Stocks Mixed After June's US CPI Report is Released

The S&P 500 Index ($SPX) (SPY) today is down -0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.21%.

Stock indexes today are mixed, with the Dow Jones Industrials posting a 7-week high and the S&P 500 falling back from a new record high.  This morning the US June CPI Fed-friendly report knocked bond yields lower and reinforced speculation the Fed will be able to cut interest rates this year.  However, gains in stocks were limited after US weekly initial unemployment claims fell to a 6-week low, a sign of strength in the labor market that is hawkish for Fed policy.

The US June CPI eased to +3.0% y/y from +3.3% y/y in May, better than expectations of +3.1% y/y.  The June CPI ex-food and energy eased to a 3-year low of +3.3% y/y from +3.4% y/y in May, better than expectations of no change at +3.4% y/y.

US weekly initial unemployment claims fell -17,000 to a 6-week low of 222,000, showing a stronger labor market than expectations of 235,000.  Weekly continuing claims unexpectedly fell -4,000 to 1,852 million, showing a stronger labor market than expectations of an increase to 1.860 million.

The markets are looking ahead to the Q2 earnings season that 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 9% for the next FOMC meeting on July 30-31 and 86% for the following meeting on September 17-18.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.50%.  China's Shanghai Composite closed up +1.06%.  Japan's Nikkei Stock 225 Index climbed to a new all-time high and closed up +0.94%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +22 ticks.  The 10-year T-note yield is down -9.5 bp at 4.189%.  Sep T-notes today climbed to a 4-month high, and the 10-year T-note yield fell to a 4-month low of 4.173%.  T-notes rallied today after today’s weaker-than-expected US Jun CPI report bolstered expectations for the Fed to cut interest rates this year.  Also, a decline in inflation expectations supported T-notes after the 10-year breakeven inflation rate fell to a 2-week low of 2.239%.

On the bearish side, weekly US jobless claims fell to a 6-week low, a hawkish factor for Fed policy.  Also, supply pressures are negative for T-notes as the Treasury will auction $22 billion of reopened 30-year T-bonds later today to conclude this week’s $119 billion T-notes and T-bonds auction package. 

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-1/2 week low of 2.470% and is down -5.6 bp at 2.476%.  The 10-year UK gilt yield fell to a 2-week low of 4.083% and is down -3.4 bp at 4.092%. 

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 5% for the July 18 meeting and 78% for the September 12 meeting.

US Stock Movers

Homebuilding stocks are rallying today after the 10-year T-note yield fell to a 4-month low, a supportive factor for housing demand.  As a result, Builders FirstSource (BLDR) is up more than +4%.  Also, PulteGroup (PHM), DR Horton (DHI), Lennar (LEN), and Toll Brothers (TOL) are up more than +3%.

Atlassian (TEAM) is up more than +4% today after Capital One Securities upgraded the stock to overweight from equal weight with a price target of $211. 

Alcoa (AA) is up more than +1% after announcing Q2 preliminary sales of $2.85 billion-$2.93 billion, above the consensus of $2.80 billion.

Pfizer (PFE) is up more than +2% after it said it is advancing the development of its once-daily weight-loss pill, danuglipron. 

WD-40 (WDFC) is up more than +1% after reporting Q3 EPS of $1.46, stronger than the consensus of $1.39. 

Spotify Technology SA (SPOT) is up more than +1% after Jeffries assumed coverage of the stock with a buy recommendation and a price target of $385. 

Airline stocks are under pressure today after Delta Air Lines forecast Q3 adjusted EPS of $1.70-$2.00, below the consensus of $2.04. As a result, Delta Air Lines (DAL) is down more than -7% to lead losers in the S&P 500.  Also, American Airlines Group (AAL), United Airlines Holdings (UAL), Alaska Air Group (ALK), and Southwest Airlines (LUV) are down more than -3%. 

Cruise line operators are falling on negative carryover from a slide in airline stocks today.  As a result, Norwegian Cruise Line Holdings (NCLH), Carnival (CCL), and Royal Caribbean Cruises (RCL) are down more than -1%.

Conagra Brands (CAG) is down more than -3% after reporting Q4 net sales of $2.91 billion, below the consensus of $2.93 billion. 

Citigroup (C) is down more than -1% after it was fined $136 million by US bank regulators over issues related to data-quality management and risk controls

PepsiCo (PEP) is down more than -1% after reporting Q2 net revenue of $22.50 billion, weaker than the consensus of $22.59 billion. 

ON Semiconductor (ON) is down more than -1% after Morgan Stanley downgraded th stock to underweight from equal weight. 

XP Inc (XP) is down more than -1% after UBS 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).

More Stock Market News from Barchart

• 1 'Strong Buy' Biotech Stock With 132% Upside Potential
• Can This 'Big 3' Auto Stock Threaten Tesla's EV Dominance?
• J-Hook Pattern: A Barchart Screener That Offers an Early ‘Buy’ Signal
• Is Palantir the Best AI Stock to Buy for the Second Half of 2024?