Stocks Waver on Higher Bond Yields and Mixed Corporate Earnings

The S&P 500 Index ($SPX) (SPY) Wednesday closed unchanged, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.44%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.04%. 

US stock indexes Wednesday settled mixed, with the Dow Jones Industrials posting a 1-month high.  Hawkish Fed comments and higher bond yields Wednesday weighed on stocks. Mixed earnings results limited the upside in stocks on Wednesday. 

On the positive side, Vistra Corp closed up more than +9% after reporting better-than-expected Q1 adjusted Ebitda.  Also, Lyft rose more than +6% after reporting better-than-expected Q1 gross bookings and forecasting Q2 gross bookings above consensus.  In addition, Arista Networks closed up more than +5% after reporting stronger-than-expected Q1 adjusted EPS. 

On the negative side, Uber Technologies fell more than -5% after reporting Q1 gross bookings below the consensus and forecasting weaker-than-expected Q2 gross bookings.  Also, Match Group closed down more than -5% after forecasting Q2 revenue below consensus.   In addition, Broadridge Financial Solutions closed down more than -5% after reporting Q3 revenue below consensus.

Q1 earnings results have been mostly better than expected, a supportive factor for stocks.  Q1 earnings are now expected to climb +6.5% y/y, well above the pre-earnings season estimate of +3.8%.  According to data compiled by Bloomberg Intelligence, about 81% of reporting S&P 500 companies have beaten Q1 earnings estimates. 

Hawkish comments Wednesday from Boston Fed President Collins weighed on stocks when she said, "The recent upward surprises to activity and inflation suggest the likely need to keep policy at its current level until we have greater confidence that inflation is moving sustainably toward 2% and that the recent data lead me to believe this will take more time than previously thought."

US MBA weekly mortgage applications rose +2.6% in the week ended May 3.  The purchase mortgage sub-index rose +1.8%, and the refinancing mortgage sub-index rose +4.5%.  The average 30-year fixed rate mortgage fell -0.11 bp to 7.18% from 7.29% in the prior week.

US Mar wholesale trade sales unexpectedly fell -1.3% m/m, weaker than expectations of a +0.8% m/m increase.

The markets are discounting the chances for a -25 bp rate cut at 10% for the June 11-12 FOMC meeting and 34% for the following meeting on July 30-31.

Overseas stock markets Wednesday settled mixed.  The Euro Stoxx 50 climbed to a 1-month high and closed up +0.44%.  China's Shanghai Composite closed down -0.61%.  Japan's Nikkei Stock Index closed down -1.63%. 

Interest Rates

June 10-year T-notes (ZNM24) on Wednesday closed down -6 ticks.  The 10-year T-note yield rose +3.5 bp to 4.492%.  Higher European government bond yields Wednesday weighed on T-note prices.  Also, hawkish comments from Boston Fed President Collins were bearish for T-notes when she said interest rates would likely need to be held higher for longer to reduce price pressures.  T-notes maintained moderate losses on tepid demand for the Treasury’s $42 billion of 10-year T-notes that had a bid-to-cover ratio of 2.49, below the 10-auction average of 2.51.

European government bond yields Wednesday finished higher. The 10-year German bund yield rose +4.3 bp at 2.462%.  10-year UK gilt yield rose +1.5 bp at 4.139%.

German Mar industrial production fell -0.4% m/m, a smaller decline than expectations of -0.7% m/m.

ECB Governing Council member Wunsch said with "no sign of de-anchoring" of inflation expectations in the Eurozone in the longer term, "the costs of remaining tight for too long seem to outweigh those of a premature loosening."

US Stock Movers

Vistra Corp (VST) closed up more than +9% to lead gainers in the S&P 500 after reporting Q1 adjusted Ebitda of $790 million, better than the consensus of $679.6 million.

Arista Networks (ANET) closed up more than +5% after reporting Q1 adjusted EPS of $1.99, stronger than the consensus of $1.73. 

Emerson Electric (EMR) closed up more than +4% after reporting Q2 net sales of $4.38 billion, stronger than the consensus of $4.29 billion. 

Louisiana-Pacific (LPX) closed up more than +20% after reporting Q1 net sales of $724 million, better than the consensus of $687 million. 

Reddit (RDDT) closed up more than +4% after reporting 82.7 million daily active users in Q1, above the consensus of 77.35 million.

Confluent (CFLT) closed up more than +12% after raising its full-year total revenue forecast to about $957 million from a previous forecast of about $950 million, above the consensus of $951.5 million. 

Lyft (LYFT) closed up more than +6% after reporting Q1 gross bookings of $3.69 billion, stronger than the consensus of $3.59 billion, and forecasting Q2 gross bookings of $4.0 billion-$4.1 billion, better than the consensus of $4.02 billion.

International Flavors & Fragrances (IFF) closed up more than +2% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $100.

Uber Technologies (UBER) closed down more than -5% to lead losers in the S&P 500 after reporting Q1 gross bookings of $37.65 billion, below the consensus of $37.97 billion, and forecasting Q2 gross bookings of $38.75 billion-$40.25 billion, weaker than the consensus of $40.04 billion.   

Match Group (MTCH) closed down more than -5% after forecasting Q2 revenue of $850 million-$860 million, weaker than the consensus of $882.4 million.

Broadridge Financial Solutions (BR) closed down more than -5% after reporting Q3 revenue of $1.73 billion, below the consensus of $1.77 billion.

Electronic Arts (EA) closed down more than -3% after reporting Q4 net bookings of $1.67 billion, weaker than the consensus of $1.77 billion, and forecasting 2025 net bookings of $7.30 billion-$7.70 billion, below the consensus of 7.77 billion.

ZoomInfo Technologies (ZI) closed down more than -23% after forecasting Q2 revenue of $306 million-$309 million, below the consensus of $312.9 million. 

Twilio (TWLO) closed down more than -7% after forecasting Q2 revenue of $1.05 billion-$1.06 billion, weaker than the consensus of $1.08 billion. 

Intel (INTC) closed down more than -2% to lead losers in the Dow Jones Industrials after tempering its Q2 outlook and saying it now expects Q2 revenue below the midpoint of $12.5 billion-$13.5 billion.

Tesla (TSLA) closed down more than -1% after Reuters reported that US prosecutors are looking into whether Tesla misled investors and consumers about its electric vehicles’ self-driving capabilities.

Earnings Reports (5/9/2024)

Akamai Technologies Inc (AKAM), Charles River Laboratories Int (CRL), Constellation Energy Corp (CEG), EPAM Systems Inc (EPAM), Evergy Inc (EVRG), Gen Digital Inc (GEN), Insulet Corp (PODD), Mettler-Toledo International Int (MTD), Solventum Corp (SOLV), Tapestry Inc (TPR), Viatris Inc (VTRS), Warner Bros Discovery Inc (WBD).

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