Nasdaq 100 Posts a New Record High on Strength in AI Hardware Stocks

The S&P 500 Index ($SPX) (SPY) today is up +0.23%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.41%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.73%.

Stock indexes today are mixed, with the Nasdaq 100 posting a new all-time high.  Stocks rose, and bond yields fell, after the US May producer prices unexpectedly eased. Also, weekly jobless claims unexpectedly rose to a nearly 10-month high, bolstering the outlook for a Fed rate cut later this year.

Some positive corporate news is also bullish for stocks, with Broadcom up more than +14% to lead AI hardware stocks higher after reporting stronger-than-expected Q2 adjusted net revenue and forecasting full-year revenue above consensus.  Also, Tesla is up more than +6% after CEO Musk said proposals to re-ratify his pay package and move the company’s legal home to Texas from Delaware were passing by “wide margins.” 

US weekly initial unemployment claims unexpectedly rose +13,000 to a 10-month high of 242,000, showing a weaker labor market than expectations of a decline to 225,000.

US May PPI final demand unexpectedly eased to +2.2% y/y from +2.3% y/y in April, weaker than expectations of an increase of +2.5% y/y. May PPI ex-food and energy unexpectedly eased to +2.3% y/y from +2.5% y/y in April, weaker than expectations of +2.5% y/y.

The markets are discounting the chances for a -25 bp rate cut at 10% for the July 30-31 FOMC meeting and 62% for the next meeting on September 17-18.

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 lower.  The Euro Stoxx 50 is down -1.12%.  China's Shanghai Composite closed down -0.28%.  Japan's Nikkei Stock 225 Index closed down -0.40%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +8 ticks.  The 10-year T-note yield is down -4.7 bp at 4.269%.  Sep T-note prices today climbed to a 2-1/4 month high, and the 10-year T-note yield fell to a 2-1/4 month low of 4.237%. T-notes extended Wednesday’s gains on today’s dovish economic reports that showed weekly jobless claims rose to a 10-month high and May producer prices rose less than expected.  Also, a decline in inflation expectations boosted T-notes after the 10-year breakeven inflation rate today fell to a 4-1/4 month low of 2.215%.  Supply pressures may limit further gains in T-notes as the Treasury will auction $22 billion of 30-year T-bonds this afternoon.

European government bond yields today are mixed.  The 10-year German bund yield fell to a 1-week low of 2.499% and is down -1.5 bp at 2.515%.  The 10-year UK gilt yield is up +2.7 bp at 4.154%.

Eurozone Apr industrial production unexpectedly fell -0.1% m/m versus expectations of a +0.2% m/m increase.

ECB Governing Council member Muller said Eurozone inflation could quicken again, and "in order to achieve our goal, interest rates presumably still need to stay above average for some time."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 8% for the July 18 meeting and 49% for the September 12 meeting.

US Stock Movers

Broadcom (AVGO) is up more than +14% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 adjusted net revenue of $12.49 billion, stronger than the consensus of $12.06 billion, and forecasting full-year revenue of $51.0 billion, above the consensus of $50.58 billion. Other AI hardware stocks gained on the news, with Nvidia (NVDA), Arista Networks (ANET), Marvell Technology (MRVL), and Super Micro Computer (SMCI) up more than +3%. 

Tesla (TSLA) is up more than +6% after CEO Musk said proposals to re-ratify his pay package and move the company’s legal home to Texas from Delaware were passing by “wide margins.” 

Chipotle Mexican Grill (CMG) is up more than +3% after Goldman Sachs initiated coverage on the stock with a recommendation of buy.

Kimberly-Clark (KMB) is up more than +2% after Bank of America Global Research double-upgraded the stock to buy from underperform with a price target of $160.

eBay (EBAY) is up more than +1% after announcing that it launched Venmo as a new payment option for its platform.

3M Co (MMM) is up more than +1% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $125.

Paramount Global (PARA) is down more than -5% to lead losers in the S&P 500 after CreditSights said the company could get cut by Moody’s Ratings to junk by the end of the year after negotiations to sell the company to Skydance Media fell through.

Airbnb (ABNB) is down more than -3% on signs of insider selling after a SEC filing showed CEO Chesky sold $17 million shares on Monday.

Dave & Buster’s Entertainment (PLAY) is down more than -10% after reporting Q1 revenue of $588.1 million, weaker than the consensus of $615.5 million. 

Ares Management Corp (ARES) is down more than -2% after announcing the launch of an underwritten public offering of 2.65 million shares of Class A common stock. 

Jack in the Box (JACK) is down more than -3%, and Wendy’s (WEN) is down more than -1% after Goldman Sachs initiated coverage on the stocks with sell ratings.

Earnings Reports (6/13/2024)

Adobe Inc (ADBE), AMMO Inc (POWW), Inhibrx Biosciences Inc (INBX), Iteris Inc (ITI), John Wiley & Sons Inc (WLY), Korn Ferry (KFY), Lovesac Co/The (LOVE), RH (RH), Seneca Foods Corp (SENEB), Signet Jewelers Ltd (SIG).

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