Stocks Settle Mixed as Indexes Consolidate Below Record Highs

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.06%. 

US stock indexes settled mixed on Friday as they consolidated just below this week’s all-time highs.  Stocks garnered some support Friday 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 on Friday weighed on chip stocks and kept the Nasdaq 100 in negative territory.  Hawkish comments from Fed Governor Bowman pushed T-note yields higher when she said, "With average core CPI this year through April running at an annualized rate of 4.3%, well above average inflation in the second half of last year, I expect inflation to remain elevated for some time."

Also, mixed economic news from China limited 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 on Friday settled mixed.  The Euro Stoxx 50 fell to a 1-week low and closed down -0.16%.  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) on Friday closed down -9.5 ticks.  The 10-year T-note yield rose +4.3 bp to 4.418%.  June T-notes were under pressure Friday from weakness in European government bonds.  Losses in T-notes accelerated Friday after Fed Governor Bowman said she expects inflation to remain elevated “for some time." 

A supportive factor for T-notes was Friday’s weaker-than-expected US Apr leading indicators report, a dovish factor for Fed policy.  T-notes also had 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 on Friday moved higher.  The 10-year German bund yield rose +5.5 bp to 2.515%.  The 10-year UK gilt yield rose +4.8 bp to 4.127%.

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

Freeport McMoRan (FCX) closed up more than +4% to lead mining stocks higher after the price of silver soared to an 11-year high. 

Chubb (CB) closed up more than +3%, adding to Thursday’s +4% gain after Berkshire Hathaway unveiled a $6.7 billion stake in the company. 

DuPont de Nemours (DD) closed up more than +3% after Jeffries upgraded the stock to buy from hold with a price target of $101. 

Doximity (DOCS) closed up more than +18% 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) closed up more than +10% after it partnered with OpenAI to bring its content to the ChatGPT chatbot, a deal analysts say will boost Reddit’s data licensing business.

Take-Two Interactive Software (TTWO) closed up more than +1% after reporting Q4 net bookings of $1.35 billion, above the consensus of $1.31 billion.

Advanced Micro Devices (AMD) closed up more than +1% after Wolfe Research added the stock to its Alpha List, replacing Nvidia.

Higher T-note yields on Friday weighed on chip stocks.  Lam Research (LRCX) closed down more than -3%.  Also, Micron Technology (MU) closed down more than -2%.  In addition, Nvidia (NVDA), Broadcom (AVGO), and Marvell Technology (MRVL) closed down more than -1%. 

DXC Technology (DXC) closed down more than -16% after forecasting 2025 revenue of $12.67 billion-$12.95 billion, weaker than the consensus of $13.18 billion.

Cracker Barrel (CBRL) closed down more than -14% after cutting its quarterly dividend to 25 cents per share, well below the consensus of $1.30. 

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

Gen Digital (GEN) closed down more than -1% on signs of insider selling after an SEC filing showed CFO Derse sold $4.12 million of shares on Tuesday.

EPAM Systems (EPAM) closed down -0.73% after Wolfe Research downgraded the stock to peer perform from outperform. 

Earnings Reports (5/20/2024)

Keysight Technologies Inc (KEYS), Nordson Corp (NDSN), Palo Alto Networks Inc (PANW), Zoom Video Communications Inc (ZM).

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