Stocks See Support from Positive Corporate News and Dovish Fed Comments

The S&P 500 Index ($SPX) (SPY) today is up +0.18, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) down -0.02%.

US stocks today are mostly higher, with the S&P 500 and Dow Jones Industrials climbing to 2-week highs.  Positive corporate news is supporting stocks today, with Advanced Micro Devices up more than +1% after acquiring server maker ZT Systems in a deal valued at $4.9 billion.  Also, ZIM Integrated Shipping is up more than +13% after reporting stronger-than-expected Q2 adjusted Ebitda and raising its full-year adjusted Ebitda forecast.

Dovish Fed comments today are supportive of stocks.  San Francisco Fed President Daly said recent US economic data has given the Fed "more confidence" that inflation is under control and it is time to consider adjusting benchmark borrowing costs.  Also, Minneapolis Fed President Kashkari signaled he would be open to a Fed rate cut at the September FOMC meeting when he said, "The balance of risks has shifted, so the debate about potentially cutting interest rates in September is an appropriate one to have."

The markets are awaiting the minutes of the July 30-31 FOMC meeting on Wednesday for clues as to how close the Fed is to cutting interest rates.  Also, the markets are awaiting opening comments Friday from Fed Chair Powell at the Fed’s annual symposium in Jackson Hole, Wyoming for fresh insights on the future course of Fed policy. 

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 27% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 climbed to a 2-week high and is up +0.60%. China's Shanghai Composite rose to a 2-week high and closed up +0.49%.  Japan's Nikkei Stock 225 closed down by -1.77%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -3 ticks.  The 10-year T-note yield is up +1.0 bp at 3.892%.  Sep T-notes today gave up an early advance and turned lower as strength in stocks reduced safe-haven demand for T-notes. Also, corporate supply pressures are weighing on T-notes, with as much as $20 billion of corporate debt expected to be sold this week, prompting bond dealers to short T-notes as a hedge against the incoming supply. 

T-notes today initially moved higher on dovish Fed comments.  San Francisco Fed President Daly said recent US economic data has given the Fed "more confidence" that inflation is under control and it is time to consider adjusting benchmark borrowing costs. Also, Minneapolis Fed President Kashkari said, “The debate about potentially cutting interest rates in September is an appropriate one to have." 

European government bond yields today are moving higher.  The 10-year German bund yield is up +1.0 bp at 2.257%.  The 10-year UK gilt yield is up +0.9 bp at 3.935%.

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

US Stock Movers

Home builders and suppliers are climbing today after Barron’s said in a weekend report that US home sales should improve in coming quarters as long-term mortgage rates are expected to head down toward 5% as the Fed gains on inflation.  As a result, Builders FirstSource (BLDR) is up more than +2%.  Also, DR Horton (DHI), Lennar (LEN), and Toll Brothers (TOL) are up more than +1%.

McDonald’s (MCD) is up more than +2% to lead gainers in the Dow Jones Industrials after Evercore ISI raised its price target on the stock to $320 from $300.

Advanced Micro Devices (AMD) is up more than +1% to lead gainers in the Nasdaq 100 after acquiring server maker ZT Systems in a deal valued at $4.9 billion. 

ZIM Integrated Shipping (ZIM) closed up more than +13% after reporting Q2 adjusted Ebitda of $488 million, stronger than the consensus of $311 million, and raising its full-year adjusted Ebitda forecast to $2.6 billion-$3.0 billion from a previous forecast of $1.15 billion-$1.55 billion, above the consensus of $2.31 billion.

PROG Holdings (PRG) is up more than +2% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $55. 

Gates Industrial Corp (GTES) is up more than +1% after RBC Capital Markets upgraded the stock to outperform from neutral with a price target of $22. 

Onto Innovation (ONTO) is up more than +1% after Needham upgraded the stock to buy from hold with a price target of $245. 

HP Inc (HPQ) is down more than -3% to lead losers in the S&P 500 after Morgan Stanley downgraded the stock to equal weight from overweight. 

Estee Lauder (EL) is down more than -1% after forecasting full-year annual revenue growth of down -1% to up +2%, weaker than the consensus of up +5.6%. 

Dutch Bros (BROS) is down more than -2% after Piper Sandler downgraded the stock to neutral from overweight. 

Shake Shack (SHAK) is down more than -1% after Piper Sandler downgraded the stock to neutral from overweight. 

AngloGold Ashanti Plc (AU) is down more than -1% after Scotiabank downgraded the stock to sector underperform from sector perform with a price target of $30.

Earnings Reports (8/19/2024)

3D Systems Corp (DDD), Bit Digital Inc (BTBT), Estee Lauder Cos Inc/The (EL), Fabrinet (FN), Flexsteel Industries Inc (FLXS), Maui Land & Pineapple Co Inc (MLP), Palo Alto Networks Inc (PANW).

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