Global Stocks Rally on Dovish Bank of Japan Comments

The S&P 500 Index ($SPX) (SPY) today is up +1.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.78%.

US stocks today are trading higher on positive carryover from a jump in Japanese stocks in the wake of dovish comments from Bank of Japan Deputy Governor Uchida, who pledged to refrain from raising interest rates when the markets are unstable.  The Nikkei Stock Index rallied more than +1% today, and the yen tumbled nearly -2%, BOJ Deputy Governor Uchida said, "I believe that the BOJ needs to maintain monetary easing with the current policy interest rate for the time being, with developments in financial and capital markets at home and abroad being extremely volatile."

Financial markets have been in turmoil since last week when the BOJ unexpectedly raised interest rates, which sparked a surge in the yen to a 7-month high against the dollar and fueled a rapid unwinding of the yen carry trade that dragged down risk assets globally. 

Some positive corporate news today is also boosting stocks.  Fortinet is up more than +23% after reporting better-than-expected Q2 billings and raising its full-year revenue forecast.  Also, Axon Enterprise is up more than +16% after raising its revenue guidance for the year.  Global Payments is up more than +7% after reporting Q2 adjusted EPS above consensus.

US MBA mortgage applications rose +6.9% in the week ended August 2, with the purchase mortgage sub-index up +0.8% and the refinancing mortgage sub-index up +15.9%.  The average 30-year fixed rate mortgage fell -27 bp to 6.55% from 6.82% the prior week.

Chinese trade news today was mixed as China July exports rose +7.0% y/y, weaker than expectations of +9.5% y/y and a bearish factor for global growth prospects.  July imports rose +7.2% y/y, stronger than expectations of +3.2% y/y. 

The market consensus is that Q2 earnings for the S&P 500 companies will rise +9% y/y.  About half of the companies in the S&P 500 have reported thus far.  According to Bloomberg, most reporting companies have beaten their earnings consensus, but only 43% have beaten revenue expectations, the lowest percentage in five years.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 71% for a -50 bp rate cut at that meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +1.48%.  China's Shanghai Composite closed up +0.09%.  Japan's Nikkei Stock 225 closed up +1.19%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -9 ticks.  The 10-year T-note yield is up +4.2 bp at 3.934%.  Strength in stocks today is curbing safe-haven demand for government debt.  Also, supply pressures are undercutting T-notes as the Treasury will auction $42 billion of 10-year T-notes later today as part of this week’s $125 billion August quarterly refunding operation. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +7.3 bp at 2.273%.  The 10-year UK gilt yield is up +4.0 bp at 3.960%.

German June industrial production rose +1.4% m/m, stronger than expectations of +1.0% m/m and the largest increase in 16 months.

German trade news was weaker than expected as June exports fell -3.4% m/m, weaker than expectations of -1.5% m/m and the biggest decline in 6 months.  Also, June imports rose +0.3% m/m, weaker than expectations of +2.5% m/m.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.

US Stock Movers

The strength in chip stocks today is supportive of the overall market.  Marvell Technology (MRVL) and ARM Holdings Plc (ARM) are up more than +4%.  Also, Nvidia (NVDA), Broadcom (AVGO), ASML Holding NV (ASML), GlobalFoundries (GFS), Lam Research (LRCX), ON Semiconductor (ON), and KLA Corp (KLAC) are up more than +3%.  In addition, Advanced Micro Devices (AMD), Microchip Technology (MCHP), and NXP Semiconductors (NXPI) are up more than +2%.

Fortinet (FTNT) is up more than +23% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 billings of $1.54 billion and raising its full-year revenue forecast to $5.80 billion-$5.90 billion from a previous estimate of $5.75 billion-$5.85 billion, above the consensus of $5.80 billion.

Axon Enterprise (AXON) is up more than +16% after raising its revenue guidance for the year to $2.00 billion-$2.05 billion from a previous estimate of $1.94 billion-$1.99 billion, stronger than the consensus of $1.98 billion. 

Global Payments (GPN) is up more than +6% after reporting Q2 adjusted EPS of $2.93, better than the consensus of $2.91. 

Builders FirstSource (BLDR) is up more than +5% after Baird upgraded the stock to outperform from neutral with a price target of $190.

Shopify (SHOP) is up more than +22% after reporting Q2 revenue of $2.05 billion, above the consensus of $2.01 billion. 

VF Corp (VFC) is up more than +13% after reporting Q1 revenue of $1.91 billion, stronger than the consensus of $1.85 billion. 

Maplebear Inc (CART) is up more than +3% after reporting Q2 adjusted Ebitda of $208 million, better than the consensus of $187.7 million, and forecasting Q3 adjusted Ebitda of $205 million-$215 million, well above the consensus of $202.7 million. 

Airbnb (ABNB) is down more than -14% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q3 revenue of $3.67 billion-$3.73 billion, below the consensus of $3.84 billion and warning of slowing demand from US vacationers. 

Super Micro Computer (SMCI) is down more than -14% after reporting Q4 adjusted EPS of $6.25, well below the consensus of $8.25, and forecasting Q1 adjusted EPS of $6.69-$8.27, the midpoint well below the consensus of $7.68.

TripAdvisor (TRIP) is down more than -11% after reporting Q2 revenue of $497 million, below the consensus of $504.9 million. 

Charles River Laboratories International (CRL) is down more than -10% after cutting its full-year adjusted EPS estimate to $9.90-$10.20 from a previous forecast of $10.90-$11.40, well below the consensus of $11.00. 

Amgen (AMGN) is down more than -5% to lead losers in the Dow Jones Industrials after reporting Q2 adjusted EPS of $4.97, below the consensus of $4.98.  operating income of $223.9 million, weaker than the consensus of $231.2 million.

Trex Co (TREX) is down more than -19% after reporting Q2 net sales of $376.5 million, weaker than the consensus of $388 million, and cutting its full-year sales forecast to $1.13 billion-$1.15 billion from a previous forecast of $1.215 billion-$1.235 billion. 

Bio-Techne (TECH) is down more than -6% after reporting Q4 net sales of $306.1 million, weaker than the consensus of $307.1 million.

Emerson Electric (EMR) is down more than -3% after reporting Q3 net sales of $4.38 billion, weaker than the consensus of $4.41 billion. 

Earnings Reports (8/7/2024)

Atmos Energy Corp (ATO), Bio-Techne Corp (TECH), CF Industries Holdings Inc (CF), Charles River Laboratories Int (CRL), Corpay Inc (CPAY), CVS Health Corp (CVS), Emerson Electric Co (EMR), Equinix Inc (EQIX), Global Payments Inc (GPN), Hilton Worldwide Holdings Inc (HLT), Marathon Oil Corp (MRO), McKesson Corp (MCK), Monster Beverage Corp (MNST), NiSource Inc (NI), Occidental Petroleum Corp (OXY), Ralph Lauren Corp (RL), Rockwell Automation Inc (ROK), Walt Disney Co/The (DIS), Warner Bros Discovery Inc (WBD), Zimmer Biomet Holdings Inc (ZBH).

• Is Wall Street Bullish or Bearish on Duke Energy Stock?
• NRG Energy Stock Outlook: Is Wall Street Bullish or Bearish?
• Merck & Co. Stock: Analyst Estimates & Ratings
• Do Wall Street Analysts Like Baxter International Stock?