Strength in Mega-Cap Tech Stocks Lifts the Broader Market

The S&P 500 Index ($SPX) (SPY) today is up +0.19%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.63%.

Stock indexes today are mixed.  A rally in mega-cap tech stocks is boosting the overall market.   Also, Carnival is up more than +5% after reporting above-consensus revenue and expected Ebitda.  The broader market maintained its gains after US June consumer confidence was stronger than expected. 

Hawkish comments today from Fed Governor Bowman pushed bond yields higher and were bearish for stocks when she said she sees a number of upside risks to the inflation outlook, and "we are still not yet at the point where it is appropriate to lower the policy rate."  She added that she "doesn't see any rate cuts by the Fed this year and shifted her outlook for rate cuts to 2025."

The Conference Board US June consumer confidence index fell -0.9 to 100.4, stronger than expectations of 100.0.

The US June Richmond Fed manufacturing survey fell -10 to -10, weaker than expectations of -3.

The US Apr S&P CoreLogic composite-20 home price index eased to +7.20% y/y from +7.46% y/y in March, stronger than expectations of +7.00% y/y.

The US June Chicago Fed national activity index unexpectedly rose +0.44 to 0.18, stronger than expectations of a decline to -0.25.

The markets are awaiting Friday’s release of the US May core PCE deflator, the Fed’s preferred inflation gauge, to see if price pressures are abating, which could pave the way for the Fed to begin cutting interest rates.  The consensus is that the May core PCE deflator eased to +2.6% y/y from +2.8% y/y in April.

The markets are discounting the chances for a -25 bp rate cut at 10% for the next FOMC meeting on July 30-31 and 64% 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 mixed.  The Euro Stoxx 50 is down -0.49%.  China's Shanghai Composite dropped to a 4-month low and closed down -0.44%.  Japan's Nikkei Stock 225 Index climbed to a 1-1/2 week high and closed up +0.95%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -1 tick.  The 10-year T-note yield is up +0.6 bp at 4.238%.  T-notes today gave up an early advance and turned slightly lower on hawkish comments from Fed Governor Bowman who said she "doesn't see any Fed rate cuts this year and shifted her outlook for rate cuts to 2025."  Also, supply pressures are bearish for T-notes as the Treasury will auction $211 billion of T-notes and floating-rate notes this week, beginning with today’s $69 billion auction of 2-year T-notes.

T-note prices today initially moved higher on carryover support from strength in 10-year German bunds.  Also, a decline in inflation expectations supported T-notes as the 10-year breakeven inflation rate fell to a 1-week low today at 2.211%.

European government bond yields today are moving lower.  The 10-year German bund yield is down -2.3 bp at 2.396%.  The 10-year UK gilt yield is down -1.5 bp at 4.065%.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 7% for the July 18 meeting and 67% for the September 12 meeting.

US Stock Movers

Mega-cap tech stocks are climbing today and are boosting the overall market.   Nvidia (NVDA) is up more than +3% to lead gainers in the Nasdaq 100.  Also, Meta Platforms (META) is up more than +2%, and Amazon.com (AMZN) is up more than +1% to lead gainers in the Dow Jones Industrials.  Alphabet (GOOGL) and Tesla (TSLA) are up more than +1%. 

Cruise line operators are climbing today after Carnival reported Q2 revenue of $5.78 billion, better than the consensus of $5.69 billion, and forecasted Q3 adjusted Ebitda of $2.66 billion, stronger than the consensus of $2.62 billion.  As a result, Carnival (CCL) is up more than +5% to lead gainers in the S&P 500.  Also, Norwegian Cruise Line Holdings (NCLH) is up more than +4%, and Royal Caribbean Cruises Ltd (RCL) is up more than +3%.

Apple (AAPL) is up nearly +1% after Maxim Group LLC raised its price target on the stock to $195 from $178.

Capri Holdings (CPRI) is up more than +2% after Wells Fargo upgraded the stock to overweight from equal weight with a price target of $43. 

The Gap (GPS) is up more than +1% after TD Cowen upgraded the stock to buy from hold with a price target of $30.

Insmed Inc (INSM) is up more than +1% after Barclays raised its price target on the stock to $90 from $63. 

Trump Media & Technology (DJT) is up more than +4%, adding to Monday’s 20% surge following an announcement late Friday that the company would receive more than $69.4 million in proceeds from the cash exercise of stock warrants. 

Pool Corp (POOL) is down more than -7% to lead losers in the S&P 500 after cutting its full-year EPS forecast to $11.04-$11.44 from a prior forecast of $$13.19-$14.19, well below the consensus of $13.11.  Other building-related stocks fell on the news with Home Depot (HD) down more than -3% to lead losers in the Dow Jones Industrials.  Also, Tractor Supply (TSCO) is down more than -4%, and Lowe’s (LOW) is down more than -3%.

Norfolk Southern (NSC) is down more than -4% after Susquehanna Financial cut its price target on the stock to $245 from $265.

Paramount Global (PARA) is down more than -2% after Goldman Sachs reinstated coverage of the stock with a recommendation of sell and a price target of $9.50.

Builders FirstSource (BLDR) is down more than -5% after Wedbush cut its price target on the stock to $175 from $215.

TD Synnex (SNX) is down more than -8% after reporting Q2 revenue of $13.95 billion, weaker than the consensus of $14.10 billion, and forecasting Q3 revenue of $13.3 billion-$14.9 billion, the midpoint below the consensus of$14.5 billion. 

Spirit Aero (SPR) is down more than -5% after Bloomberg reported that Boeing switched its proposed funding for the company from an all-cash offer to a deal funded mostly by stock. 

Birkenstock (BIRK) is down more than -3% after holder L. Catterton Management offered 14 million shares of the stock via Morgan Stanley and JPMorgan Chase.

Earnings Reports (6/25/2024)

Carnival Corp (CCL), FedEx Corp (FDX), Ocean Biomedical Inc (OCEA), Progress Software Corp (PRGS), TD SYNNEX Corp (SNX), Worthington Enterprises Inc (WOR).

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