Stocks Climb Ahead of Fed Chair Powell’s Comments

The S&P 500 Index ($SPX) (SPY) today is up +0.57%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.50%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.74%.

US stocks today are moderately higher ahead of a much-anticipated speech by Fed Chair Powell at the Fed’s annual symposium in Jackson Hole, Wyoming.  The markets will look to see if Powell validates expectations for a September rate cut and whether he offers any indication of how big any rate cut might be. 

Some positive corporate news is also giving stocks a lift.  Workday is up more than +12% after reporting better-than-expected Q2 adjusted EPS and saying it would sharply increase profitability over the next three years. Also, Ross Stores is up more than +5% after reporting Q2 EPS above consensus and raising its 2025 EPS forecast. In addition, Intuit is up more than +2% after reporting stronger-than-expected Q4 net revenue and announcing a new $3 billion share repurchase authorization.

Dovish comments today from Atlanta Fed President Bostic knocked T-note yields lower and boosted stocks when he said it is possible that more than one interest rate cut by the Fed may now be needed by year-end as inflation had slowed more than he had expected.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 30% for a -50 bp rate cut at that meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 rose to a 1-month high and is up +0.30%. China's Shanghai Composite recovered from a 6-1/2 month low and closed up +0.40%.  Japan's Nikkei Stock 225 climbed to a 3-week high and closed up +0.40%.

Interest Rates

September 10-year T-notes (ZNU24) today are up +5 ticks.  The 10-year T-note yield is down -1.9 bp at 3.833%.  Dovish comments today from Atlanta Fed President Bostic gave T-notes a boost when he said more than one interest rate cut by the Fed may be needed by year-end.  Also, some mild short covering is pushing T-notes higher ahead of Fed Chair Powell’s speech at Jackson Hole, Wyoming later this morning.  Strength in stocks today is limiting the upside in T-notes.

European government bond yields today are lower.  The 10-year German bund yield is down -0.3 bp at 2.241%. The 10-year UK gilt yield fell from a 1-1/2 week high of 3.964% and is down -1.6 bp at 3.944%.

The ECB's Eurozone July 1-year inflation expectations indicator was unchanged from June at 2.8%, stronger than expectations of an easing to 2.7%.  Also, July 3-year inflation expectations indicator unexpectedly rose to 2.4% from 2.3% in June, stronger than expectations of no change at 2.3%.

ECB Governing Council member Vujcic said, "As long as data fall in line with our projections, which foresee inflation to fall to 2% in 2025, that increases confidence that we can gradually ease the restrictiveness of our monetary policy." 

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 97% for the September 12 meeting.

US Stock Movers

Chip stocks are climbing today and supporting gains in the broader market.  Nvidia (NVDA), Marvell Technology (MRVL), and GlobalFoundries (GFS) are up more than +2%.  Also, ON Semiconductor (ON), NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), KLA Corp (KLAC), and Texas Instruments (TXN) are up more than +1%.

Workday (WDAY) is up more than +13% to lead gainers in the Nasdaq 100 after reporting Q2 adjusted EPS of $1.75, above the consensus of $1.64, and said it would increase profitability over the next three years to enable strategic investments.

Ross Stores (ROST) is up more than +6% to lead gainers in the S&P 500 after reporting Q2 EPS of $1.59, stronger than the consensus of $1.49, and raising its 2025 EPS forecast to $6.00-$6.13 from a previous estimate of $5.79-$5.98, above the consensus of $6.01. 

Moderna (MRNA) is up more than +3% after the European Commission approved the company’s RSV vaccinee Mresvia for use in 27 EU member states.

Cava Group (CAVA) is up more than +11% after boosting its full-year restaurant comparable sales forecast to +8.5% to +9.5% from a previous estimate of +4.5% to +6.5%, well above the consensus of +6.05%.

Roku Inc (ROKU) is up more than +6% after Guggenheim Securities upgraded the stock to buy from neutral with a price target of $75.

Chewy (CHWY) is up more than +1% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $35. 

Intuit (INTU) is down more than -5% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q1 adjusted EPS of $2.33-$2.38, well below the consensus of $2.80. 

GE Vernova (GEV) is down more than -4% after reports of a blade failure occurred at the Dogger Bank A offshore wind farm.

Las Vegas Sands (LVS) is down more than -1% after UBS downgraded the stock to neutral from buy, noting the recovery in the company’s Macau business is getting more protracted. 

Paramount Global (PARA) is down more than -1% after Skydance Media accused the company of breaching the terms of their merger agreement by continuing to engage with other suitors. 

Earnings Reports (8/23/2024)

Aviat Networks Inc (AVNW), Buckle Inc/The (BKE), Dakota Gold Corp (DC), Dakota Gold Corp (DC), Movado Group Inc (MOV).

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