Stocks Gain as Consumer Spending Remains Solid and Price Pressures Ease

The S&P 500 Index ($SPX) (SPY) today is up +0.52%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.77%.

Stocks today are moderately higher on some positive corporate news.  Intel is up more than +7% after Bloomberg News reported that the company is discussing various scenarios, including a split of its product design and manufacturing businesses.  Also, Autodesk is up more than +4% after reporting better-than-expected Q2 net revenue and boosting its full-year revenue forecast.  In addition, MongoDB is up more than +16% after reporting Q2 adjusted EPS well above consensus and raising its 2025 adjusted EPS forecast.

Stocks added to their gains today on the favorable US July core PCE price index and July personal spending reports. The reports suggest the Fed has so far been able to tame price pressures without causing too much pain to consumers, thus boosting the prospects for a soft landing.  The Fed-friendly PCE report also reinforces expectations the Fed will cut interest rates at the Sep 17-18 FOMC meeting. 

US stocks have carryover support today from a rally in European stocks.  The Euro Stoxx 50 today rose to a 1-1/2 month high on better-than-expected Eurozone economic news that showed Eurozone consumer prices eased to a 3-year low, and the Eurozone unemployment rate unexpectedly fell to a record low.

US July personal spending rose +0.5% m/m, right on expectations.  July personal income rose +0.3% m/m, slightly stronger than expectations of +0.2% m/m.

The US July core PCE price index, the Fed's preferred inflation gauge, remained unchanged from June at +2.6% y/y, better than expectations of an increase to +2.7% y/y.

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 higher.  The Euro Stoxx 50 climbed to a 1-1/2 month high and is up +0.05%.  China's Shanghai Composite rose to a 1-1/2 week high low and closed up +0.68%.  Japan's Nikkei Stock 225 climbed to a 4-week high and closed up +0.74%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -2 ticks.  The 10-year T-note yield is up +0.8 bp at 3.869%.  Sep T-notes today are slightly lower as a rally in stocks curbed safe-haven demand for government debt.  Also, today’s mixed US economic reports dampened hopes that the Fed will cut rates by 50 bp in September.  Month-end buying of T-notes by bond fund managers supported T-note prices as bond fund managers extend the duration of their portfolios and buy longer-term debt. 

European government bond yields today are mixed.  The 10-year German bund yield is up +0.4 bp at 2.279%. The 10-year UK gilt yield is down -2.6 bp at 3.993%.

The Eurozone Aug CPI eased to 2.2% y/y from 2.6% y/y, right on expectations and the smallest increase in 3 years.  Also, Aug core CPI eased to 2.8% y/y from 2.9% y/y in July, right on expectations. 

The Eurozone July unemployment rate unexpectedly fell -0.1 to a record low 6.4%, showing a stronger labor market than expectations of no change at 6.5%.

ECB Executive Board member Schnabel said the ECB shouldn't lower interest rates too quickly as risks to inflation's return to 2% persist.

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

US Stock Movers

Intel (INTC) is up more than +7% to lead gainers in the S&P 500 and Dow Jones Industrials after Bloomberg News reported the company is discussing various scenarios, including a split of its product-design and manufacturing businesses. 

Energy producers and energy service providers are under pressure today, with the price of WTI crude oil down by more than -2%.  As a result, APA Corp (APA), ConocoPhillips (COP), and Marathon Oil (MRO) are down more than -1%.  Also, Baker Hughes (BKR), Diamondback Energy (FANG), Occidental Petroleum (OXY), and Exxon Mobil (XOM) are down more than -0.7%.

MongoDB (MDB) is up more than +16% to lead gainers in the Nasdaq 100 after reporting Q2 adjusted EPS of 70 cents, well above the consensus of 49 cents, and raising its 2025 adjusted EPS forecast to $2.33-$2.47 from a previous forecast of $2.15-$2.30, stronger than the consensus of $2.33. 

Marvell Technology (MRVL) is up more than +6% after reporting Q2 net revenue of $1.27 billion, better than the consensus of $1.25 billion, and forecasting Q3 net revenue of $1.45 billion-$1.46 billion, stronger than the consensus of $1.40 billion. 

Autodesk (ADSK) is up more than +4% after reporting Q2 net revenue of $1.51 billion, better than the consensus of $1.48 billion, and boosting its full-year revenue forecast to $6.08 billion-$6.13 billion from a previous forecast of $5.99 billion-$6.09 billion, stronger than the consensus of $6.05 billion. 

Crowdstrike Holdings (CRWD) is up more than +3% after HSBC upgraded the stock to buy from hold with a price target of $339. 

Dell Technologies (DELL) is up more than +3% after reporting Q2 adjusted EPS of $1.89, above the consensus of $1.71. 

Ulta Beauty (ULTA) is down more than -3% to lead losers in the S&P 500 after reporting Q2 net sales of $2.55 billion, below the consensus of $2.61 billion, and cutting its 2025 net sales forecast to $11.0 billion-$11.2 billion from a previous forecast of $11.5 billion-$11.6 billion, weaker than the consensus of $11.51 billion. 

Lululemon Athletica (LULU) is down more than +2% to lead losers in the Nasdaq 100 after cutting its full-year net revenue estimate to $10.38 billion-$10.48 billion from a previous estimate of $10.70 billion-$10.80 billion. 

Elastic NV (ESTC) is down more than -27% after cutting its full-year revenue forecast to $1.44 billion from a previous forecast of $147 billion-$1.48 billion, below the consensus of $1.48 billion.

Alnylam Pharmaceuticals (ALNY) is down more than -6% on disappointment that data from a trial of its drug Amvuttra to treat heart disease failed to improve conditions better than existing drugs. 

Earnings Reports (8/30/2024)

None.

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