Chip Stocks Support Overall Stock Market

The S&P 500 Index ($SPX) (SPY) today is up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.10%.

Stock indexes today are mixed, with the S&P 500 and Nasdaq 100 posting new record highs and the Dow Jones Industrials posting a 6-week high.  Chip stocks are leading technology stocks higher today and are boosting the overall market.

Some positive corporate news is supporting gains in stocks today.  Corning is up more than +6% after reporting preliminary Q2 core sales above the consensus.  Also, Morphic Holding is up more than +74% after Eli Lilly agreed to purchase the company in a deal valued at $3.2 billion.  On the negative side today is higher T-note yields.

US stocks have carryover support from reduced political tensions in France.  The Euro Stoxx 50 rose to a 3-week high today after Sunday’s elections in France showed a surprise victory for the far-left party that produced a divided parliament with no clear majority.  That outcome limits how much any party can do, leading to expectations that President Macron will form a new coalition between the center and center-left.

The markets are looking ahead to Fed Chair Powell’s semiannual monetary policy report to the Senate Banking Committee on Tuesday and to the House Financial Services Committee on Wednesday.  The markets will then look to Thursday’s June US CPI report to see if price pressures are continuing to ease.  The consensus is that the June CPI eased to +3.1% y/y from +3.3% y/y in May, and the June core CPI remained unchanged from May at +3.4% y/y.   

The markets are discounting the chances for a -25 bp rate cut at 7% for the next FOMC meeting on July 30-31 and 76% for the following meeting on September 17-18.

Overseas stock markets today are lower.  The Euro Stoxx 50 fell back from a 3-week high and is down -0.14%.  China's Shanghai Composite fell to a 4-1/2 month low and closed down -0.93%.  Japan's Nikkei Stock 225 Index fell back from a record high and closed down -0.32%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -2 ticks.  The 10-year T-note yield is up +0.4 bp at 4.282%.  Sep T-notes today are slightly lower on caution ahead of Tuesday’s semiannual testimony to Congress from Fed Chair Powell. Also, supply pressures are weighing on T-notes as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with Tuesday’s auction of $58 billion of 3-year T-notes. 

European government bond yields today are lower.  The 10-year German bund yield is down -1.5 bp at 2.540%. The 10-year UK gilt yield fell to a 1-1/2 week low of 4.100% and is down -1.6 bp at 4.109%. 

The Eurozone July Sentix investor confidence index fell -7.6 to a 4-month low of -7.3, weaker than expectations of -0.5.

German May exports fell -3.6% m/m, weaker than expectations of -2.8% m/m and the biggest decline in 5 months.  May imports fell -6.6% m/m, weaker than expectations of -1.0% m/m and the biggest decline in 17 months.

ECB Governing Council member Muller said Eurozone wage gains and service-price growth remain elevated, and "for that reason, the ECB can't rush with lowering interest rates."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 4% for the July 18 meeting and 74% for the September 12 meeting.

US Stock Movers

Strength in chip stocks is supportive of the overall market. Intel (INTC) is up more than +4% to lead gainers in the Dow Jones Industrials and Nasdaq 100.  Also, Advanced Micro Devices (AMD) is up more than +2%.  In addition, Nvidia (NVDA), Qualcomm (QCOM), Marvell Technology (MRVL), GlobalFoundries (GFS), ON Semiconductor (ON), NXP Semiconductors NV (NXPI), and Analog Devises (ADI) are up more than +1%.

Corning (GLW) is up more than +9% to lead gainers in the S&P 500 after reporting preliminary Q2 core sales of $3.60 billion, better than the consensus of $3.41 billion.

R1 RCM Inc (RCM) is up more than +15% after top holder TCP-ASC said it is in the process of finalizing a proposal to acquire all of the outstanding shares of the company that it doesn’t already own. 

Gilead Sciences (GILD) is up more than +2% after Raymond James upgraded the stock to outperform from market perform with a price target of $93. 

Morphic Holding (MORF) is up more than +75% after Eli Lilly agreed to purchase the company in a deal valued at $3.2 billion.

StoneCo (STNE) is up more than +3% after UBS upgraded the stock to buy from neutral with a price target of $17.

Domino’s Pizza (DPZ) is up more than +1% after Baird upgraded the stock to outperform from neutral with a price target of $580.

ServiceNow (NOW) is down more than -4% after Guggenheim Securities downgraded the stock to sell from neutral with a price target of $640. 

Software stocks are under pressure today.  Datadog (DDOG), Atlassian (TEAM), and Adobe (ADBE) are down more than -2%.  In addition, MongoDB (MDB), Workday (WDAY), and Intuit (INTU) are down more than -1%.

Cybersecurity stocks are retreating today.  Palo Alto Networks (PANW) is down more than -3% to lead losers in the Nasdaq 100.  Also, Fortinet (FTNT), Zscaler (ZS), and SentinelOne (S) are down more than -1%.

Devon Energy (DVN) is down more than -2% after it acquired the Williston Basin business of Grayson Mill Energy for $5 billion, an amount that several analysts said was expensive.

Brinker International (EAT) is down more than -1% after Raymond James downgraded the stock to outperform from a strong buy.   

Earnings Reports (7/8/2024)

3D Systems Corp (DDD), Greenbrier Cos Inc/The (GBX), KalVista Pharmaceuticals Inc (KALV).

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