Stocks Fall Despite Nvidia's Impressive Quarter

The S&P 500 Index ($SPX) (SPY) today is down -0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.53%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.37%. 

US stock indexes today are lower this afternoon, with the Dow Jones down more than 600 points.  This is despite Nvidia's stock being up more than +9%, after reporting blowout earnings boost market sentiment and expectations that the global artificial intelligence boom will continue. 

However, the indexes fell back from a record high and turned lower after the 10-year T-note yield jumped to a 1-week high when US weekly initial unemployment claims fell more than expected and the May S&P manufacturing PMI rose, hawkish factors that dampened expectations of Fed rate cuts.

The markets slide is despite 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. 

US weekly initial unemployment claims fell -8,00 to 215,000, showing a stronger labor market than expectations of 220,000.

The US Apr Chicago Fed national activity index fell -0.19 to -0.23, weaker than expectations of +0.13.

The US May S&P manufacturing PMI unexpectedly rose +0.9 to 50.9, stronger than expectations of a decline to 49.9.

US Apr new home sales fell -4.7% m/m to 634,000, weaker than expectations of 678,000.

The markets are discounting the chances for a -25 bp rate cut at 0% for the June 11-12 FOMC meeting and 12% for the following meeting on July 30-31.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.06%.  China's Shanghai Composite fell to a 3-week low and closed down -1.33%.  Japan's Nikkei Stock Index closed up +1.26%. 

Interest Rates

June 10-year T-notes (ZNM24) today are down -9 ticks.  The 10-year T-note yield is up +4.476 bp at 4.489%.  June T-notes gave up overnight gains and fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 4.496% after US weekly jobless claims fell more than expected, a sign of labor market strength that is hawkish for Fed policy.  T-note prices fell further after the May S&P manufacturing PMI unexpectedly rose.  Today’s rally in the S&P 500 to a new all-time high also reduces safe-haven demand for T-notes.   

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 3-1/2 week high of 2.611% and is up +7.5 bp at 2.609%.  The 10-year UK gilt yield rose to a 2-1/2 week high of 4.277% and is up +3.3 bp at 4.265%.

The ECB reported that Eurozone negotiated wages in Q1 increased +4.7% y/y from +4.5% y/y in Q4, which matched a record.

The Eurozone May S&P manufacturing PMI rose +1.7 to a 15-month high of 47.4, stronger than expectations of 46.1.  The May S&P composite PMI rose +0.6 to 52.3, stronger than expectations of 52.0 and the fastest pace of expansion in a year.

The Eurozone May consumer confidence index rose +0.4 to a 2-1/4 year high of -14.3, slightly weaker than expectations of -14.2.

US Stock Movers

Nvidia (NVDA) is up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q1 revenue of $26.0 billion, above the consensus of $24.69 billion, and forecasting Q2 revenue of $28.0 billion-plus or minus 2%, stronger than the consensus of $26.8 billion.  Other chip stocks are rallying on the news, with ASML Holding NV (ASML) up more than +3%.  Also, Super Micro Computer (SMCI), Western Digital (WDC), Applied Materials (AMAT), and Micron Technology (MU) are up more than +2%.  In addition, KLA Corp (KLAC), Qualcomm (QCOM), and Lam Research (LRCX) are up more than +1%. 

Dell Technologies (DELL) is up more than +5% after Evercore ISI added the stock to its tactical outperform list with a price target of $165.

Synopsys (SNPS) is up more than +2% after reporting Q2 revenue of $1.46 billion, better than the consensus of $1.44 billion, and raising its full-year revenue forecast to $6.09 billion-$6.15 billion from a previous estimate of $6.06 billion-$6.12 billion, above the consensus of $6.09 billion. 

Ralph Lauren (RL) is up more than +2% after reporting Q4 total comparable sales were up +6.0%, stronger than the consensus of +4.34%.

Freshpet (FRPT) is up more than +2% after Redburn upgraded the stock to buy from neutral with a price target of $168. 

News Corp (NWSA) is up more than +1% after announcing a multi-year agreement to bring News Corp news content to Open AI.

International Paper (IP) is up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $57.

Hewlett Packard Enterprise (HPE) is up more than +1% after Evercore ISI added the stock to its tactical outperform list.

Arista Networks (ANET) is down more than -7% to lead losers in the S&P 500 after Nvidia discussed its networking ambitions in an earnings call, potentially increasing competition for Arista Networks.

GlobalFoundries (GFS) is down more than -8% to lead losers in the Nasdaq 100 after holder Mubadala Technology Investments offered $950 million of shares via Morgan Stanley and Bank of America Securities. 

Monro (MNRO) is down more than -5% after reporting Q4 comparable sales rose +0.1%, weaker than the consensus of +2.23%. 

Live Nation Entertainment (LYV) is down more than -3% after Bloomberg reported that the US Justice Department and a group of states will sue the company for antitrust violations related to Ticketmaster’s unrivaled control of concert ticket sales. 

Boeing (BA) is down more than -2% after CEO Calhoun said the company’s Q2 deliveries won’t step up and will be close to Q1,

VF Corp (VFC) is down more than -2% after reporting Q4 revenue of $2.37 billion, weaker than the consensus of $2.41 billion.

Medtronic Plc (MDT) is down more than -2% after reporting Q4 adjusted EPS of $1.46 versus $1.57 y/y. 

Earnings Reports (5/23/2024)

BJ's Wholesale Club Holdings Inc (BJ), Deckers Outdoor Corp (DECK), Intuit Inc (INTU), Medtronic PLC (MDT), Ralph Lauren Corp (RL), Ross Stores Inc (ROST), Workday Inc (WDAY).

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