Stocks See Support from Higher Chip Stocks and Earnings Optimism

The S&P 500 Index ($SPX) (SPY) today is up +0.37%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.41%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.55%. 

US stock indexes today are mildly higher on higher chip stocks and carry-over support from Thursday’s dovish initial unemployment claims report.

Stocks also have support from generally positive Q1 earnings results.  Q1 earnings are 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. 

Bearish factors this morning include slightly higher T-note yields and a Bloomberg report that President Biden next Tuesday will announce new and elevated tariffs on three Chinese import sectors, including electric vehicles, batteries, and solar cells.  Bloomberg said other US tariffs on Chinese imports are expected to be largely maintained.  The tariffs may help some domestic US businesses, but tariffs generally increase costs for consumers and are indicative of high US-Chinese geopolitical tensions. Also, China may retaliate with tariffs on key US sectors such as agriculture.

Fed Governor Michelle Bowman issued mildly hawkish comments today when she said the Fed must maintain its inflation credibility “by proceeding carefully and deliberately to achieve our 2% goal.” Also, Atlanta Fed President Raphael Bostic told Reuters in an interview that he expects only one 25 bp rate cut this year, coming late in the year.

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 higher.  The Euro Stoxx 50 is up +0.68%.  China's Shanghai Composite rose to an 8-month high and closed up +0.01%.  Japan's Nikkei Stock Index closed up +0.33%. 

Interest Rates

June 10-year T-notes (ZNM24) today are down -9 ticks.  The 10-year T-note yield is up +3.1 bp at 4.485%. T-note prices are seeing some downward pressure from hawkish Fed remarks from Bowman and Bostic.  Also, Francisco Fed President Daly said on Thursday that it may take "more time" to return inflation to the Fed's goal.

European government bond yields today are narrowly mixed.  The 10-year German bund yield is up 0.6 bp at 2.501%.  10-year UK gilt yield is down -0.4 bp at 4.137%.

US Stock Movers

Chip stocks are featured on the Nasdaq 100 leaderboard this morning, with Applied Materials (AMAT), Micron Technology (MU), NVIDIA (NVDA), and Lam Research (LRCX) up more than 2%.

On the negative leaderboard, Alphabet (GOOG) and Tesla (TSLA) are down about -1% this morning.

Novavax (NVAX) is up by an extraordinary +130% after news that the company signed a $1.2 billion licensing agreement with Sanofi for the commercialization of a combined Covid and flu shot. 

3M (MMM) is up +1% after HSBC raised its rating to buy from hold on a positive view of the company’s restructuring efforts.

Dropbox (DBX)  is up +3% on positive Q1 earnings results.

Yelp’s (YELP) is down -1% on a downward revision in full-year Ebitda guidance.  Also, Jefferies warned that the company’s revenue could be hindered by macro headwinds for restaurants and growing competition from delivery platforms.

Earnings Reports (5/10/2024)

4D Molecular Therapeutics Inc (FDMT), AirSculpt Technologies Inc (AIRS), Alpine Immune Sciences Inc (ALPN), AlTi Global Inc (ALTI), ALX Oncology Holdings Inc (ALXO), AMC Networks Inc (AMCX), American Realty Investors Inc (ARL), AnaptysBio Inc (ANAB), ANI Pharmaceuticals Inc (ANIP), Astria Therapeutics Inc (ATXS), Cabaletta Bio Inc (CABA), CareMax Inc (CMAX), Carrols Restaurant Group Inc (TAST), CBL & Associates Properties In (CBL), Construction Partners Inc (ROAD), Consumer Portfolio Services In (CPSS), Contango ORE Inc (CTGO), Costamare Inc (CMRE), Cullinan Therapeutics Inc (CGEM), DigitalOcean Holdings Inc (DOCN), Dillard's Inc (DDS), DNOW Inc (DNOW), Enliven Therapeutics Inc (ELVN), EVI Industries Inc (EVI), Eyenovia Inc (EYEN), FTC Solar Inc (FTCI), Generation Bio Co (GBIO), Hawaiian Electric Industries Inc (HE), Humacyte Inc (HUMA), I3 Verticals Inc (IIIV), ImmunityBio Inc (IBRX), Inspired Entertainment Inc (INSE), iTeos Therapeutics Inc (ITOS), Kezar Life Sciences Inc (KZR), Lazydays Holdings Inc (GORV), Li-Cycle Holdings Corp (LICY), Lightwave Logic Inc (LWLG), Luna Innovations Inc (LUNA), MarketWise Inc (MKTW), Maui Land & Pineapple Co Inc (MLP), Mitek Systems Inc (MITK), Mondee Holdings Inc (MOND), NextDecade Corp (NEXT), Nkarta Inc (NKTX), Novavax Inc (NVAX), Overseas Shipholding Group Inc (OSG), Park Aerospace Corp (PKE), PepGen Inc (PEPG), Prime Medicine Inc (PRME), ProKidney Corp (PROK), Protalix BioTherapeutics Inc (PLX), Sphere Entertainment Co (SPHR), Star Holdings (STHO), Sylvamo Corp (SLVM), Tenaya Therapeutics Inc (TNYA), Third Harmonic Bio Inc (THRD), Transcontinental Realty Invest (TCI), TruBridge Inc (TBRG), United Homes Group Inc (UHG), Vor BioPharma Inc (VOR).

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