Stock Indexes Mixed as They Consolidate Below Record Highs

The S&P 500 Index ($SPX) (SPY) today is down -0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.34%. 

US stock indexes today are mixed as they consolidate just below this week’s all-time highs.  Stocks garnered some support today on dovish comments made Thursday evening from Atlanta Fed President Bostic, who said if the outlook unfolds as he expects, referring to slowly moderating inflation and continued economic momentum, "then it could be appropriate for us to reduce rates toward the end of the year."

Higher T-note yields today and some mixed economic news from China limit stock gains.  An uneven recovery in China may weigh on global growth prospects and is negative for stocks.  China Apr industrial production rose +6.7% y/y, stronger than expectations of +5.5% y/y.  However, China Apr retail sales rose +2.3% y/y, weaker than expectations of +3.7% y/y and the smallest increase in 16 months.  Also, China Apr new home prices fell -0.58% y/y, the largest decline in 9-1/2 years, and Apr used home prices fell -0.94% y/y, also the biggest decline in 9-1/2 years.

US Apr leading indicators fell -0.6% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 6 months.

Generally positive Q1 earnings results are supportive of stocks.  Q1 earnings are expected to climb +7.1% 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. 

The markets are discounting the chances for a -25 bp rate cut at 10% for the June 11-12 FOMC meeting and 32% for the following meeting on July 30-31.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell to a 1-week low and is down -0.17%. China's Shanghai Composite closed up +1.01%.  Japan's Nikkei Stock Index closed down -0.34%. 

Interest Rates

June 10-year T-notes (ZNM24) today are down -4 ticks.  The 10-year T-note yield is up +1.8 bp at 4.393%.  June T-notes are under pressure today from weakness in European government bonds.  T-notes recovered from their worst levels after US Apr leading indicators fell more than expected, a dovish factor for Fed policy.  T-notes also have support on dovish comments made Thursday evening by Atlanta Fed President Bostic, who said if the economy evolves in the way he anticipates, it will be appropriate for the Fed to begin cutting interest rates later this year.

European government bond yields today are moving higher.  The 10-year German bund yield is up +4.5 bp at 2.505%.  The 10-year UK gilt yield is up +3.6 bp at 4.115%.

ECB Executive Board member Schnabel warned against back-to-back interest-rate cuts in June and July and said, "Based on current data, a rate cut in July does not seem warranted."

US Stock Movers

Take-Two Interactive Software (TTWO) is up more than +2% to lead gainers in the Nasdaq 100 after reporting Q4 net bookings of $1.35 billion, above the consensus of $1.31 billion.

Advanced Micro Devices (AMD) is up more than +2% after Wolfe Research added the stock to its Alpha List, replacing Nvidia.

DuPont de Nemours (DD) is up more than +2% after Jeffries upgraded the stock to buy from hold with a price target of $101. 

Freeport McMoRan (FCX) is up more than +2% to lead mining stocks higher after the price of silver soared to an 11-year high. 

Doximity (DOCS) is up more than +17% after reporting Q4 revenue of $118.1 million, stronger than the consensus of $116.5 million, and forecasting Q1 revenue of $119.5 million-$120.5 million, above the consensus of $118.7 million.

Reddit (RDDT) is up more than +13% after it partnered with OpenAI to bring its content to the ChatGPT chatbot, a deal analysts say will boost Reddit’s data licensing business.

United Airlines Holdings (UAL) is up more than +1% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $76. 

DXC Technology (DXC) is down more than -18% after forecasting 2025 revenue of $12.67 billion-$12.95 billion, weaker than the consensus of $13.18 billion.

Cracker Barrel (CBRL) is down more than -15% after cutting its quarterly dividend to 25 cents per share, well below the consensus of $1.30. 

Flowers Foods (FLO) is down more than -4% after reporting Q1 adjusted EPS of 38 cents, weaker than the consensus of 41 cents.

Gen Digital (GEN) is down more than -2% on signs of insider selling after an SEC filing showed CFO Derse sold $4.12 million of shares on Tuesday.

EPAM Systems (EPAM) is down more than -1% after Wolfe Research downgraded the stock to peer perform from outperform. 

Earnings Reports (5/17/2024)

Cato Corp/The (CATO), DZS Inc (DZSI), RBC Bearings Inc (RBC).

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