Stocks Supported as US Jobs Report Bolsters Rate Cut Speculation

The S&P 500 Index ($SPX) (SPY) today is up +0.18%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.61%.

Stock indexes today are mostly higher, with the S&P 500 and Nasdaq 100 climbing to new record highs.  Stocks found support today after the US June payroll report bolstered the outlook for the Fed to cut interest rates this year. Jun nonfarm payrolls rose more than expected by +16,000, but May payrolls were revised lower by -54,000. T-note yields tumbled after the US Jun unemployment rate unexpectedly rose to a 2-1/2 year high, and Jun average hourly earnings posted their slowest annual pace of increase in 3 years.

Weaknesses in healthcare stocks are negative for the broader market.  Also, Nvidia is down more than -1% after being downgraded at New Street Research.

US Jun nonfarm payrolls rose +206,000, stronger than expectations of +190,000.  However, May nonfarm payrolls were revised down to +218,000 from the previously reported +272,000.  Also, the Jun unemployment rate unexpectedly rose +0.1 to a 2-1/2 year high of 4.1%, showing a weaker labor market than expectations of no change at 4.0%.

US Jun average hourly earnings eased to +3.0% y/y from +4.1% y/y in May, right on expectations and the slowest pace of increase in 3 years.

Today's comments from New York Fed President Williams were slightly hawkish when he said, "Inflation is now around 2.5%, so we have seen significant progress in bringing it down. But we still have a way to go to reach our 2% target on a sustained basis."

The price of Bitcoin (^BTCUSD) is down more than -4% today at a 4-month low. Concerns about the potential selling of Bitcoin by creditors and governments are weighing on cryptocurrencies. Administrators of the failed Mt Gox exchange are returning $8 billion of Bitcoin to creditors, with uncertainty about how much of that will eventually get sold weighing on the overall market. According to Arkham Intelligence, a Mt Gox-linked wallet moved $2.7 billion worth of the token today.  Also, there are signs that German authorities are preparing to sell some of the 50,000 Bitcoin they seized earlier from online criminals, pressuring Bitcoin.

The markets are discounting the chances for a -25 bp rate cut at 5% for the next FOMC meeting on July 30-31 and 75% for the following meeting on September 17-18.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell back from a 3-week high and is down -0.41%.  China's Shanghai Composite fell to a 4-1/2 month low and closed down -0.26%.  Japan's Nikkei Stock 225 Index fell back from a record high and closed unchanged.

Interest Rates

September 10-year T-notes (ZNU24) today are up +9 ticks.  The 10-year T-note yield is down -5.7 bp to 4.302%.  Sep T-notes today climbed to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.275%.  T-notes rallied today after the US Jun payroll report showed the unemployment rate unexpectedly rose to a 2-1/2 year high and wage growth cooled as Jun average hourly earnings posted their slowest annual pace of increase in 3 years. 

European government bond yields today are moving lower.  The 10-year German bund yield is down -3.8 bp at 2.570%.  The 10-year UK gilt yield is down -6.4 bp at 4.133%.

Eurozone May retail sales rose +0.1% m/m, weaker than expectations of +0.2% m/m.

German May industrial production unexpectedly fell -2.5% m/m, weaker than expectations of a +0.1% m/m increase and the biggest decline in 17 months.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 5% for the July 18 meeting and 72% for the September 12 meeting.

US Stock Movers

After Samsung Electronics reported better-than-expected Q2 earnings results, Chip stocks are moving higher today.  As a result, ARM Holdings Plc (ARM) is up more than +4% to lead gainers in the Nasdaq 100.  Also, Advanced Micro Devices (AMD) is up more than +4% to lead gainers in the S&P 500.  In addition, Globalfoundries (GFS), ON Semiconductor (ON), and Qualcomm (QCOM) are up by more than +1%. 

The strength of mega-cap technology stocks today provides support to the broader market.  Meta Platforms (META) and Alphabet (GOOGL) are up more than +2%.  Also, Apple (AAPL), Amazon.com (AMZN), and Microsoft (MSFT) are up more than +1%. 

Macy’s (M) is up more than +12% after the Wall Street Journal reported that Arkhouse Management and Brigade Capital management have raised their buyout offer for the company to about $6.9 billion. 

Golar LNG (GLNG) is up more than +4% after it signed a deal with Pan American Energy for a 20-year deployment of a floating liquified natural gas vessel in Argentina.

Mining stocks are climbing today after copper prices rallied to a 5-week high and gold and silver rose to 2-week highs.  As a result, Newmont (NEM), Freeport McMoRan (FCX), AngloGold Ashanti Plc (AU),  Southern Copper (SCCO) are up more than +1%.

Cryptocurrency-related stocks are retreating today, with the price of Bitcoin (^BTCUSD) down more than -4% at a 4-month low.  As a result, Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are down more than -3%.

Nvidia (NVDA) is down more than -1% after New Street Research downgraded the stock to neutral from buy.

Defensive healthcare stocks are under pressure today.  Universal Health Services (UHS) is down more than -3%, and Molina Healthcare (MOH), HCA Healthcare (HCA), and Cigna Group (CI) are down more than -2%.  Also, Centene (CNC) is down more than -1%, and UnitedHealth Group (UNH) is down -0.82%.

Jacobs Solutions (J) is down more than -2% on signs of inside selling after an SEC filing showed Executive Chair Demetriou sod $979,580 of shares on Monday. 

Earnings Reports (7/5/2024)

Amer Sports Inc (AS), Park Aerospace Corp (PKE).

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