Stocks Waver on Mixed US Economic News

The S&P 500 Index ($SPX) (SPY) today is up +0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.11%.

Stock indexes today are mixed.  Stocks are wavering today on mixed US economic news.  The strength of today’s report on US May manufacturing production boosted stocks as it eased concerns about a slowdown in consumer spending based on the weaker-than-expected US May retail sales report.  Also, a decline in T-note yields today is supporting stocks.  In addition, today’s rally in crude prices to a 7-week high is giving a boost to energy stocks. 

US May retail sales rose +0.1% m/m, weaker than expectations of +0.3% m/m.  Also, Apr retail sales were revised downward to -0.2% m/m from the previously reported unchanged m/m.

US May manufacturing production rose +0.9% m/m, stronger than expectations of +0.3% m/m.

New York Fed President Williams said the US economy is "moving in the right direction" but needs more data before the Fed can cut interest rates.

The markets are discounting the chances for a -25 bp rate cut at 8% for the next FOMC meeting on July 30-31 and 65% for the following 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 higher.  The Euro Stoxx 50 is up +0.66%.  China's Shanghai Composite closed up +0.48%.  Japan's Nikkei Stock 225 Index closed up +1.00%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +6 ticks.  The 10-year T-note yield is down -2.9 bp at 4.252%.  T-notes recovered from overnight losses and moved higher on the weaker-than-expected US May retail sales report, a dovish factor for Fed policy.  Supply pressures may limit T-notes' upside as the Treasury will auction $13 billion of 20-year bonds this afternoon.  Also, a heavy slate of corporate issuance has prompted bond dealers to short T-notes as a hedge against the oncoming supply, with as many as ten borrows considering new bond sales this week of as much as $30 billion. 

European government bond yields today are moving lower.  The 10-year German bund yield is down -0.7 bp at 2.406%.  The 10-year UK gilt yield is down -4.7 bp at 4.068%.

The German Jun ZEW survey expectations of economic growth rose +0.4 to a 2-1/3 year high of 47.5, weaker than expectations of 50.0.

ECB Vice President Guindos said, "ECB forecasts are updated every three months, and the next one is in September.  The forecasts are an important indicator at the time of deciding how interest rates will evolve."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 8% for the July 18 meeting and 59% for the September 12 meeting.

US Stock Movers

Micron Technology (MU) is up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 after Bank of America added the stock to its US 1 list.

Energy stocks and energy service providers are climbing today, with the price of WTI crude up more than +1% at a 7-week high.  As a result, Schlumberger (SLB) and Occidental Petroleum (OXY) are up more than +2%.  Also, Chevron (CVX) is up more than +1% to lead gainers in the Dow Jones Industrials.  In addition, Exxon Mobil (XOM), Marathon Petroleum (MPC), ConocoPhillips (COP), Marathon Oil (MRO), and Valero Energy (VLO) are up more than +1%.

Qualcomm (QCOM) is up more than +3% as Microsoft readies to sell its new Copilot+ AI Windows PCs that contain chips made by Qualcomm next Tuesday.

Nvidia (NVDA) is up more than +1% after Rosenblatt Securities raised its price target on the stock to $200 from $140.

La-Z-Boy (LZB) is up more than +17% after reporting Q4 sales of $553.5 million, stronger than the consensus of $520.5 million. 

Kroger (KR) is up more than +1% after BMO Capital Markets upgraded the stock to outperform from market perform with a price target of $60.

Silk Road Medical (SILK) is up more than +24% after Boston Scientific entered into a definitive agreement to buy the company for approximately $1.16 billion, or $27.50 a share. 

Homebuilders are sliding today after Lennar forecasted Q3 new orders of 20,500 to 21,000, below the consensus of 21,095.  As a result, Lennar (LEN), PulteGroup (PHM), and Toll Brothers (TOL) are down more than -2%.  Also, DR Horton (DHI) is down more than -1%.

Tesla (TSLA) is down more than -2% after CEO Musk said the company is working on offering stock-based compensation for top-performing employees.

Boeing (BA) is down more than -2% to lead losers in the Dow Jones Industrials after a Boeing quality inspector alleged the company mishandled and lost track of as many as 400 faulty 737 Max aircraft parts, some of which may have been installed on new 737 Max planes.

Phillip Morris (PM) is down more than -1% after stopping online sales of its flavored nicotine pouch brand Zyn in the US after affiliate Swedish Match North America received a subpoena from the DC Attorney General related to flavored nicotine products banned there. 

Earnings Reports (6/18/2024)

America's Car-Mart Inc/TX (CRMT), KB Home (KBH), Patterson Cos Inc (PDCO).

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