Stocks Push Higher on Positive Corporate News and M&A Activity

The S&P 500 Index ($SPX) (SPY) today is up +0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.33%.

US stocks today are mildly higher, with the Dow Jones Industrials posting a 2-1/2 week high.  Positive corporate news is lifting stocks today, with Target up more than +15% after reporting better-than-expected Q2 adjusted EPS and boosting its full-year adjusted EPS estimate.  Also, Keysight Technologies is up more than +11% after reporting stronger-than-expected Q3 adjusted EPS and forecasting Q4 adjusted EPS above consensus. M&A activity also supported stocks today after JT Group agreed to buy Vector Group for about $2.4 billion, and Consol Energy agreed to buy Arch Resources for $2.3 billion.

The markets are awaiting the US Bureau of Labor Statistics (BLS) preliminary annual payroll revisions later this morning and the minutes of the July 30-31 FOMC meeting later this afternoon for clues on how close the Fed is to cutting interest rates.  Also, the markets are waiting for the opening comments from Fed Chair Powell on Friday at the Fed’s annual symposium in Jackson Hole, Wyoming, for any fresh insights on the future course of Fed policy. 

US MBA mortgage applications fell -10.1% in the week ended August 16, with the purchase mortgage sub-index down -5.2% and the refinancing mortgage sub-index down -15.2%.  The 30-year fixed rate mortgage fell -4 bp to 6.50% from 6.54% in the prior week.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 34% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.48%.  China's Shanghai Composite closed down -0.35%.  Japan's Nikkei Stock 225 closed down by -0.29%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +5 ticks.  The 10-year T-note yield is down -0.6 bp at 3.801%.  Sep T-notes today rose to a 1-week high, and the 10-year T-note yield fell to a 2-week low of 3.793%.  T-note prices are supported by speculation that the US Bureau of Labor Statistics (BLS) will revise US payroll growth lower for the year through March by at least 600,000 in its annual payroll revisions later this morning.  Gains in T-notes are limited by supply pressures as the Treasury will auction $16 billion of 20-year T-bonds this afternoon.   

European government bond yields today are moving lower.  The 10-year German bund yield is down -1.2 bp to 2.204%.  The 10-year UK gilt yield is down -1.0 bp at 3.905%.

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

US Stock Movers

Target (TGT) is up more than +15% to lead gainers in the S&P 500 and lead retailers higher after reporting Q2 adjusted EPS of $2.57, better than the consensus of $2.18.  Target also boosted its full-year adjusted EPS estimate to $9.00-$9.70 from a previous estimate of $8.60-$9.60, stronger than the consensus of $9.22. Also, Ross Stores (ROST) is up more than +4% to lead gainers in the Nasdaq 100, and Dollar Tree (DLTR) is up more than +3%.

Keysight Technologies (KEYS) is up more than +13% after reporting Q3 adjusted EPS of $1.57, stronger than the consensus of $1.35, and forecasting Q4 adjusted EPS of $1.53-$1.59, the midpoint above the consensus of $1.54. 

TJX Cos (TJX) is up more than +5% after reporting that Q2 comparable sales rose +4%, above the consensus of +2.73%, and raising its full-year comparable sales forecast to +3% from a previous estimate of +2% to +3%, stronger than the consensus of +2.76%.

Vector Group Ltd (VGR) is up more than +9% after JT Group agreed to buy the company for about $2.4 billion, or $15 a share.

Arch Resources (ARCH) is up more than +5% after Consol Energy agreed to buy the company for $2.3 billion.

Corning (GLW) is up more than +2% after Mizuho Securities upgraded the stock to outperform from neutral with a price target of $47. 

Analog Devices (ADI) is up more than +1% after reporting Q3 revenue of $2.31 billion, above the consensus of $2.28 billion, and forecasting Q4 revenue of $2.3 billion-$2.5 billion, the midpoint above the consensus of $2.38 billion. 

Texas Instruments (TXN) is up more than +1% after Citigroup upgraded the stock to buy from neutral, with a price target of $235.   

Franklin Resources (BEN) is down more than -3% to lead losers in the S&P 500 after Ken Leech, co-chief investment officer of Western Asset Management, a part of Frankin Resources, is said to take an immediate leave of absence to focus on a SEC probe of the firm.

Jack Henry & Associates (JKHY) is down more than -2% after reporting Q4 core revenue of $172.0 million, below the consensus of $177.7 million. 

American Express (AXP) is down more than -2% to lead losers in the Dow Jones Industrials after Bank of America Global Research downgraded the stock to neutral from buy. 

Macy’s (M) is down more than -12% after cutting its full-year net sales forecast to $22.1 billion-$22.4 billion from a previous estimate of $22.3 billion-$2.9 billion. 

Chewy Inc (CHWY) is down more than -1% after Raymond James downgraded the stock to market perform from outperform. 

Starbucks (SBUX) is down nearly -1% after DZ Bank AG downgraded the stock to sell from hold with a price target of $85. 

Earnings Reports (8/21/2024)

Agilent Technologies Inc (A), Analog Devices Inc (ADI), Macy's Inc (M), Nordson Corp (NDSN), Snowflake Inc (SNOW), Synopsys Inc (SNPS), Target Corp (TGT), TJX Cos Inc/The (TJX), Wolfspeed Inc (WOLF), Zoom Video Communications Inc (ZM).

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