Stocks Mixed on Geopolitical Concerns

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up -0.86%.

U.S. stocks are mixed today as chip stocks buoy the market.  Stocks are digesting bearish news, including weak Chinese consumer economic reports over the weekend, a weak German IFO report, and geopolitical concerns after Wagner Group’s brief weekend insurrection in Russia.

Stocks are seeing some support today from lower global bond yields.  The 10-year T-note yield is down -1.7 bp, the 10-year German bund yield is down -3 bp, and the 10-year UK gilt yield is down -2 bp.

Stocks are mixed today due to uncertainty about Russia’s internal stability after the short-lived rebellion on Saturday by Wagner Group leader Prigozhin as his forces were speeding towards Moscow before pulling back.  Russian President Putin reportedly talked with leaders of Iran and Qatar today on the phone but has not been seen in public since his address on Saturday in which he threatened the Wagner Group with annihilation before the Russian government said it gave amnesty to the group and its leader in return for a stand-down.

The German June IFO Business Climate index fell -3.0 points to 88.5 from May’s revised 91.5, weaker than expectations for a decline to 90.7.  The June IFO current assessment index fell -1.1 points to 93.7, a bit stronger than expectations for a decline to 93.5.  The June IFO expectations index fell by -4.7 points to 83.6, weaker than expectations for a decline to 88.1.

Chinese holiday tourism data released over the weekend showed that domestic travel spending during the recent dragon-boat festival was lower than pre-pandemic levels, fueling the narrative that China’s post-lockdown boom is running out of steam. Also, Chinese passenger car sales in June fell -6% y/y, according to China’s Passenger Car Association. Separately, Chinese home sales in June were weak, according to analysts cited by the 21st Century Business Herald.

There has been little change today in market expectations for Fed rate hikes.  The markets are discounting the odds at 72% for a +25 bp rate hike at the next FOMC meeting on July 25-26 and are almost fully anticipating that +25 bp rate hike by November.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.37%.  China’s Shanghai Composite index today closed -1.48% lower after reopening from the market holidays last Thursday and Friday.  Japan’s Nikkei Stock Index today closed down -0.25%.

Today’s stock movers…

Semiconductor stocks are leading the Nasdaq 100 higher today. A long list of semiconductor stocks dominates the leaderboard today with gains of +2 to +3%, including GLOBALFOUNDRIES (GFS), Lam Research (LRCX), Applied Materials (AMAT), Qualcomm (QCOM), ON Semiconductor (ON), NXP Semiconductors (NXPI), and Intel (INTC).

Tesla (TSLA) is down -1.5% after Goldman Sachs today downgraded the stock to neutral from buy, adding to Tesla downgrades last week from Morgan Stanley, Barclays, and DZ Bank.

Meta Platforms (META) is down -1.0% even though UBS raised its price target on expectations that AI

will provide a fresh impetus for the stock.

PacWest Bancorp (PACW) is up +4.8% after news that it sold a $3.5 billion of asset-backed loan package to Ares Management Corp (ARES), which was a positive factor in the bank’s attempt to boost its liquidity and stave off any run on deposits.  The loan package included consumer loans, mortgages, and timeshare receivables.

Pfizer (PFE) is down -5.4% after news that the drugmaker is halting a trial of its obesity drug danuglipron because of high liver enzymes seen in some trial recipients.

Moderna (MRNA) is up +1.7% on an upgrade by UBS to buy from neutral on valuation and progress on its drug pipeline.

Palo Alto Networks (PANW) is up +1.8% after Morgan Stanley raised its price target to $302 from $255.

Bitcoin (^BTCUSD) is down -1.9% today, adding to the overall -1.8% decline seen over the weekend on some long liquidation pressure after last week’s +17% rally on the recent Wall Street physical bitcoin ETF applications to the SEC.  Marathon Digital (MARA) is down -0.4%, but other crypto stocks are trading higher.  Coinbase (COIN) is up +4.5%, Riot Platforms (RIOT) is up +1.6%, and Bit Digital (BTBT) is up +0.7%. 

Across the markets…

September 10-year T-notes (ZNU23) today are up +2.5 ticks, and the 10-year T-note yield is down -1.7 bp at 3.717%.  T-notes prices rallied on weak Chinese and German economic news and on some safe-haven demand due to Russian instability. T-note prices are being undercut by supply pressures ahead of the Treasury’s sale later today of $42 billion of 2-year T-notes.  The Treasury will then sell $43 billion of 5-year T-notes on Tuesday, and $35 billion of 7-year T-notes and $22 billion of 2-year floating rate notes on Wednesday.

The dollar index (DXY00) today is down -0.15% on slightly lower T-note yields. EUR/USD (^EURUSD) is up +0.15% despite today’s weak German IFO report.  USD/JPY (^USDJPY) is down -0.13%.

August gold (GCQ3) today is up +4.4 (+0.23%), and July silver (SIN23) is up +0.446 (+2.0%).  Gold is seeing some mild support today from Russian instability.

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