Stocks Climb as Nasdaq 100 Posts a New Record High on Falling Bond Yields

The S&P 500 Index ($SPX) (SPY) today is up +0.11%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.09%.

Stock indexes today are moderately higher in this holiday-shortened session, with the Nasdaq 100 posting a new record high.  Stock indexes will end trading at 1 pm EST and close Thursday for the July 4 holiday.  Today’s decline in T-note yields supports stocks after weaker-than-expected US labor market news showed the June ADP employment change rose less than expected and weekly continuing unemployment claims rose to a 2-1/2 year high, a dovish factor for Fed policy. 

A bearish factor for stocks was today’s news that showed the US May trade deficit widened to a 19-month high, a negative factor for Q2 GDP.

US MBA mortgage applications fell -2.6% in the week ended June 28, with the purchase mortgage sub-index falling -3.3% and the refinancing mortgage sub-index falling-1.5%.  The average 30-year fixed rate mortgage rose +10 bp to 7.03% from 6.93% in the prior week.

The US Jun ADP employment change rose +150,000, weaker than expectations of +165,000.

US weekly initial unemployment claims rose +4,000 to 238,000, showing a weaker labor market than expectations of 235,000.  Weekly continuing claims rose +26,000 to a 2-1/2 year high of 1.858 million, showing a weaker labor market than expectations of 1.840 million.

The US May trade deficit widened to a 19-month high of -$75.1 billion from -$74.5 billion in April.

The markets are discounting the chances for a -25 bp rate cut at 7% for the next FOMC meeting on July 30-31 and 65% for the following meeting on September 17-18.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +1.20%.  China's Shanghai Composite closed down -0.49%.  Japan's Nikkei Stock 225 Index climbed to a 3-month high and closed up +1.26%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +6 ticks.  The 10-year T-note yield is down -2.8 bp to 4.404%.  Sep T-notes today are moderately higher on weaker-than-expected US labor market news, a dovish factor for Fed policy. The June ADP employment change rose less than expected, and weekly continuing unemployment claims climbed to a 2-1/2 year high.  Limiting the upside in T-notes is the weakness in 10-year German bunds, which fell to a 3-week low today. 

European government bond yields today are mixed.  The 10-year German bund yield rose to a 3-week high of 2.642% and is up +1.2 bp at 2.615%.  The 10-year UK gilt yield is down -4.4 bp at 4.204%.

Eurozone May PPI fell -0.2% m/m and -4.2% y/y, weaker than expectations of -0.1% m/m and -4.1% y/y.

The Eurozone Jun S&P composite PMI was revised upward by +0.1 to 50.9 from the previously reported 50.8.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 7% for the July 18 meeting and 65% for the September 12 meeting.

US Stock Movers

Paramount Global (PARA) is up more than +10% to lead gainers in the S&P 500 after Bloomberg News reported that Skydance Media had reached a preliminary agreement to buy National Amusements and merge with Paramount. 

Tesla (TSLA) is up more than +3% to lead gainers in the Nasdaq 100 after Bank of America Global Research raised its price target on the stock to $260 from $220.

Mining stocks are climbing today, with gold, silver, and copper prices rising to 1-1/2 week highs.  As a result, Freeport McMoRan (FCX) is up more than +3%, and Newmont (NEM) is up more than +2%.

Casino stocks are moving higher today after BTIG LLC initiated coverage on MGM Resorts International with a buy rating and a price target of $52. As a result, MGM Resorts International (MGM), Caesars Entertainment (CZR), and Wynn Resorts Ltd (WYNN) are up more than +2%.

Quest Diagnostics (DGX) is up more than +1% after agreeing to buy LifeLabs from Omers for about C$1.35 billion, including net debt. 

Dell Technologies (DELL) is up more than +1% after Bank of America added the stock to its US number 1 list. 

Permian Resources (PR) is up nearly +1% after BMO Capital Markets upgraded the stock to outperform from market perform with a price target of $21. 

Cryptocurrency-related stocks are under pressure today, with the price of Bitcoin (^BTCUSD) down more than -2% at a 1-week low.  As a result, Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are down more than -1%. 

Simulations Plus (SLP) is down more than -11% after cutting its 2024 diluted EPS estimate to 46 cents-48 cents from a June estimate of 54 cents-56 cents, and after the company’s Board of Directors said it is discontinuing its quarterly cash dividend.

Azek Co. (AZEK) is down more than -3% after D.A. Davidson downgraded the stock to neutral from buy.

Charter Communications (CHTR) is down more than -1% after Citigroup downgraded the stock to sell from neutral with a price target of $255.

Earnings Reports (7/3/2024)

Constellation Brands Inc (STZ), Dakota Gold Corp (DC), Lifecore Biomedical Inc (LFCR), Simulations Plus Inc (SLP).

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