The S&P 500 Index ($SPX) (SPY) today is up +0.30%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.79%.
Stock indexes today are mostly higher. Strength in technology stocks is boosting the broader market after Hewlett Packard Enterprise reported stronger-than-expected Q2 revenue and CrowdStrike Holdings reported better-than-expected Q1 EPS. Stock indexes also garnered support after the May ADP employment report rose less than expected, signaling a slowdown in the US labor market that was dovish for Fed policy. A -2% fall in Cisco Systems is weighing on the Dow Jones Industrials.
US MBA mortgage applications fell -5.2% in the week ended May 31. The purchase mortgage sub-index fell -4.4%, and the refinancing mortgage sub-index fell -6.8%. The average 30-year fixed rate mortgage rose +0.02 bp to 7.07% from 7.05% in the prior week.
The US May ADP employment change rose +152,000, weaker than expectations of +175,000.
The markets are looking ahead to Thursday’s ECB meeting, with the ECB expected to cut its main refinancing rate by 25 bp to 4.25%. In addition, Friday’s monthly US payroll report for May will be scoured for clues to the labor market's strength that could decide when the Fed can begin cutting interest rates. The consensus is for May nonfarm payrolls to increase by +190,000 and for the May unemployment rate to remain unchanged at 3.9%.
The markets are discounting the chances for a -25 bp rate cut at 1% for the June 11-12 FOMC meeting and 16% for the following meeting on July 30-31.
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.
Overseas stock markets today are mixed. The Euro Stoxx 50 rose to a 1-week high and is up +1.76%. China's Shanghai Composite closed down -0.83%. Japan's Nikkei Stock 225 Index closed down -0.89%.
Interest Rates
September 10-year T-notes (ZNU24) today are up +2 ticks. The 10-year T-note yield is down -1.4 bp at 4.312%. Sep T-notes today rose to a 3-week high, and the 10-year T-note yield fell to a 2-month low of 4.307%. T-notes recovered from overnight losses after the US May ADP employment change rose less than expected, a sign of a slowdown in the labor market that is dovish for Fed policy. Strength in stocks today is limiting the upside in T-notes.
European government bond yields today are lower. The 10-year German bund yield is down -2.3 bp at 2.510%. The 10-year UK gilt yield is down -0.2 bp at 4.176%.
Eurozone Apr PPI fell -1.0% m/m and -5.7% y/y, weaker than expectations of -0.7% m/m and -5.3% y/y.
The Eurozone May S&P composite PMI was revised downward by -0.1 to 52.2 from the previously reported 52.3.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 99% for Thursday’s meeting. If the ECB cuts rates by -25 bp on Thursday as expected, then the markets are expecting a 0% chance of another rate cut at the following meeting on July 18 and a 65% chance of a -25 bp rate cut at the September 12 meeting.
US Stock Movers
Hewlett Packard Enterprise (HPE) is up more than +12% to lead gainers in the S&P 500 after reporting Q2 net revenue of $7.20 billion, well above the consensus of $6.89 billion, and forecasting Q2 net revenue of $7.4 billion-$7.8 billion, with the midpoint being above the consensus of $7.45 billion.
Crowdstrike Holdings (CRWD) is up more than +8% to lead gainers in the Nasdaq 100 after reporting Q1 adjusted EPS of 93 cents, better than the consensus of 90 cents, and raising its 2025 adjusted EPS forecast to $3.93-$4.03 from a previous forecast of $3.77-$3.97, stronger than the consensus of $3.94.
Applied Materials (AMAT) is up more than +3%, and KLA Corp (KLAC) is up more than +2% after Barclays upgraded the stocks to equal weight from underweight.
ASML Holding NV (ASML) is up more than +6% after saying it will ship its latest high-NA extreme ultraviolet chipmaking machine to Taiwan Semiconductor Manufacturing Co and Intel by the end of this year.
Meta Platforms (META) is up more than +2% after Raymond James raised its price target on the stock to $550 from $525.
Maplebear (CART) is up more than +2% after Gordon Haskett upgraded the stock to buy from hold with a price target of $45.
Brown-Forman (BF/B) is down more than -3% to lead losers in the S&P 500 after reporting Q4 net sales of $964 million, weaker than the consensus of $1.03 billion.
Cisco Systems (CSCO) is down more than -2% to lead losers in the Dow Jones Industrials after it held an investor event, and Citigroup said, “The company’s outlook suggests little acceleration in the core business.”
Campbell Soup (CPB) is down more than -1% to lead losers in the S&P 500 after it cut its full-year adjusted EPS estimate to $3.07-$3.10 from a previous forecast of $3.09-$3.15.
Dollar Tree (DLTR) is down more than -1% after reporting Q1 net sales of $4.17 billion, weaker than the consensus of $4.24 billion.
Earnings Reports (6/5/2024)
Brown-Forman Corp (BF/B), Campbell Soup Co (CPB), ChargePoint Holdings Inc (CHPT), Dollar Tree Inc (DLTR), Five Below Inc (FIVE), Lululemon Athletica Inc (LULU), Ollie's Bargain Outlet Holding (OLLI), Smartsheet Inc (SMAR), Thor Industries Inc (THO), Victoria's Secret & Co (VSCO).
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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