Stocks Rise on Fed Rate Cut Hopes

The S&P 500 Index ($SPX) (SPY) this morning is up +0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.13%. 

US stock indexes this morning are moderately higher, with the S&P 500 climbing to a 4-week high and the Dow Jones Industrials posting a 5-week high.  Stock index futures are moving higher after today’s US weekly initial unemployment claims rose more than expected to an 8-1/2 month high, bolstering hopes that the Fed will soon cut interest rates.

Corporate news today is mixed.  Equinix is up more than +11% after reporting stronger-than-expected Q1 adjusted Ebitda. Steris Plc is up more than +4% after reporting Q4 revenue above consensus.  AppLovin is up more than +17% after reporting stronger-than-expected Q1 revenue.

On the negative side for corporate news, EPAM Systems is down more than -23% after cutting its full-year adjusted EPS estimate.  Also, Airbnb is down more than -7% after forecasting Q2 revenue below consensus. Viatris is down more than -4% after cutting its full-year revenue forecast.

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. 

US weekly initial unemployment claims rose +22,000 to an 8-1/2 month high of 231,000, showing a weaker labor market than expectations of 212,000.

A supportive factor for global growth prospects is better than expected Chinese trade data as China Apr exports rose +1.5% y/y, stronger than expectations of +1.3% y/y.  Also, Apr imports rose +8.4% y/y, stronger than expectations of +4.7% y/y.

The markets are discounting the chances for a -25 bp rate cut at 10% for the June 11-12 FOMC meeting and 36% for the following meeting on July 30-31.

Overseas stock markets today are mixed.  The Euro Stoxx 50 rose to a 5-week high and is up +0.28%. China's Shanghai Composite rose to an 8-month high and closed up +0.83%.  Japan's Nikkei Stock Index closed down -0.34%. 

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +1 tick.  The 10-year T-note yield is down -0.9 bp at 4.4850%. T-note prices this morning recovered from overnight losses and are little changed after US weekly jobless claims rose more than expected to an 8-1/2 month high, a dovish factor for Fed policy. 

Supply pressures are weighing on T-note prices as the Treasury will auction $25 billion of 30-year T-bonds this afternoon to conclude this week’s $125 billion auctions of T-notes and T-bonds for the May quarterly refunding. 

European government bond yields today are mixed.  The 10-year German bund yield is up +3.2 bp at 2.495%. 10-year UK gilt yield is down -0.1 bp at 4.138%.

As expected, the Bank of England (BOE) kept the key bank rate unchanged at 5.25% for the sixth straight meeting and said risks from inflation persistence are receding. 

BOE Governor Baily said, "It's likely that we will need to cut the bank rate over the coming quarters and make monetary policy less restrictive over the forecast period, possibly more so than currently priced into market rates." He added that a change in the bank rate in June "is neither ruled out nor a fait accompli."   

US Stock Movers

Equinix (EQIX) is up more than +12% to lead gainers in the S&P 500 after reporting Q1 adjusted Ebitda of $992 million, above the consensus of $976.9 million,

Steris Plc (STE) is up more than +4% after reporting Q4 revenue of $1.50 billion, stronger than the consensus of $1.43 billion.

Trade Desk (TTD) is up more than +2% to lead gainers in the Nasdaq 100 after reporting Q1 revenue of $491 million, stronger than the consensus of $480 million.

AppLovin (APP) is up more than +17% after reporting Q1 revenue of $1.06 billion, well above the consensus of $973.7 million. 

Cheesecake Factory (CAKE) is up more than +8% after reporting Q1 adjusted EPS of 73 cents, stronger than the consensus of 64 cents.

SharkNinja (SN) is up more than +5% after reporting Q1 net sales of $1.07 billion, stronger than the consensus of $950 million. 

Affirm Holdings (AFRM) is up more than +4% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $43.

HubSpot (HUBS) is up more than +1% after Bloomberg reported that Alphabet has been progressing in talks to acquire the company.

EPAM Systems (EPAM) is down more than -24% to lead losers in the S&P 500 after cutting its full-year adjusted EPS estimate to $10.00-$10.30 from a previous estimate of $10.00-$10.40.

Airbnb (ABNB) is down more than -7% to lead losers in the Nasdaq 100 after forecasting Q2 revenue of $2.68 billion-$2.74 billion, weaker than the consensus of $2.74 billion.

Exact Sciences (EXAS) is down more than -10% after reporting a Q1 loss per share of -60 cents, which is wider than the consensus of -46 cents. 

Viatris (VTRS) is down more than -4% after cutting its full-year revenue forecast to $14.98 billion-$15.48 billion from a previous forecast of $15.25 billion-$15.75 billion. 

Corpay (CPAY) is down more than -4% after reporting Q1 revenue of $935.3 million, weaker than the consensus of $938.9 million, and cutting its full-year revenue forecast to $3.96 billion-$4.04 billion from a previous forecast of $4.04 billion-$4.12 billion.

Norfolk Southern (NSC) is down more than -3% after investors voted to keep ten of the company’s 13 board of director candidates that activists had tried to unseat. 

Salesforce (CRM) is down more than -1% to lead losers in the Dow Jones of Industrials in signs of insider selling after an SEC filing showed CEO Benioff sold $4.16 million of shares on Tuesday.

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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