilly tendered an offer to buy the company for $2.4 billion.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.44%. China’s Shanghai Composite closed down -0.47%, and Japan’s Nikkei Stock Index closed up +0.06%.
Today’s stock movers…
Energy stocks and energy service providers are falling today, with WTI crude down more than -2%. As a result, APA Corp (APA), Haliburton (HAL), Devon Energy (DVN), Marathon Oil (MRO), and Valero Energy (VLO) are down more than -3%. Also, Chevron (CVX), ConocoPhillips (COP), Exxon Mobil (XOM), Phillips 66 (PSX), Marathon Petroleum (MPC), and Schlumberger (SLB) are down more than -2%.
LyondellBasell Industries NV (LYB) is down more than -3% on negative carryover from a slump in European chemical makers after Lanxess AG plunged -15% when it cut its profit outlook, citing weak demand.
Nike (NKE) is down more than -3% to lead losers in the Dow Jones Industrials after Morgan Stanley said inventory problems could weigh on the company’s margins in Q4, even if it reports “mostly in-line” results.
U.S.-listed Chinese stocks are falling in pre-market trading after China’s State Council failed to issue specific economic support measures and the PBOC cut lending rates less than expected. As a result. JD.com (JD) is down more than -7% to lead losers in the Nasdaq 100. Also, PDD Holdings (PDD) is down more than -7%, and Alibaba Group Holding (BABA) is down more than -4%. In addition, NetEase (NTES) is down more than -2%.
Arcellx (ACLX) is down more than -8% after the FDA placed a clinical hold on the company’s drug for the treatment of patients with relapsed or refractory multiple myeloma.
Warner Bros Discovery (WBD) is down more than -2% after weekend box office receipts for the opening of The Flash came in at $55.1 million, well below a Boxoffice Pro estimate of $69 million.
Homebuilders are climbing today after U.S May housing starts and building permits rose more than expected, and the Jun NAHB housing market index climbed to an 11-month high. As a result, DR Horton (DHI), Lennar (LEN), PulteGroup (PHM), and Toll Brothers (TOL) are up more than +1%.
PayPal Holdings (PYPL) is up more than +2% to lead gainers in the Nasdaq 100 after KKR& Co agreed to buy 40 billion euros of PayPal’s pay-later loans.
Tesla (TSLA) is up more than +1% after Rivian Automotive agreed to adopt Tesla’s charging standard.
UnitedHealth Group (UNH) is up more than +1% to lead gainers in the Dow Jones Industrials after it reported its Q2 occupancy rate was up +0.33% versus Q1.
Avis Budget Group (CAR) is up more than +6% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $230.
Dice Therapeutics (DICE) is up more than +37% after Eli Lilly tendered an offer to buy the company for $2.4 billion.
Across the markets…
September 10-year T-notes (ZNU23) today are up +13 ticks, and the 10-year T-note yield is down -5.0 bp at 3.711%. T-note prices this morning recovered from early losses and moved higher as short-covering emerged after 10-year UK gilts rallied to a 1-week high. An increase in safe-haven demand is also boosting T-notes as stocks slide. T-notes this morning initially moved lower on today’s stronger-than-expected U.S. May housing starts and building permits reports, which were hawkish for Fed policy.
The dollar index (DXY00) this morning is up +0.04%. The dollar index today recovered from early losses and is slightly higher. Today’s better-than-expected U.S. housing starts report was bullish for the dollar. Also, the weakness in stocks today has boosted the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is down by -0.07%. The euro today gave up an early advance and is slightly lower on a rebound in the dollar. Also, the weaker-than-expected German May PPI report knocked bund yields lower and undercut the euro’s interest rate differentials. EUR/USD today initially moved higher on hawkish comments from ECB Governing Council member Rehn who said inflation in the Eurozone is easing “only gradually.”
Eurozone Apr construction output fell -0.4% m/m, the second straight monthly decline.
German May PPI eased to +1.0% y/y from +4.1% y/y in Apr, better than expectations of +1.7% y/y and the slowest pace of increase in nearly 2-1/2 years.
ECB Governing Council member Rehn said a pullback in core prices is a pre-requisite for pausing rate hikes and "inflation excluding energy and food is falling only gradually and not to the extent desired."
USD/JPY (^USDJPY) today is down by -0.34%. The yen today recovered from a 7-1/4 month low against the dollar and is moderately higher. Comments from Japanese government officials today sparked short covering in the yen after Finance Minister Suzuki and Economy Minister Nishimura warned that officials were watching out for any excessive or speculative moves in the forex market. Also, today’s upward revision to Japan’s Apr industrial production was bullish for the yen. The yen today initially fell after the 10-year JGB bond yield dropped to a 1-month low, which weakened the yen’s interest rate differentials.
Japan Apr industrial production was revised upward to +0.7% m/m from the initially reported -0.4% m/m.
August gold (GCQ3) this morning is down -26.2 (-1.33%), and July silver (SIN23) is down -0.811 (-3.36%). Precious metals prices this morning are sharply lower, with silver falling to a 2-1/2 week low. A stronger dollar today is weighing on precious metals. Also, hawkish central bank comments weighed on metals after ECB Governing Council member Rehn said inflation is falling only gradually, which bolsters speculation the ECB will continue to raise interest rates. Silver also fell on Chinese industrial metals demand concerns after the PBOC cut lending rates less than expected.
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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