Stocks Push Higher on US Economic Strength

The S&P 500 Index ($SPX) (SPY) today is up +0.48%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.95%.

Stocks today are moderately higher after the US Q2 GDP was revised higher due to an upward revision of consumer spending, showing that the economy is holding up despite high interest rates.  Also, price pressures eased as the Q2 core PCE price index was revised lower.

Limiting gains in the overall market was a -2% decline in Nvidia, which was under pressure despite reporting better than expected Q2 earnings, as it projected Q3 revenue will be about $32.5 billion.  While higher than the consensus of $31.9 billion, it failed to top lofty expectations of as high as $37.9 billion.

US weekly initial unemployment claims fell -2,000 to 231,000, showing a slightly stronger labor market than expectations of 232,000.

US Q2 GDP was revised upward to +3.0% (q/q annualized), stronger than expectations of no change at +2.8%. Q2 personal consumption was unexpectedly revised upward to +2.9% from +2.3% versus expectations of a downside revision to +2.2%.  The Q2 core PCE price index was revised slightly lower to to +2.8% q/q from +2.9% q/q.

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 rallied to a 6-week high and is up +0.97%. China's Shanghai Composite dropped to a 6-1/2 month low and closed down -0.40%.  Japan's Nikkei Stock 225 closed down -0.02%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -8 ticks.  The 10-year T-note yield is up +3.6 bp at 3.871%.  T-notes are under pressure today from the stronger-than-expected US jobless claims and Q2 GDP reports.  Also, supply pressures are undercutting T-note prices as the Treasury will auction $44 billion of 7-year T-notes this afternoon.  An increase in inflation expectations is also bearish for T-notes after the 10-year breakeven inflation rate today rose to a 3-1/2 week high of 2.172%.   

European government bond yields today are moving higher.  The 10-year German bund yield is up +1.2 bp at 2.273%.  The 10-year UK gilt yield is up +0.7 bp at 4.009%.

ECB Governing Council member Patsalides said if the ECB's projections "continue to materialize, there's nothing to prevent the Governing Council from reducing interest rates."

The Eurozone Aug economic confidence index rose +0.6 to a 15-month high of 96.6, stronger than expectations of 96.0.

German Aug CPI (EU harmonized) eased to +2.0% y/y from +2.6% y/y in July, better than expectations of +2.2% y/y and the smallest year-over-year increase in 3-1/2 years.

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

US Stock Movers

Nvidia (NVDA) is down more than -2% after it forecasted Q3 revenue of $32.5 billion, which was above the consensus of $31.9 billion but not as high as some estimates as high as $37.9 billion. 

Best Buy (BBY) is up more than +12% to lead gainers in the S&P 500 after reporting Q2 adjusted EPS of $1.34, better than the consensus of $1.16, and raising its full-year adjusted EPS forecast to $6.10-$6.35 from a prior view of $5.75-$6.20.

Cooper Cos (COO) is up more than +9% after reporting Q3 net sales of $1.00 billion, better than the consensus of $997.9 million, and forecasting Q4 revenue of $1.02 billion to $1.04 billion, stronger than the consensus of $1.01 billion.

Crowdstrike Holdings (CRWD) is up more than 6% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $963.9 million, above the consensus of $958.2 million. 

Affirm Holdings (AFRM) is up more than +25% after reporting Q4 revenue of $659.2 million, higher than the consensus of $605.1 million, and forecasting Q1 revenue of $640 million-$670 million, stronger than the consensus of $631.9 million. 

Veeva Systems (VEEV) is up more than +10% after reporting Q2 adjusted EPS of $1.62, above the consensus of $1.53, and raising its 2025 adjusted EPS forecast to $6.22 from a previous forecast of $6.16.

Nutanix (NTNX) is up more than +17% after reporting Q4 billings of $672.9 million, well above the consensus of $574 million, and forecasting 2025 revenue of $2.44 billion-$2.47 billion, better than the consensus of $2.43 billion.

Dollar General (DG) is down more than -23% to lead losers in the S&P 500 after reporting Q2 net sales of $10.21 billion, below the consensus of $10.37 billion, and cutting its full-year comparable sales estimate to +1% to +1.6% from a previous estimate of +2% to +2.7%.  Dollar Tree (DLTR) is also down more than -6% on the news to lead losers in the Nasdaq 100.

NetApp (NTAP) is down more than -5% after forecasting Q2 net revenue of $1.57 billion-$1.72 billion versus the consensus of $1.62 billion.

Campbell Soup (CPB) is down more than -2% after reporting Q4 net sales of $2.29 billion, below the consensus of $2.31 billion, and forecasting 2025 adjusted EPS of $3.12-$3.22, weaker than the consensus of $3.23.

Okta (OKTA) is down more than -18% after Bank of America downgraded the stock to underperform from buy with its price target cut to $75, citing headwinds to Okta’s outlook for current remaining performance obligation. 

Pure Storage (PSTG) is down more than -12% after forecasting 2025 adjusted operating income of $532 million, below the consensus of $541.6 million.

Earnings Reports (8/29/2024)

Autodesk Inc (ADSK), Best Buy Co Inc (BBY), Birkenstock Holding Plc (BIRK), Brown-Forman Corp (BF/B), Burlington Stores Inc (BURL), Campbell Soup Co (CPB), Catalent Inc (CTLT), Dell Technologies Inc (DELL), Dollar General Corp (DG), Elastic NV (ESTC), Gap Inc/The (GAP), HashiCorp Inc (HCP), Lululemon Athletica Inc (LULU), Marvell Technology Inc (MRVL), MongoDB Inc (MDB), Ollie's Bargain Outlet Holding (OLLI), Ulta Beauty Inc (ULTA).

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