Stocks Mixed as Broader Marker Weighed Down by Global Economic Concerns

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) is +0.32%.

Stocks this morning are mixed, with the Nasdaq 100 climbing to a 2-week high.  The broader market is under pressure today after weaker-than-expected news on China’s services industry sparked concerns about the outlook for the global economy.  The China Caixin Jun services PMI fell -3.2 to a 5-month low of 53.9, weaker than expectations of 56.2.

Strength today in the mega-cap tech stocks of Meta Platforms and Alphabet are pushing the Nasdaq 100 higher.  Meta is gaining on speculation its Threads app could gain support on concern users of Twitter may abandon the platform after Twitter announced it would limit users to around 600 tweets a day.  Alphabet is moving higher after Piper Sandler raised its price target on the stock.

This morning’s U.S economic news was weaker-than-expected and bearish for stocks after May factory orders rose +0.3% m/m, weaker than expectations of +0.8% m/m.

Today's minutes of the June 13-14 FOMC meeting will be scrutinized to see how hawkish policymakers will remain after they held rates steady but said that inflation has proved stickier than expected.  Since last month's policy meeting, mostly positive U.S. economic data has priced out rate cuts this year and pushed the terminal rate up slightly.

The markets are discounting the odds at 85% for a +25 bp rate hike at the next FOMC meeting on July 25-26.  The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.

Global bond yields are higher.  The 10-year T-note yield is up +3.0 bp at 3.884%. The 10-year German bund yield is up +0.2 bp at 2.455%, and the 10-year UK Gilt yield is up +5.2 bp at 4.467%.  

Overseas stock markets are lower.  The Euro Stoxx 50 is down -0.86%.  China’s Shanghai Composite Index today closed down -0.69%. Japan’s Nikkei Stock Index today closed down -0.25%.

Today’s stock movers…

Semiconductor stocks are under pressure today after China imposed restrictions on exporting gallium and germanium, two metals crucial to parts of the chip industry.  As a result, ON Semiconductor (ON) is down more than -2% to lead losers in the Nasdaq 100.  Also, Lam Research (LRCX) and Qualcomm (QCOM) are down more than -2%.  In addition, Intel (INTC), Microchip Technology (MCHP), ASML Holding NV (ASML), KLA Corp (KLAC), Micron Technology (MU), Applied Materials (AMAT), Texas Instruments (TXN), and Globalfoundries (GFS) are down more than -1%.

Generac Holdings (GNRC) is down more than -5% to lead losers in the S&P 500 on signs of insider selling after an SEC filing showed CEO Jagdfeld sold $745,750 of shares on Monday. 

United Parcel Service (UPS) is down more than -2% on strike concerns after talks between the company and the Teamsters union fell apart this morning. 

Mining stocks are falling as latest negative economic news from China, the U.S., and the Eurozone fueled concerns over the demand outlook for industrial metals.  As a result, Freeport-McMoRan (FCX) is down more than -3%, and ArcelorMittal (MT) is down more than -2%.

Steel Dynamics (STLD) and U.S. Steel (X) are down more than -3% after BXP Paribas Exane downgraded the stocks to neutral from outperform.

Moderna (MRNA) is up more than +3% after it announced a $1 billion investment in China and said it signed a deal to make mRNA vaccines for China. 

Meta Platforms (META) is up more than +3% to lead gainers in the S&P 500 and Nasdaq 100 on speculation the company’s Threads app could gain support on concern users of Twitter may abandon the platform after Twitter announced it would limit users to around 600 tweets a day.

Alphabet (GOOGL) is up more than +2% after Piper Sandler raised its price target on the stock to $140 from $128.

Fidelity National Information Services (FIS) is up more than +2% on reports private equity firm GTCR is in advanced talks to buy a majority stake in the merchant acquiring business of Fidelity National Information Services. 

Across the markets…

September 10-year T-notes (ZNU23) today are down -4 ticks, and the 10-year T-note yield is up +3.0 bp at 3.884%.  Sep T-notes today are modestly lower on the outlook for tighter Fed policy.  The markets are discounting the odds at 85% for a +25 bp rate hike at the next FOMC meeting on July 25-26.  T-notes are also under pressure on expectations that today’s minutes of the Jun 13-14 FOMC meeting will show that policymakers continue to remain hawkish.  Today’s slump in stocks has boosted some safe-haven demand for government debt and is limiting losses in T-notes.

The dollar index (DXY00) today is up by +0.14%.  The dollar this morning recovered from modest losses and moved higher on strength in T-note yields.  Also, a slump in stocks has boosted the liquidity demand for the dollar. A bearish factor for the dollar was today’s weaker-than-expected U.S. May factory orders report.

EUR/USD (^EURUSD) is down by -0.07%.  A stronger dollar today is weighing on the euro.   EUR/USD is also under pressure from today’s economic news that showed Eurozone May PPI fell more than expected, and the Eurozone S&P Jun composite PMI was revised lower, which was dovish for ECB policy.

Eurozone May PPI fell -1.5% y/y, weaker than expectations of -1.3% y/y and the biggest decline in 2-1/2 years.

The Eurozone S&P Jun composite PMI was revised lower by -0.4 to 49.9 from the initially reported 50.3, the steepest pace of contraction in 6 months.

The ECB's monthly inflation expectations survey showed inflation expectations for the next 12 months fell to 3.9% in May from 4.1% in April.  However, inflation expectations for the next three years were unchanged at 2.5% from April.

USD/JPY (^USDJPY) is up +0.06%.  The yen today gave up moderate gains and turned lower on higher T-note yields. Also, a downward revision to the Japan Jibun Bank Jun services PMI by -0.2 to 54.0 from the initially reported 54.2 is bearish for the yen.  The yen today initially moved higher after a fall in global equity markets sparked safe-haven buying of the yen. 

August gold (GCQ3) today is down -2.5 (-0.13%), and Sep silver (SIU23) is up +0.248 (+1.77%). Precious metals prices are mixed, with silver posting a 2-week high.  Gold fell back from a 1-week high and turned lower after the dollar strengthened.  Also, higher T-note yields today are bearish for metals prices.  In addition, the prospects of additional Fed rate hikes have sparked fund liquidation of gold as holdings in gold ETFs fell to a 3-1/2 month low Tuesday.  However, today’s slump in global stock prices has boosted some safe-haven demand for precious metals. 

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