Stocks Pressured by Higher Bond Yields and Chip Stock Weakness

The S&P 500 Index ($SPX) (SPY) this morning is down -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.43%. 

US stock indexes this morning are mixed, with the Nasdaq 100 falling to a 1-3/4 month low.  Weakness in chip stocks for a second today is weighing on the overall market. Also, rising T-note yields today are undercutting stocks. 

On the positive side, Genuine Parts Co. is up more than +11% after reporting better-than-expected Q1 adjusted EPS and raising its full-year adjusted EPS estimate.  Also, homebuilding stocks are higher after DR Horton reported stronger-than-expected Q2 revenue. 

Today’s stronger-than-expected US unemployment claims and the Philadelphia Fed reports pushed T-note yields higher and were hawkish factors for Fed policy.

Geopolitical risks in the Middle East continue to be a negative factor for stocks on concern Israel will retaliate after Iran fired a barrage of missiles and drones into Israel over the weekend.

US weekly initial unemployment claims were unchanged at 212,000, showing a stronger labor market than expectations of an increase to 215,000.

The US Apr Philadelphia Fed business outlook survey unexpectedly rose +12.3 to a 2-year high of 15.5 versus expectations of a decline to 2.0.

The markets are discounting the chances for a -25 bp rate cut at 3% for the next FOMC meeting on April 30-May 1 and 17% for the following meeting on June 11-12.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.14%.  China's Shanghai Composite rose to a 6-month high and closed up +0.09%.  Japan's Nikkei Stock Index recovered from a 2-month low and closed up +0.31%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are down -9 ticks.  The 10-year T-note yield is up +4.1 bp to 4.629%.  June T-notes came under pressure this morning from stronger-than-expected US economic reports on weekly jobless claims and the Apr Philadelphia Fed business outlook survey.

European government bond yields today are mixed.  The 10-year German bund yield is up +1.9 bp to 2.484%. The 10-year UK gilt yield is down -0.2 bp at 4.260%.

In its monthly report, the Bundesbank updated its assessment of the German economy and said the German economy in Q1 may have seen a "slight increase" in growth, an improvement from March when they projected the economy contracted in Q1.

ECB Executive Board member de Guindos said that should officials' confidence in meeting the 2% target for consumer-price growth increase, "it would be appropriate to reduce the current level of monetary policy restriction."

Eurozone Mar new car registrations fell -5.2% y/y, the biggest decline in 20 months.

Eurozone Feb construction output rose +1.8% m/m, the biggest increase in a year.

US Stock Movers

Genuine Parts Co (GPC) is up more than +11% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $2.22, better than the consensus of $2.17, and raising its full-year adjusted EPS estimate to $9.80-$9.95 from a previous estimate of $9.70-$9.90, above the consensus of $9.78. 

Homebuilders are climbing today after DR Horton reported Q2 revenue of $9.11 billion, stronger than the consensus of $8.28 billion.  As a result, DR Horton (DHI) is up more than +3%.  Also, Lennar (LEN), Builders FirstSource (BLDR), PulteGroup (PHM), and Toll Brothers (TOL) are up more than +2%.

Elevance Health (ELV) is up more than +3% after reporting Q1 adjusted EPS of $10.64, better than the consensus of $10.53, and raised its full-year adjusted EPS forecast to above $37.20 from a previous forecast of above $37.10, stronger than the consensus of $37.16.

Comerica (CMA) is up more than 3% after reporting Q1 average deposits of $65.31 billion, above the consensus of $63.85 billion. 

Zscaler (ZS) is up more than +1% to lead gainers in the Nasdaq 10 after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $220. 

Equifax (EFX) is down more than -9% to lead losers in the S&P 500 after reporting Q1 operating revenue of $1.39 billion, weaker than the consensus of $1.41 billion, and forecast full-year revenue of $5.67 billion-$5.77 billion, below the consensus of $5.80 billion. 

Las Vegas Sands (LVS) is down more than -6% despite reporting Q1 EPS above expectations after results at its Macau locations broadly missed consensus estimates.

Tesla (TSLA) is down more than -3% to lead losers in the Nasdaq 100 after Deutsche Banks downgraded the stock to hold from buy. 

Autodesk (ADSK) is down more than -3%, adding to Wednesday’s -5% plunge, after saying it won’t file its annual report within the 15-day extension period as it continues investigating free cash flow and non-GAAP operating margin practices. 

Chip stocks are under pressure for a second day and are weighing on technology stocks.  NXP Semiconductors NV (NXPI) and ON Semiconductor (ON) are down more than -2%.  Also, Qualcomm (QCOM), Marvel Technology (MRVL), Applied Materials (AMAT), Lam Research (LRCX), ASML Holding NV (ASML), GlobalFoundries (GFS), and Texas Instruments (TXN) are down more than -1%. 

Earnings Reports (4/18/2024)

Blackstone Inc (BX), Comerica Inc (CMA), DR Horton Inc (DHI), Elevance Health Inc (ELV), Genuine Parts Co (GPC), Intuitive Surgical Inc (ISRG), KeyCorp (KEY), Marsh & McLennan Cos Inc (MMC), Netflix Inc (NFLX), PPG Industries Inc (PPG), Snap-on Inc (SNA).

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