Stocks Climb as Bond Yields Fall on Signs of Lower Price Pressures

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.06%.

Stock indexes Monday settled mixed, with the Nasdaq 100 falling to a 1-week low.  Lower T-note yields Monday supported modest gains in the broader market.  Also, expectations that Wednesday’s U.S. Jun CPI report will show that price pressures continue to ease underpinned stocks after Manheim, a vehicle auction service, reported that U.S. Jun used-car prices fell -4.2% m/m and -10.3% y/y.

Gains in stocks were muted Monday on hawkish Fed comments.  San Francisco Fed President Daly said the risk of doing too little on rates outweighs doing too much, and with inflation printing too high, the Fed needs to keep raising interest rates.  Also, Cleveland Fed President Mester said, "In order to ensure that inflation is on a sustainable and timely path back to 2%, my view is that the funds rate will need to move up somewhat further from its current level and then hold there for a while as we accumulate more information on how the economy is evolving."

Monday’s U.S. economic news was weaker-than-expected and bearish for stocks.  May wholesale trade sales unexpectedly fell -0.2% m/m, weaker than expectations of +0.3% m/m.  Also, May consumer credit rose +$7.24 billion, weaker than expectations of +$20.00 billion and the smallest increase in 2-1/2 years.

The markets are discounting the odds at 89% 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 on Monday were mixed.  The 10-year T-note yield fell -5.6 bp to 4.006%. The 10-year German bund yield rose to a 4-month high of 2.679% and finished up +0.3 bp at 2.640%.  The 10-year UK Gilt yield fell -102 bp at 4.640%. 

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed up +0.47%.  China’s Shanghai Composite Index today closed up +0.22%.  Japan’s Nikkei Stock Index today closed down -0.61%.

Today’s stock movers…

Casino stocks with operations in Macau rallied Monday after JPMorgan Chase said the sector is worth buying at the moment as gaming revenue in Macau has been solid so far this month, and it expects the trend to improve further by October.  As a result, Wynn Resorts (WYNN) closed up more than +5% to lead gainers in the S&P 500.  Also, MGM Resorts International (MGM) closed up more than +5%, and Las Vegas Sands (LVS) closed up more than +3%. 

Zscaler (ZS) closed up more than +7% to lead gainers in the Nasdaq 100 after Needham rated the stock as a strong buy with a price target of $210.

Carrier Global (CARR) closed up more than +3% after Citigroup raised its price target on the stock to $52 from $45. 

Icahn Enterprises (IEP) closed up more than +20% after the Wall Street Journal reported that Carl Icahn finalized amended agreements with banks that untied his personal loans from the trading price of his company’s shares. 

Helen of Troy (HELE) closed up more than +18% after reporting Q1 net sales of $474.7 million, better than expectations of $465.4 million.

Shockwave Medical (SWAV) closed up more than +6% after Morgan Stanley upgraded the stock to overweight from neutral with a price target of $335. 

Invesco Ltd (IVZ) closed up more than +2% after investors added $3.09 billion to Invesco exchange-traded funds the week ended July 7, more than any other U.S. ETF-sponsored funds. 

FMC Corp (FMC) closed down more than -11% to lead losers in the S&P 500 after cutting its full-year revenue forecast to $5.20 billion-$5.40 billion from a prior forecast of $6.08 billion-$6.22 billion.  Other producers of agriculture products were also weaker on the news.  Corteva (CTVA) closed down more than -5%.  Also, Mosaic (MOS) and CF Industries Holdings (CF) closed down more than -2%.

Verizon Communications (VZ) closed down more than -2% to lead losers in the Dow Jones Industrials after the Wall Street Journal reported that the company, along with AT&T, left behind a network of cables covered in toxic lead that stretches across the U.S. 

Microsoft (MSFT) closed down more than -1% after Phillip Securities downgraded the stock to neutral from accumulate. 

MercadoLibre (MELI) closed down more than -5% to led losers in the Nasdaq 100 after Bank of America downgraded the stock to neutral from buy.

Ball Corp (BALL) closed down more than -2% after Bank of America Global Research downgraded the stock to neutral from buy.

Amcor Plc (AMCR) closed down more than -2% after Bank of America Global Research downgraded the stock to underperform from buy.

Across the markets…

September 10-year T-notes (ZNU23) Monday closed up +15 ticks, and the 10-year T-note yield fell -5.6 bp to 4.006%.  Signs of easing price pressures supported T-notes after Manheim, a vehicle auction service, reported that U.S. Jun used-car prices fell -4.2% m/m and -10.3% y/y.  The data bodes well for Wednesday’s U.S. Jun CPI report.  Also, weaker-than-expected U.S. economic news Monday on May wholesale trade sales and May consumer credit were bullish for T -note prices. 

Gains in T-notes were limited Monday on hawkish comments from San Francisco Fed President Daly and Cleveland Fed President Mester, who said they supported additional Fed interest rate hikes to bring inflation back toward the Fed’s 2% goal.

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.06%.

Stock indexes Monday settled mixed, with the Nasdaq 100 falling to a 1-week low.  Lower T-note yields Monday supported modest gains in the broader market.  Also, expectations that Wednesday’s U.S. Jun CPI report will show that price pressures continue to ease underpinned stocks after Manheim, a vehicle auction service, reported that U.S. Jun used-car prices fell -4.2% m/m and -10.3% y/y.

Gains in stocks were muted Monday on hawkish Fed comments.  San Francisco Fed President Daly said the risk of doing too little on rates outweighs doing too much, and with inflation printing too high, the Fed needs to keep raising interest rates.  Also, Cleveland Fed President Mester said, "In order to ensure that inflation is on a sustainable and timely path back to 2%, my view is that the funds rate will need to move up somewhat further from its current level and then hold there for a while as we accumulate more information on how the economy is evolving."

Monday’s U.S. economic news was weaker-than-expected and bearish for stocks.  May wholesale trade sales unexpectedly fell -0.2% m/m, weaker than expectations of +0.3% m/m.  Also, May consumer credit rose +$7.24 billion, weaker than expectations of +$20.00 billion and the smallest increase in 2-1/2 years.

The markets are discounting the odds at 89% 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 on Monday were mixed.  The 10-year T-note yield fell -5.6 bp to 4.006%. The 10-year German bund yield rose to a 4-month high of 2.679% and finished up +0.3 bp at 2.640%.  The 10-year UK Gilt yield fell -102 bp at 4.640%. 

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed up +0.47%.  China’s Shanghai Composite Index today closed up +0.22%.  Japan’s Nikkei Stock Index today closed down -0.61%.

Today’s stock movers…

Casino stocks with operations in Macau rallied Monday after JPMorgan Chase said the sector is worth buying at the moment as gaming revenue in Macau has been solid so far this month, and it expects the trend to improve further by October.  As a result, Wynn Resorts (WYNN) closed up more than +5% to lead gainers in the S&P 500.  Also, MGM Resorts International (MGM) closed up more than +5%, and Las Vegas Sands (LVS) closed up more than +3%. 

Zscaler (ZS) closed up more than +7% to lead gainers in the Nasdaq 100 after Needham rated the stock as a strong buy with a price target of $210.

Carrier Global (CARR) closed up more than +3% after Citigroup raised its price target on the stock to $52 from $45. 

Icahn Enterprises (IEP) closed up more than +20% after the Wall Street Journal reported that Carl Icahn finalized amended agreements with banks that untied his personal loans from the trading price of his company’s shares. 

Helen of Troy (HELE) closed up more than +18% after reporting Q1 net sales of $474.7 million, better than expectations of $465.4 million.

Shockwave Medical (SWAV) closed up more than +6% after Morgan Stanley upgraded the stock to overweight from neutral with a price target of $335. 

Invesco Ltd (IVZ) closed up more than +2% after investors added $3.09 billion to Invesco exchange-traded funds the week ended July 7, more than any other U.S. ETF-sponsored funds. 

FMC Corp (FMC) closed down more than -11% to lead losers in the S&P 500 after cutting its full-year revenue forecast to $5.20 billion-$5.40 billion from a prior forecast of $6.08 billion-$6.22 billion.  Other producers of agriculture products were also weaker on the news.  Corteva (CTVA) closed down more than -5%.  Also, Mosaic (MOS) and CF Industries Holdings (CF) closed down more than -2%.

Verizon Communications (VZ) closed down more than -2% to lead losers in the Dow Jones Industrials after the Wall Street Journal reported that the company, along with AT&T, left behind a network of cables covered in toxic lead that stretches across the U.S. 

Microsoft (MSFT) closed down more than -1% after Phillip Securities downgraded the stock to neutral from accumulate. 

MercadoLibre (MELI) closed down more than -5% to led losers in the Nasdaq 100 after Bank of America downgraded the stock to neutral from buy.

Ball Corp (BALL) closed down more than -2% after Bank of America Global Research downgraded the stock to neutral from buy.

Amcor Plc (AMCR) closed down more than -2% after Bank of America Global Research downgraded the stock to underperform from buy.

Across the markets…

September 10-year T-notes (ZNU23) Monday closed up +15 ticks, and the 10-year T-note yield fell -5.6 bp to 4.006%.  Signs of easing price pressures supported T-notes after Manheim, a vehicle auction service, reported that U.S. Jun used-car prices fell -4.2% m/m and -10.3% y/y.  The data bodes well for Wednesday’s U.S. Jun CPI report.  Also, weaker-than-expected U.S. economic news Monday on May wholesale trade sales and May consumer credit were bullish for T -note prices. 

Gains in T-notes were limited Monday on hawkish comments from San Francisco Fed President Daly and Cleveland Fed President Mester, who said they supported additional Fed interest rate hikes to bring inflation back toward the Fed’s 2% goal.

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