S&P 500 and Nasdaq 100 Post Record Highs as Tech Stocks Rally

The S&P 500 Index ($SPX) (SPY) Wednesday closed up +1.02%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.09%.

Stock indexes rallied Wednesday, with the S&P 500 and Nasdaq 100 posting new all-time highs and the Dow Jones Industrials posting a 7-week high.  The strength of chip stocks led technology stocks and the broader market higher Wednesday after Taiwan Semiconductor Manufacturing Co, the sole supplier of Nvidia's and Apple's most advanced chips, reported stronger-than-expected Q2 sales.  Also, shares of Apple rose to a record high on news that it aims to ship 10% more new iPhones this year.

On the negative side was the weakness in software stocks after Intuit cut 1,800 employees or about 10% of its workforce.

US MBA mortgage applications fell -0.2% in the week ended July 5.  The purchase mortgage sub-index rose +1.0%, and the refinancing mortgage sub-index fell -2.2%.  The average 30-year fixed mortgage rate fell -3 bp to 7.00% from 7.03% in the prior week.

Fed Chair Powell said he believes inflation is receding but "isn't yet confident" that price gains are sustainably slowing to the Fed's 2% goal.

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 74% for the following meeting on September 17-18.

Overseas stock markets Wednesday settled mixed.  The Euro Stoxx 50 closed up +1.13%.  China's Shanghai Composite closed down -0.68%.  Japan's Nikkei Stock 225 Index rallied to a new all-time high and closed up +0.61%.

Interest Rates

September 10-year T-notes (ZNU24) Wednesday closed up +3 ticks.  The 10-year T-note yield fell -2.0 bp to 4.276%.  Sep T-notes Wednesday posted modest gains and garnered carryover support from a rally in European government bonds.  T-notes maintained their advance on strong demand for the Treasury’s $39 billion auction of reopened 10-year T-notes with a bid-to-cover ratio of 2.58, above the 10-auction average of 2.51.

T-notes fell back from their best levels Wednesday after Fed Chair Powell said the Fed “has a ways to go” on shrinking its balance sheet. Also, Wednesday’s rally in the S&P 500 to a new record high reduced the safe-haven demand for T-notes. 

European government bond yields Wednesday moved lower.  The 10-year German bund yield fell to a 1-1/2 week low of 2.514% and finished down -4.7 bp at 2.533%.  The 10-year UK gilt yield fell to a 2-week low of 4.090% and finished down -3.4 bp at 4.126%. 

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

Chip stocks rallied Wednesday after Taiwan Semiconductor Manufacturing Co, the sole supplier of Nvidia's and Apple's most advanced chips, reported Q2 sales above expectations.  As a result, ON Semiconductor (ON) closed up more than +4%.  Also, Advanced Micro Devices (AMD), Micron Technology (MU), Microchip Technology (MCHP), and ASML Holding NV (ASML) closed up more than +3%.  In addition, Nvidia (NVDA), Analog Devices (ADI), GlobalFoundries (GFS), and NXP Semiconductors NV (NXPI) closed up more than +2%. 

Illumina (ILMN) closed up more than +6% to lead gainers in the Nasdaq 100 after acquiring Fluent BioSciences, a developer of single-cell technology.   

Newmont (NEM) closed up more than +3% after CIBC Capital Markets upgraded the stock to outperform from neutral with a price target of $61. 

Apple (AAPL) closed up more than +1% at a record high after it told supplies and partners that it aims to ship 90 million iPhone 16 devices in the second half of this year, a +10% increase from last year.  Apple suppliers Qorvo (QRVO) and Skyworks Solutions (SWKS) closed up more than +4% on the news. 

Aehr Test Systems (AEHR) closed up more than +24% after reporting Q4 preliminary revenue of $16.6 million, better than the consensus of $15.4 million.

SMART Global Holdings (SGH) closed up more than +24% after reporting Q3 adjusted EPS of 37 cents, above the consensus of 30 cents. 

Carvana (CVNA) closed up more than +3% after Needham upgraded the stock to buy from hold with a price target of $160. 

Honeywell International (HON) closed up more than +1% after buying the liquified natural gas process technology and equipment business of Air Products & Chemicals for $1.81 billion.

Software stocks were under pressure Wednesday after Intuit cut 1,800 employees or about 10% of its workforce.  As a result, Intuit (INTU) closed down more than -2%.  Also, Atlassian (TEAM) and MongoDB (MDB) closed down more than -1%.  In addition, Datadog (DDOG) closed down -0.27%, and Adobe closed down -0.26%. 

Deckers Outdoors (DECK) closed down more than -4% to lead losers in the S&P 500 after M Science flagged a notable deceleration in growth for its Hoka and UGG brands in June.

Mastercard (MA) closed down more than -2% after Bank of America Global Research downgraded the stock to neutral from buy. 

Warner Music Group (WMG) closed down more than -2% after Redburn downgraded the stock to sell from neutral with a price target of $24.

Target (TGT) closed down more than -1% after Piper Sandler assumed coverage on the stock with a neutral rating, citing a lack of catalysts to push sales and margins above estimates in the near term.

Visa (V) closed down nearly -1% to lead losers in the Dow Jones Industrials after Bank of America Global Research downgraded the stock to neutral from buy.

Earnings Reports (7/11/2024)

Bank7 Corp (BSVN), Conagra Brands Inc (CAG), Delta Air Lines Inc (DAL), Methode Electronics Inc (MEI), Northern Technologies International (NTIC), and PepsiCo Inc (PEP).

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