Stocks Waver on Mixed U.S. Economic News

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.64%.

Stocks this morning are mixed, with the S&P 500 and Nasdaq 100 falling to 1-month lows.  Mixed U.S. economic news today has stocks trading on either side of unchanged.  An increase in bond yields is weighing on technology stocks and the overall market today after U.S. July producer prices rose more than expected, bolstering speculation the Fed will keep its monetary policy tighter for longer.  However, stocks found support after the University of Michigan’s Aug inflation expectations unexpectedly eased.  Also, the strength in crude prices today is boosting energy stocks.

U.S. Jul PPI final demand rose +0.8% y/y from +0.2% y/y in Jun, stronger than expectations of +0.7% y/y.  Jul PPI ex-food and energy was unchanged from Jun at +2.4% y/y, stronger than expectations of +2.3% y/y.

The University of Michigan U.S. Aug consumer sentiment fell -0.4 to 71.2, right on expectations.  The University of Michigan's Aug 1-year inflation expectations unexpectedly eased to 3.3%, better than expectations of an increase to 3.5%. Also, the Aug 5-10 year inflation expectations eased to 2.9%, better than expectations of no change at 3.0%.

U.S. stock indexes have a negative carryover from -2% fall in the Shanghai Composite today on concerns about China’s economy after a monthly report on credit growth showed China's July new yuan loans rose by the least amount since 2009.  Chinese stocks also fell on concerns that the country’s property debt crisis is worsening after property developer Country Garden Holdings predicted a multibillion-dollar loss for the first half of 2023. 

Bank of America said investors put money into cash and bonds while pulling money out of the U.S. stock market over the past week.  Data from EPFR Global in the week through August 9 showed cash funds had $20.5 billion of inflows and investors put $6.9 billion into bonds, while stocks had $1.6 billion of outflows.

The markets are discounting the odds at 11% for a +25 bp rate hike at the September 20 FOMC meeting and 36% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields are higher.  The 10-year T-note yield rose to a 1-week high of 4.158% and is up +1.8 bp at 4.123%.  The 10-year German bund yield is up +8.6 bp at 2.614%.  The 10-year UK gilt yield climbed to a 4-week high of 4.531% and is up +15.0 bp at 4.514%.  

Overseas stock markets are lower.  The Euro Stoxx 50 is down -1.21%.  China’s Shanghai Composite Index today closed down -2.01%.  Japan’s Nikkei Stock Index was closed for a holiday.

Today’s stock movers…

Chip stocks are retreating today on higher T-note yields.  As a result, Globalfoundries (GFS) is down more than -3%.  Also, Applied Materials (AMAT), NXP Semiconductors (NXPI), and Lam Research (LRCX) are down more than -2%.  In addition, Advanced Micro Devices (AMD), Nvidia (NVDA), ON Semiconductor (ON), and KLA Corp (KLAC) are down more than -1%.

U.S.-listed Chinese technology companies are under pressure today on economic concerns in China after a monthly report on credit growth showed China's July new yuan loans rose by the least amount since 2009.  As a result, JD.com (JD) is down more than -5% to lead losers in the Nasdaq 100.  Also, PDD Holdings (PDD) is down more than -4%.  In addition, Alibaba Group Holding Ltd (BABA), Baidu (BIDU), and NetEase (NTES) are down more than -3%. 

Mining stocks are falling today, with the price of COMEX copper falling more than -1% to a 6-week low.  As a result, Freeport McMoRan (FCX) and Southern Copper (SCCO) are down more than -1%.   

Stanley Black & Decker (SWK) is down more than -1% after Wolfe Research downgraded the stock to underperform from peer perform. 

Lucid Group (LCID) is down more than -1% after BNP Paribas Exane downgraded the stock to underperform from neutral. 

Sealed Air Corp (SEE) is down more than -1% after UBS downgraded the stock to neutral from buy. 

VFC Corp (VFC) is up more than +4% to lead gainers in the S&P 500 on signs of insider buying after an SEC filing showed director Carucci bought $763,444 worth of shares on Wednesday. 

News Corp (NWS) is up more than +3% after reporting Q4 adjusted EPS of 14 cents, better than the consensus of 8.3 cents. 

Stronger crude prices today are supportive of energy stocks and energy service providers.  As a result, Chevron (CVX), Marathon Oil (MRO), Occidental Petroleum (OXY), Valero Energy (VLO), Marathon Petroleum (MPC), APA Corp (APA), Phillips 66 (PSX), Exxon Mobil (XOM), and Schlumberger (SLB) are up more than +1%. 

IonQ (IONQ) is up more than +19% after boosting its full-year bookings forecast to $49 million-$56 million from a prior estimate of $45 million-$55 million.

Semler Scientific (SMLR) is up more than +15% after reporting Q2 revenue of $18.6 million, stronger than the consensus of $16.0 million. 

Axon Enterprise (AXON) is up more than +2%, adding to Thursday’s +1 gain and Wednesday’s +13% surge after reporting Q2 net sales of $374.6 million, stronger than the consensus of $350.7 million.

Tyson Foods (TSN) is up more than +1% after announcing late Thursday that it will maintain its regular quarterly cash dividend at 48 cents a share. 

Across the markets…

September 10-year T-notes (ZNU23) today are down -10 ticks, and the 10-year T-note yield is up +1.8 bp at 4.123%.  Sep T-notes today fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 4.158%.  Today’s stronger-than-expected U.S. Jul PPI report was bearish for T-notes. Also, a jump in the 10-year UK gilt yield today to a 4-week high of 4.513% is weighing on T-note prices.  T-notes recovered from their worst levels after the University of Michigan’s Aug inflation expectations eased.

The dollar index (DXY00) today is up by +0.10%.  The dollar index today climbed to a 1-week high after the stronger-than-expected U.S. Jul PPI report bolstered speculation the Fed may raise interest rates higher and for longer.  The dollar also garnered support from today’s slide in the Chinese yuan to a 1-month low after China’s credit growth slowed more than expected.

EUR/USD (^EURUSD) today is down by -0.02%.  A stronger dollar today is undercutting the euro.  Also, today’s stronger-than-expected U.S. Jul PPI report pushed the 10-year T-not yield to a 1-week high and strengthened the dollar’s interest rate differentials against the euro. 

USD/JPY (^USDJPY) is up by +0.02%.  The yen today dropped to a 5-week low against the dollar.  Strength in T-note yields today is weighing on the yen. Also, central bank divergence is negative for the yen as today’s strength in the U.S Jul PPI report may prompt the Fed to keep raising interest rates while the BOJ continues to hold interest rates at record lows.

October gold (GCV3) today is up +1.3 (+0.07%), and Sep silver (SIU23) is up +0.039 (+0.17%). Precious metals prices this morning recovered from early losses and are slightly higher.  Weakness in stocks today has boosted some safe-haven demand for precious metals.  Also, a slowdown in China’s credit growth may prompt the government to increase stimulus measures, which supports precious metals after Chian Jul new yuan loans rose at the slowest pace in nearly 14 years.  On the negative side is today’s rally in the dollar index to a 1-week high, which curbs.  Also, higher global bond yields are bearish for precious metals.  In addition, a slump in copper prices today to a 6-week low is weighing on silver prices. 

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