Stocks Settle Higher on Strength in Megacap Tech Stocks

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.63%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.99%. 

Stocks on Monday posted moderate gains, led by strength in megacap technology stocks.  Tesla closed up more than +6% on news that the company will raise the price of its Model Y cars in April.  Also, Alphabet closed up more than +4% after Bloomberg reported that Apple is in talks to build Google’s Gemini AI engine into its iPhone. 

A bearish factor for stocks was Monday’s +2.6 bp rise in the 10-year T-note yield to a 3-week high on the stronger-than-expected NAHB housing market index and the increase in the 10-year breakeven inflation expectations rate to a 1-1/2 week high.

Market attention this week will focus on the Tue/Wed FOMC meeting.  The markets expect the Fed to leave its 5.25%-5.50% federal funds target range unchanged and the markets will look to newly updated Fed projections (dot-plot) for the outlook for interest rate cuts.  The markets will also scour comments from Fed Chair Powell after Wednesday's conclusion of the FOMC meeting for the future direction of Fed policy. 

The US Mar NAHB housing market index unexpectedly rose +3 points to an 8-month high of 51, stronger than expectations of no change at 48.

The markets are discounting the chances for a -25 bp rate cut at 1% for the Tue/Wed FOMC meeting, 9% for the following meeting on April 30-May 1, and 60% for the meeting after that on June 11-12.

China Feb industrial production rose +7.0% year-to-date y/y, stronger than expectations of +5.2% year-to-date y/y.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed down -0.07%.  China's Shanghai Composite closed up +0.99%.  Japan's Nikkei Stock Index closed up +2.67%.

Interest Rates

June 10-year T-notes (ZNM24) Monday closed down -8.5 ticks.  The 10-year T-note yield rose +2.6 bp to 4.332%.  June T-notes fell to a 3-week low on Monday, and the 10-year T-note yield rose to a 3-week high of 4.346%.  Strength in stocks Monday weighed on T-note prices.  Also, an increase in inflation expectations was bearish for T-notes as today's 10-year breakeven inflation rate rose to a 1-1/2 week high of 2.330%.  T-notes dropped to their lows on Monday’s stronger-than-expected Mar NAHB housing market index report.

European government bond yields on Monday were mixed.  The 10-year German bund yield rose to a 2-week high of 2.468% and finished up +1.8 bp at 2.459%.  The 10-year UK gilt yield fell -1.2 bp to 4.089%.

ECB Governing Council member de Cos said, "The announcement last week that we have completed our goal of getting inflation to 2% is compatible with a cut in interest rates soon, and that could probably happen in June."

US Stock Movers

Tesla (TSLA) closed up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 after the company posted on X that it will increase the price by $1,000 for all US Model Y vehicles on April 1st. 

Alphabet (GOOGL) closed up more than +4% after Bloomberg News reported that Apple is in talks to build Google’s Gemini artificial intelligence search engine into the iPhone. 

Nuvei Corp (NVEI) closed up more than +30% after the Wall Street Journal reported that Advent International was in talks to acquire the company.

HashiCorp (HCP) closed up more than +8% on a report that said the company has been considering strategic options, including a sale. 

PepsiCo (PEP) closed up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight. 

CoStar Group (CSGP) closed up more than +1% after JMP Securities raised its price target on the stock to $110 from $85. 

Carlyle Group (CG) closed up nearly +1% after Bloomberg said the company is preparing to enter advanced negotiations to acquire a majority stake in Thyssenkrupp AG’s naval building unit.

Fastenal (FAST) closed up nearly +1% after Stifel raised its price target on the stock to $85 from $75. 

Science Applications International (SAIC) closed down more than -10% after reporting Q4 adjusted EPS of $1.43, weaker than the consensus of $1.46, and forecast 2025 adjusted EPS of $8.00-$8.20, the midpoint below the consensus of $8.16.

Shift4 Payments (FOUR) closed down more than -6% after CEO Isaacman said bids from potential suitors have failed to value the firm adequately. 

B Riley Financial (RILY) closed down more than -2% after it failed to file audited results after an extension period ended. 

Viatris (VTRS) closed down more than -1% on signs of insider selling after an SEC filing showed that Officer Mauro sold $3.02 million of shares last Wednesday. 

Boeing (BA) closed down more than -1% to lead losers in the Dow Jones Industrials after the US Attorney for the Western District of Washington late last Friday said it had convened a “grand jury investigation of suspected violations of federal criminal laws” by Boeing.   

Earnings Reports (3/19/2024)

Smartsheet Inc (SMAR), Core & Main Inc (CNM), Design Therapeutics Inc (DSGN), Harrow Inc (HROW), HealthEquity Inc (HQY), Mitek Systems Inc (MITK), Precigen Inc (PGEN), Terawulf Inc (WULF), Waldencast plc (WALD).

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