Stocks Climb on Positive Corporate News and Lower Bond Yields

The S&P 500 Index ($SPX) (SPY) today is up +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.33%.

US stocks today are modestly higher, with the S&P 500 posting a 1-month high, the Dow Jones Industrials posting a 2-1/2 week high, and the Nasdaq 100 posting a 4-week high.  Positive corporate news is lifting stocks today, with Keysight Technologies up more than +12% after reporting stronger-than-expected Q3 adjusted EPS and forecasting Q4 adjusted EPS above consensus.  Also, Target is up more than +11% after reporting better-than-expected Q2 adjusted EPS and boosting its full-year adjusted EPS estimate. M&A activity is also supporting 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 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. 

The US Bureau of Labor Statistics (BLS) revised US payrolls down by -818,000 for the year through March, a bigger decline than expectations of -600,000 and the largest downward revision since 2009, signaling less job growth than originally reported.  The report was dovish for Fed policy since it indicated a weaker US labor market than was originally reported.

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 31% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.39%.  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 +7 ticks.  The 10-year T-note yield is down -1.5 bp at 3.792%.  Sep T-notes today rose to a 1-week high, and the 10-year T-note yield fell to a 2-week low of 3.780%.  T-note prices saw support from the US Bureau of Labor Statistics (BLS) downward revision of US payrolls for the year through March by 818,000 jobs, a larger revision than expectations of 600,000 and a sign of a weaker US labor market.  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 -1.3 bp to 2.202%.  The 10-year UK gilt yield is down -0.4 bp at 3.911%.

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

US Stock Movers

Keysight Technologies (KEYS) is up more than +12% to lead gainers in the S&P 500 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. 

Target (TGT) is up more than +11% 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.  Other retailers moved higher on the news with Ross Stores (ROST) and Ulta Beauty (ULTA) up more than +3%.

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%.

Take-Two Interactive Software (TTWO) is up more than +3% to lead gainers in the Nasdaq 100 after announcing its Borderlands 4 video game will be released next year.

Vector Group Ltd (VGR) is up more than +7% after JT Group agreed to buy the company for about $2.4 billion, or $15 a share.

Arch Resources (ARCH) is up more than +3% after Consol Energy agreed to buy the company for $2.3 billion.

Texas Instruments (TXN) is up more than +3% after Citigroup upgraded the stock to buy from neutral, with a price target of $235.   

Analog Devices (ADI) is up more than +2% 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. 

Corning (GLW) is up more than +1% after Mizuho Securities upgraded the stock to outperform from neutral with a price target of $47. 

Franklin Resources (BEN) is down more than -6% 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.

Bank stocks are under pressure today with KeyCorp (KEY), Citigroup (C), Regions Financial (RF), Wells Fargo (WFC), Discover Financial Services (DFS), Capital One Financial (COF), and Truist Financial (TFC) down more than -1%.

American Express (AXP) is down more than -3% to lead losers in the Dow Jones Industrials after Bank of America Global Research downgraded the stock to neutral from buy. 

Jack Henry & Associates (JKHY) is down more than -1% after reporting Q4 core revenue of $172.0 million, below the consensus of $177.7 million. 

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. 

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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