Stocks Finish Modestly Lower Due to Rising Bond Yields

The S&P 500 Index ($SPX) (SPY) Monday closed down -0.04%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.05%. 

Stock indexes on Monday closed slightly lower as the 10-year T-note yield rose to a 4-1/2 month high.  Stronger-than-expected US economic news and recent hawkish Fed comments have curbed expectations for Fed rate cuts.

Some positive corporate news provided underlying support for stocks on Monday.  Tesla closed up more than +4% after CEO Musk said the company will unveil its robotaxis on Aug 8.  Also, Ducommun closed up more than +14% after confirming the board of directors received an unsolicited non-binding indication from Albion River to buy all outstanding shares for $60 per share in cash.  In addition, property stocks and real estate investment trust stocks rallied Monday after the Wall Street Journal reported that Blackstone offered to acquire AIR Communities for $10 billion or $39.12 per share. 

The markets are awaiting Wednesday’s US consumer price report for market direction, along with Q1 corporate earnings season that begins in earnest this Friday with results from big banks, including JPMorgan Chase, Citigroup, and Wells Fargo.

The markets are discounting the chances for a -25 bp rate cut at 5% for the next FOMC meeting on April 30-May 1 and 54% for the following meeting on June 11-12.

Overseas stock markets on Monday settled mixed.  The Euro Stoxx 50 closed up +0.62%.  China's Shanghai Composite fell to a 1-week low and closed down -0.72%.  Japan's Nikkei Stock Index closed up +0.91%.

Interest Rates

June 10-year T-notes (ZNM24) on Monday closed down -12.5 ticks.  The 10-year T-note yield rose +1.8 bp to 4.420%.  June T-note prices Monday tumbled to a 4-1/2 month low, and the 10-year T-note yield rose to a 4-1/2 month high of 4.462%. T-notes were under pressure from last Friday’s stronger-than-expected US March payroll report of +303,000, which reinforced speculation the Fed will be in no hurry to cut interest rates.  Also, supply pressures undercut T-notes as the Treasury will auction $119 billion of T-notes and T-bonds this week, starting with Tuesday’s $58 billion auction of reopened 3-year T-notes. 

European government bond yields on Monday moved higher.  The 10-year German bund yield rose to a 2-1/2 week high of 2.456% and finished up +3.6 bp at 2.435%.  The 10-year UK gilt yield rose to a 5-week high of 4.128% and finished up +1.6 bp at 4.085%.

The Eurozone Apr Sentix investor confidence index rose +4.6 to a 2-year high of -5.9, stronger than expectations of -8.3.

German Feb industrial production rose +2.1% m/m, stronger than expectations of +0.5% m/m and the biggest increase in 13 months.

German trade data was mixed.  German Feb exports fell -2.0% m/m, weaker than expectations of -0.5% m/m. Feb imports unexpectedly rose +3.2% m/m versus expectations of -1.2% m/m.

US Stock Movers

Paramount Global (PARA) closed down more than -7% to lead losers in the S&P 500 after holder Matrix Asset Advisors raised concerns over the proposal that would see Paramount Global sell its voting stock and merge with Skydance Media. 

Kroger (KR) closed down more than -3% after BNP Paribas Exane downgraded the stock to underperform from neutral. 

Lamb Weston Holdings (LW) closed down more than -2% after Barclays cut its price target on the stock to $105 from $125.

Dollar General (DG) closed down more than -2% on signs of insider selling after an SEC filing showed EVP and CIO Wenkoff sold $958,616 of shares last Thursday.

Schlumberger Ltd (SLB) closed down more than -1% after Cowen cut its price target on the stock to $64 from $71.

Skyworks Solutions (SWKS) closed down more than -1% after KeyBanc Capital Markets downgraded the stock to sector weight from overweight. 

Eaton Corp Plc (ETN) closed down more than -1% after Wolfe Research downgraded the stock to underperform from peer perform.

Perion Network Ltd (PERI) closed down more than -41% after cutting its full-year revenue forecast to $590 million-$610 million from a previous forecast of $860 million-$880 million, well below the consensus of $868 million.

GE Vernova (GEV) closed up more than +5% after JPMorgan Chase upgraded the stock to overweight from neutral. 

Tesla (TSLA) closed up more than +4% to lead gainers in the Nasdaq 100 after CEO Musk said the company will unveil its robotaxis on Aug 8.

Nike (NKE) closed up more than +1% to lead gainers in the Dow Jones Industrials after Hedgeye Risk Management upgraded the stock to buy from hold.

Property stocks and real estate investment stocks rallied Monday after the Wall Street Journal reported that Blackstone offered to acquire AIR Communities for $10 billion or $39.12 per share.  As a result, Camden Property Trust (CPT) closed up more than +5%, and Mid-America Apartment Communities (MAA) closed up more than +4%.  Also, Boston Properties (BXP), UDR Inc (UDR), and Equity Residential (EQR) closed up more than +3%.  In addition, Essex Property Trust (ESS) and AvalonBay Communities (AVB) closed up more than +2%.

Ducommun (DCO) closed up more than +14% after confirming the board of directors received an unsolicited non-binding indication from Albion River to buy all outstanding shares for $60 per share in cash. 

Zebra Technologies (ZBRA) closed up more than +2% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $337.

Take-Two Interactive Software (TTWO) closed up more than +1% after Citigroup upgraded the stock to buy from neutral with a price target of $200.

UiPath (PATH) closed up more than +1% after KeyBanc Capital Markets assumed coverage on the stock with an overweight rating and a price target of $27. 

Earnings Reports (4/9/2024)

Aehr Test Systems (AEHR), Dakota Gold Corp (DC), Liberty Media Corp-Liberty Liv (LLYVA), Neogen Corp (NEOG), PriceSmart Inc (PSMT), RCI Hospitality Holdings Inc (RICK), SMART Global Holdings Inc (SGH), WD-40 Co (WDFC).

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