Broader Market Sees Pressure from Weakness in Bank and Energy Stocks

The S&P 500 Index ($SPX) (SPY) today is down -0.03%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.52%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.15%.

Stocks today are mixed.  Weakness in bank stocks today is weighing on the broader market after JPMorgan Chase President Pinto said analysts are too optimistic in projecting next year’s expenses and net interest income.  Also, Goldman Sachs CEO Solomon said his bank’s trading unit is on track to drop -10% from the prior year, led by declines in the fixed-income business. Today’s -3% slump in WTI crude oil to a 16-month low is undercutting energy stocks. 

On the positive side, Oracle is up more than +12% after reporting stronger-than-expected Q1 adjusted revenue. Also, Tesla is up more than +3% after Deutsche Bank named the stock a top pick with a buy recommendation.

Another supportive factor for stocks was today’s Chinese trade news that showed China’s Aug exports rose +8.7% y/y, stronger than expectations of +6.6% y/y and the largest increase in 17 months.  The strength in Chinese exports is supportive of the global economic growth outlook.

The markets are cautious going into tonight’s debate between presidential candidates Harris and Trump, which may affect polling ahead of the November election.

The markets are looking ahead to US consumer price news on Wednesday to see if inflation falls by enough to allow the Fed to ease monetary policy aggressively.  The consensus is for Aug CPI to ease to +2.6% y/y from +2.9% y/y in July and for the Aug core CPI to be unchanged from July at +3.2% 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 mixed.  The Euro Stoxx 50 is down -0.73%.  China's Shanghai Composite recovered from a 7-month low and closed up +0.28%.  Japan's Nikkei Stock 225 closed down by -0.16%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +3 ticks.  The 10-year T-note yield is down -2.4 bp at 3.676%.  Dec T-notes today recovered from early losses and moved higher after a -3% slump in crude prices to a 16-month low knocked the 10-year breakeven inflation rate to a 5-week low, a bullish factor or T-notes. T-notes initially moved lower due to supply pressures, as the Treasury will auction $58 billion of 3-year T-notes later today as part of this week’s $119 billion auction package of T-notes and T-bonds. 

European government bond yields today are lower.  The 10-year German bund yield is down -0.6 bp at 2.163%. The 10-year UK gilt yield fell to a 3-week low of 3.839% and is down -1.4 bp at 3.842%.

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

US Stock Movers

Bank stocks are getting hammered today after JPMorgan Chase President Pinto said analysts are too optimistic in projecting next year’s expenses and net interest income, and Goldman Sachs CEO Solomon said his bank’s trading unit is on track to drop -10% from the prior year.  As a result, Synchrony Financial (SYF), Discover Financial Services (DFS), and Capital One Financial (COF) are down more than -6%.  Also, JPMorgan Chase (JPM) is down more than -5% to lead losers in the Dow Jones Industrials.  In addition, Goldman Sachs (GS) and Citigroup (C) are down more than -3%.

Oracle (ORCL) is up more than +12% to lead gainers in the S&P 500 after reporting Q1 adjusted revenue of $13.31 billion, better than the consensus of $13.26 billion. 

Tesla (TSLA) is up more than +2% to lead gainers in the Nasdaq 100 after Deutsche Bank named the stock a top pick with a buy recommendation and a price target of $295. 

Today’s -3% slump in WTI crude oil to a 16-month low is undercutting energy stocks.  Diamondback Energy (FANG) is down more than -3% to lead losers in the Nasdaq 100.  Also, Devon Energy (DVN), Exxon Mobil (XOM), and Hess Corp (HES) are down more than -2%.  In addition, Chevron (CVX), Phillips 66 (PSX), Occidental Petroleum (OXY), Marathon Oil (MRO), and Schlumberger (SLB) are down more than -1%. 

Mission Produce (AVO) is up more than +20% after reporting Q3 revenue of $324 million, well above the consensus of $231 million.

Calavo Growers (CVGW) is up more than +13% after reporting Q3 adjusted EPS of 57 cents, stronger than the consensus of 43 cents. 

Johnson Controls International (JCI) is up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral. 

Hewlett Packard Enterprise (HPE) is down more than -7% to lead losers in the S&P 500 after announcing an offering of $1.35 billion of convertible preferred stock in an underwritten registered public offering. 

Ulta Beauty (ULTA) is down more than -4% after B Riley Securities initiated coverage of the stock with a sell rating and a price target of $300. 

AngloGold Ashanti Plc (AU) is down more than -7% after announcing that it agreed to buy Centamin Plc for about $2.5 billion. 

StepStone Group (STEP) is down more than -6% after announcing that it offered 4.1 million class A shares via Goldman Sachs. 

Earnings Reports (9/10/2024)

Academy Sports & Outdoors Inc (ASO), Cantaloupe Inc (CTLP), Critical Metals Corp (CRML), Dave & Buster's Entertainment (PLAY), Evolution Petroleum Corp (EPM), GameStop Corp (GME), Innovage Holding Corp (INNV), Mama's Creations Inc (MAMA), Petco Health & Wellness Co Inc (WOOF).

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