Stocks Settle Higher on Q1 Earnings Optimism

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.87%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.67%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.02%. 

US stock indexes settled moderately higher on Monday, with the Dow Jones Industrials posting a 1-week high.  Reduced geopolitical tensions boosted stocks on Monday as it appears that the Iran-Israel exchange of attacks may be over for the time being.  Also, a +4% jump in Nvidia on Monday lifted technology stocks as Nvidia recovered some of last Friday’s -10% plunge.  In addition, the strength of bank stocks on Monday supported the overall market.

Optimism in Q1 corporate earnings was another positive factor for stocks on Monday.  About 180 S&P 500 companies, or more than 40% of total capitalization, are scheduled to report earnings this week, including four of the “Magnificent Seven” megacap technology companies: Tesla, Alphabet, Microsoft, and Meta Platforms. 

On the negative side for stocks on Monday was a -5% fall in Cardinal Health after saying its pharmaceutical distribution contracts with OptumRx will not be renewed.  Also, Tesla closed down more than -3% after cutting prices on the vehicles it sells in China in an attempt to stem the slide in sales. 

The US Mar Chicago Fed national activity index rose +0.06 to a 4-month high of 0.15, stronger than expectations of 0.07.   

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 19% for the following meeting on June 11-12.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed up +0.38%.  China's Shanghai Composite closed down -0.67%.  Japan's Nikkei Stock Index closed up +1.00%.

Interest Rates

June 10-year T-notes (ZNM24) on Monday closed down -1.5 ticks.  The 10-year T-note yield fell -0.2 bp to 4.617%.  Strength in stocks Monday curbed safe-haven demand for T-notes.  Also, supply pressures are negative for T-note prices as the Treasury will sell $183 billion of T-notes this week, beginning with Tuesday’s $69 billion auction of 2-year T-notes.  T-notes recovered from their worst levels as short-covering emerged after 10-year German bunds erased losses and moved higher when ECB Governing Council member Centeno said the ECB could cut interest rates by more than 100 basis points this year.

European government bond yields Monday finished lower on the day. The 10-year German bund yield fell back from a 4-3/4 month high of 2.553% and finished down -1.4 bp at 2.486%.  The 10-year UK gilt yield fell -2.5 bp to 4.205%.

The Eurozone Apr consumer confidence index rose +0.2 to a 2-year high of -14.7, slightly weaker than expectations of -14.5.

US Stock Movers

Nvidia (NVDA) closed up more than +4% to lead chip stocks higher as it recovered from some of last Friday’s -10% plunge.  Also, Microchip Technology (MCHP) and Texas Instruments (TXN) closed up more than +2%.  In addition, Analog Devices (ADI), Advanced Micro Devices (AMD), Micron Technology (MU), NXP Semiconductors NV (NXPI), and Qualcomm (QCOM) closed up more than +1%.

Bank stocks rallied Mondy and provided support to the broader market.  Goldman Sachs (GS) closed up more than +3% to lead gainers in the Dow Jones Industrials.  Also, Citigroup (C) and Capital One Financial (COF) closed up more than +3%.  In addition, Bank of America (BAC) and Northern Trust (NTRS) closed up more than +2%. 

Truist Financial (TFC) closed up more than +3% after reporting Q1 adjusted EPS of 90 cents, stronger than the consensus of 81 cents. 

Vista Outdoor (VSTO) closed up more than +6% after it advised MNC Capital to increase its offer price from $37.50 per share.

Robert Half (RHI) closed up more than +1% after Truist Securities upgraded the stock to hold from sell, citing improving trends for the company.

Cardinal Health (CAH) closed down more than -5% to lead losers in the S&P 500 after saying its pharmaceutical distribution contracts with OptumRx will not be renewed.  Sales to OptumRx accounted for 16% of its consolidated revenue in fiscal 2023. 

Verizon Communications (VZ) closed down more than -4% to lead losers in the Dow Jones Industrials after reporting Q1 operating revenue of $33.0 billion, weaker than the consensus of $33.2 billion. 

Tesla (TSLA) closed down more than -3% to lead losers in the Nasdaq 100 after cutting prices on the vehicles it sells in China in an attempt to stem the slide in sales. 

Informatica (INFA) closed down more than -10% after the Wall Street Journal reported that talks for Salesforce to acquire it have cooled as both companies have failed to agree on price.

Newmont (NEM) closed down more than -1% to lead mining stocks lower, as the price of gold fell more than -2% to a 1-week low, and silver fell more than -5% to a 2-week low.

UnitedHealth Group (UNH) closed down more than -1% after the Wall Street Journal reported that hackers broke into the company’s Change Healthcare unit nine days before launching a ransomware attack that UnitedHealth Group said has already cost it more than $870 million. 

Earnings Reports (4/23/2024)

Baker Hughes Co (BKR), Chubb Ltd (CB), CoStar Group Inc (CSGP), Danaher Corp (DHR), Enphase Energy Inc (ENPH), EQT Corp (EQT), Equity Residential (EQR), Fiserv Inc (FI), Freeport-McMoRan Inc (FCX), General Electric Co (GE), General Motors Co (GM), Halliburton Co (HAL), IDEX Corp (IEX), Invesco Ltd (IVZ), Kimberly-Clark Corp (KMB), LKQ Corp (LKQ), Lockheed Martin Corp (LMT), MSCI Inc (MSCI), NextEra Energy Inc (NEE), NVR Inc (NVR), Pentair PLC (PNR), PepsiCo Inc (PEP), Philip Morris International In (PM), PulteGroup Inc (PHM), Quest Diagnostics Inc (DGX), RTX Corp (RTX), Seagate Technology Holdings PL (STX), Sherwin-Williams Co/The (SHW), Steel Dynamics Inc (STLD), Tesla Inc (TSLA), Texas Instruments Inc (TXN), United Parcel Service Inc (UPS), Veralto Corp (VLTO), Visa Inc (V), W R Berkley Corp (WRB).

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