Chip Stock Strength Pushes the S&P 500 and Nasdaq 100 to Record Highs

The S&P 500 Index ($SPX) (SPY) today is up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.28%.

Stock indexes today are mixed, with the S&P 500 and Nasdaq 100 posting new all-time highs.  Today's strength in chip stocks is leading technology stocks and the overall market higher.  Higher T-note yields today are a negative factor for equities.  The broader market remained higher today after balanced comments from Fed Chair Powell.

Fed Chair Powell said today that "more good data" would strengthen confidence that inflation is moving down toward the Fed's 2% target and recent readings point to "modest further progress" on prices.  He added that the labor market is strong but not overheated, and easing too soon and too much could harm inflation progress.

The markets are looking ahead 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.  Finally, Q2 earnings season begins Friday as some of the biggest US banks, including JPMorgan Chase, Citigroup, and Wells Fargo, will report quarterly results.  

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 is down -1.09%.  China's Shanghai Composite recovered from a 4-1/2 month low and closed up +1.26%.  Japan's Nikkei Stock 225 Index rallied to a new all-time high and closed up +1.96%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -7 ticks.  The 10-year T-note yield is up +2.5 bp at 4.304%.  Sep T-notes are under pressure today on negative carryover from a fall in European government bonds.  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 today’s auction of $58 billion of 3-year T-notes. 

European government bond yields today are higher.  The 10-year German bund yield is up +2.8 bp at 2.568%.  The 10-year UK gilt yield is up +4.5 bp at 4.158%.

ECB Governing Council member Panetta said the ECB shouldn't be overly worried about stubborn services inflation and still-robust wage growth and that "the reduction in key interest rates will continue at a gradual pace, accompanying the return of inflation to target, if macroeconomic developments remain in line with the ECB Governing Council's expectations."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 4% for the July 18 meeting and 73% for the September 12 meeting.

US Stock Movers

Chip stocks are climbing today after KeyBanc Capital Markets raised its price target on Nvidia to $180 from $130.  As a result, Nvidia (NVDA) is up more than +3% to lead gainers in the S&P 500 and Nasdaq 100.  Also, Micron Technology (MU) is up more than +2%.  ARM Holdings Plc (ARM) and Applied Materials (AMAT) are up more than +1%. 

Corning (GLW) is up more than +3% after Argus Research raised its price target on the stock to $50 from $40.

Principal Financial Group (PFG) is up more than +2% after Raymond James upgraded the stock to strong buy from market perform with a price target of $99.

CRH Plc (CRH) is up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $88.

CH Robinson Worldwide (CHRW) is up more than +1% after Vertical Research Partners upgraded the stock to buy from hold with a price target of $102.

Albemarle (ALB) is down more than -6% to lead losers in the S&P 500 after UBS cut its price target on the stock to $109 from $124.

Heartland Express (HTLD) is down more than -7% after UBS downgraded the stock to neutral from buy.

CSX Corp (CSX) is down more than -2% after it said it would review the capitalization of certain prior engineering materials and labor.

Helen of Troy (HELE) is down more than -29% after reporting preliminary Q1 adjusted EPS of 99 cents, well below the consensus of $1.59, and cutting its 2025 adjusted EPS estimate to $7.00-$7.50 from a prior estimate of $8.70-$9.20, weaker than the consensus of $8.93.

Helios Technologies (HLIO) is down more than -14% after placing CEO and president Matosevic on paid leave following allegations of a potential violation of the company’s Code of Business Conduct and Ethics.

Chewy (CHWY) is down more than -2% after Argus Research downgraded the stock to hold from buy. 

Earnings Reports (7/9/2024)

Byrna Technologies Inc (BYRN), Helen of Troy Ltd (HELE), Kura Sushi USA Inc (KRUS), SMART Global Holdings Inc (SGH).

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