Stock Indexes Post Record Highs on Rate Cut and Soft-Landing Optimism

The S&P 500 Index ($SPX) (SPY) this morning is up +0.48%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.90%. 

Stocks this morning extended Wednesday’s rally, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 posting new all-time highs. Stocks are climbing on the outlook for Fed rate cuts later this year after the FOMC on Wednesday maintained its projections for a total of 75 bp of interest rate cuts this year. 

Stock indexes are also finding support on today’s stronger-than-expected US economic reports that bolstered the outlook for an economic soft landing. 

US weekly initial unemployment claims unexpectedly fell -2,000 to 210,000, showing a stronger labor market than expectations of an increase to 213,000.  Weekly continuing claims rose +4,000 to 1.807 million, showing a stronger labor market than expectations of 1.820 million.

The US Mar Philadelphia Fed business outlook survey fell -2.0 to 3.2, stronger than expectations for a decline to -2.5.

The US Mar S&P manufacturing PMI unexpectedly rose +0.3 to a 1-3/4 year high of 52.5, stronger than expectations of a decline to 51.8. 

US Feb existing home sales unexpectedly rose +9.5% m/m to a 1-year high of 4.38 million, stronger than expectations for a decline to 3.95 million.

US Feb leading indicators unexpectedly rose +0.1% m/m, stronger than expectations of a -0.1% m/m decline.

The markets are discounting the chances for a -25 bp rate cut at 15% for the April 30-May 1 FOMC meeting and 81% for the meeting after that on June 11-12.

Overseas stock markets today are mixed.  The Euro Stoxx 50 climbed to a 23-year high and is up +0.90%. China's Shanghai Composite closed down -0.08%.  Japan's Nikkei Stock Index rallied to a new record high and closed up +2.03%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are down -4 ticks.  The 10-year T-note yield is up +1.4 bp at 4.287%. June T-note prices this morning gave up an early advance and turned lower on stronger than expected US economic reports, hawkish factors for Fed policy.  Also, a jump in inflation expectations weighed on T-notes after the 10-year breakeven inflation rate today rose to a 1-month high of 2.367%. 

T-notes today initially moved higher on carryover support from Wednesday when the FOMC maintained its projections for 75 bp in interest rate cuts this year.  T-notes also have carryover support from today’s rallies in European government bond prices. 

European government bond yields today are lower.  The 10-year German bund yield is down -2.1 bp at 2.410%. The 10-year UK gilt yield fell to a 1-week low of 3.924% and is down -3.4 bp at 3.982%.

The Bank of England (BOE) voted 8-1 to keep the official bank rate at 5.25%, and BOE Governor Bailey said the bank was “not yet at the point where we can cut interest rates.”

The Eurozone Mar S&P manufacturing PMI unexpectedly fell -0.8 to 45.7, weaker than expectations of an increase to 47.0.  The Mar S&P composite PMI rose +0.7 to a 10-month high of 49.9, stronger than expectations of 49.7.

US Stock Movers

Micron Technology (MU) is up more than +14% to lead gainers in the S&P 500 and Nasdaq 100 and is giving chip stocks a boost after reporting Q2 adjusted revenue of $5.82 billion, better than the consensus of $5.35 billion and forecasting Q3 adjusted revenue of $6.4 billion-$6.8 billion, well above the consensus of $5.99 billion.  Also, Western Digital (WDC) is up more than +6%, and Applied Materials (AMAT) and Lam Research (LRCX) are up more than +4%.  In addition, Marvell Technology (MRVL) is up more than +3%.  Finally, Intel (INTC), NXP Semiconductors NV (NXPI), KLA Corp (KLAC), Microchip Technology (MCHP), GlobalFoundries (GFS), and Texas Instruments (TXN) are up more than +2%.

Guess?  Inc (GES) is up more than +22% after reporting Q4 net revenue of $891.1 million, stronger than the consensus of $855.4 million. 

Astera Labs (ALAB) is up more than +14%, adding to Wednesday’s 72% surge after the company’s initial public offering topped expectations to raise $713 million.  

Broadcom (AVGO) is up more than +7% after Cowen upgraded the stock to outperform from market perform with a price target of $1,500.

Illumina (ILMN) is up more than +3% after the European Union’s (EU) Court of Justice said the European Commission exceeded its authority by probing Illumina’s $7 billion acquisition of Grail Inc. 

Bank stocks are climbing today after the FOMC maintained its projection for 75 bp of rate cuts this year on Wednesday.  As a result, Goldman Sachs (GS) is up more than +3% to lead gainers in the Dow Jones Industrials.  Also, Comerica (CMA) is up more than +3%.  Also, US Bancorp (USB), PNC Financial Services Group (PNC), KeyCorp (KEY), and Truist Financial (TFC) are up more than +2% 

Newmont (NEM) is up more than +1% to lead gold mining stocks higher after the price of gold today rallied to a new all-time high.

Accenture (ACN) is down more than -6% to lead losers in the S&P 500 after cutting its full-year adjusted EPS forecast to $11.97-$12.20 from a previous forecast of $11.97-$12.32, below the consensus of $12.22. 

Darden Restaurants (DRI) is down more than -5% after reporting Q3 sales of $2.97 billion, weaker than the consensus of $3.03 billion, and cut its full-year sales forecast to $11.4 billion from a previous estimate of $11.5 billion. 

Factset Research Systems (FDS) is down more than -4% after forecasting full-year adjusted EPS of $15.60-$16.00, weaker than the consensus of $16.10.

Paramount Global (PARA) is down more than -4% after CNBC reported that the company is not interested in selling its studio separately.

Designer Brands (DBI) is down more than -16% after forecasting 2025 EPS of 70 cents-80 cents, weaker than the consensus of 81 cents. 

Apple (AAPL) is down more than -3% to lead losers in the Dow Jones Industrials after the US Justice Department and 16 attorneys general sued the company, accusing it of violating antitrust laws. 

Five Below (FIVE) is down more than -13% after reporting Q4 net sales of $1.34 billion, weaker than the consensus of $1.35 billion, and forecast 2025 net sales of $3.97 billion-$4.07 billion, below the consensus of $4.11 billion. 

Steelcase (SCS) is down more than -8% after reporting Q4 revenue of $775.2 million, below the consensus of $780.3 million, and forecast Q1 revenue of $715 million-$740 million, weaker than the consensus of $741 million. 

Earnings Reports (3/21/2024)

Accenture PLC (ACN), Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), Lululemon Athletica Inc (LULU), NIKE Inc (NKE).

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