Stocks Close Higher as US Consumer Confidence Rises to 6-Month High

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.33%.

US stocks Tuesday shook off early losses and closed slightly higher. Stocks recovered Tuesday after the Conference Board Aug US consumer confidence index rose more than expected to a 6-month high.

Also, chip stocks rebounded from early losses Tuesday and turned higher, boosting the broader market. 

Higher T-note yields Tuesday were negative for stocks.  Corporate news Tuesday was mixed for stocks.  On the bullish side, Insulet closed up more than +6% after receiving FDA clearance for its Omnipod 5 to treat people with Type 2 diabetes ages 18 years and older.  Conversely, Paramount Global closed down more than -7% after Bronfman Jr. dropped out of a bidding war for the company.  Also, Cava Group closed down more than -6% after the company’s largest shareholder, Artal International S.C.A., filed to sell 6 million shares. 

June S&P CoreLogic US composite-20 home price index growth eased to a 6-month low of +6.47% y/y from +6.88% y/y in May but was stronger than expectations of +6.14% y/y.

The Conference Board’s Aug US consumer confidence index rose +1.4 to a 6-month high of 103.3, stronger than expectations of 100.7.

The US Aug Richmond Fed manufacturing survey current conditions index unexpectedly fell -2 to a 4-1/4 year low of -19 versus expectations of an increase to -14.

The markets are awaiting Wednesday’s earnings results from Nvidia and Friday’s US July core PCE deflator, the Fed’s preferred inflation gauge.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 35% for a -50 bp rate cut at that meeting.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.04%.  China's Shanghai Composite closed down -0.24%.  Japan's Nikkei Stock 225 closed up +0.47%.

Interest Rates

September 10-year T-notes (ZNU24) Tuesday closed down -2.5 ticks.  The 10-year T-note yield rose +1.9 bp to 3.835%.  T-note prices Tuesday posted modest losses. Higher European government bond yields Tuesday weighed on T-note prices as the 10-year German bund and 10-year UK gilt yields rose to 3-1/2 week highs.  Also, an increase in inflation expectations was negative for T-notes after Tuesday's US 10-year breakeven inflation rate rose to a 3-week high of 2.158%. 

T-notes recovered from their worst levels Tuesday on decent demand for the Treasury’s $69 billion auction of 2-year T-notes with a bid-to-cover ratio of 2.68, better than the 10-auction average of 2.62.   

European government bond yields Tuesday moved higher.  The 10-year German bund yield climbed to a 3-1/2 week high of 2.300% and finished up +4.1 bp at 2.288%.  The 10-year UK gilt rose to a 3-1/2 week high of 4.020% and finished up +8.6 bp at 3.998%.

The German Sep GfK consumer confidence index unexpectedly fell -3.4 points to a 4-month low of -22.0, weaker than expectations of an increase to -18.2.

ECB Governing Council member Centeno said the direction of monetary policy in the Eurozone seems "relatively clear" given indicators such as lower inflation.

ECB Governing Council member Knot said he favors gradual monetary easing so long as inflation stays on track to return to the ECB's 2% goal next year.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 98% for the September 12 meeting.

US Stock Movers

Chip stocks recovered from early losses Tuesday and turned higher, boosting the broader market.  Analog Devices (ADI) closed up more than +2% to lead gainers in the Nasdaq 100.  Also, Qualcomm (QCOM) closed up more than +2%.  In addition, Nvidia (NVDA), Marvell Technology (MRVL), Texas Instruments (TXN), ARM Holdings Plc (ARM), NXP Semiconductors NV (NXPI), KLA Corp (KLAC), and ON Semiconductors (ON) closed up more than +1%. 

Cruise line operators rallied Tuesday on the outlook for cruise demand to remain robust after Melius Research said cruise operators are the only part of the travel industry where analysts are raising their earnings estimates.  As a result, Royal Caribbean Cruises (RCL) closed up more than +4%.  Also, Norwegian Cruise Line Holdings (NCLH) closed up more than +3%, and Carnival (CCL) closed up more than +2%. 

ResMed (RMD) closed up more than +7% to lead gainers in the S&P 500 after William Blair said the company views the GLP-1 weight loss drug impact as a “tailwind” for its sleep apnea and CPAP business.

Insulet (PODD) closed up more than +6% after the company received FDA clearance for its Omnipod 5 to treat people with Type 2 diabetes ages 18 years and older.

Paramount Global (PARA) closed down more than -7% after Bronfman Jr. dropped out of a bidding war for the company. 

Super Micro Computer (SMCI) closed down more than -2% after Hindenburg Research said it had a short position in the stock. 

Cava Group (CAVA) closed down more than -6% after the company’s largest shareholder, Artal International S.C.A., filed to sell 6 million shares.

American Woodmark (AMWD) closed down more than -10% after reporting Q1 net sales of $459.1 million, weaker than the consensus of $479.6 million. 

Hershey (HSY) closed down more than -2% after Citigroup downgraded the stock to sell from neutral with a price target of $182. 

Energizer Holdings (ENR) closed up more than +6% after Truist Securities upgraded the stock to buy from hold with a price target of $40.

JD.com (JD) closed up more than +2% after the company announced a $5 billion stock repurchase program. 

Trip.com (TCOM) closed up more than +8% after reporting Q2 adjusted earnings per American depositary receipts of 7.25 yuan, well above the consensus of 5.22 yuan.

Earnings Reports (8/28/2024)

Affirm Holdings Inc (AFRM), Bath & Body Works Inc (BBWI), Cooper Cos Inc/The (COO), Crowdstrike Holdings Inc (CRWD), Donaldson Co Inc (DCI), Five Below Inc (FIVE), HP Inc (HPQ), J M Smucker Co/The (SJM), Kohl's Corp (KSS), NetApp Inc (NTAP), Nutanix Inc (NTNX), NVIDIA Corp (NVDA), Okta Inc (OKTA), Pure Storage Inc (PSTG), Salesforce Inc (CRM), Veeva Systems Inc (VEEV).

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