Tech Stocks Lead Broader Market Higher and Offset Bank and Energy Weakness

The S&P 500 Index ($SPX) (SPY) on Tuesday rose by +0.34%, the Dow Jones Industrials Index ($DOWI) (DIA) fell by -0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose by +0.84%.

The broader stock indexes closed higher on Tuesday as tech stocks eventually led the market higher and offset weakness in bank and energy stocks.  Bank stocks fell 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 fall -10% from the prior year, led by declines in the fixed-income business. Tuesday's -4.3% slump in WTI crude oil to a 16-month low undercut energy stocks. 

Tech stocks showed strength on Tuesday, led by chip stocks and a +4.6% rally in Tesla after Deutsche Bank named the stock a top pick with a buy recommendation.  Also, Amazon rallied +2.4%, Microsoft rallied +2.1%, and NVIDIA rallied +1.5%.

Another supportive factor for stocks was Tuesday'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 was supportive of the global economic growth outlook.

The markets were cautious going into Tuesday night'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 34% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 closed down -0.66%.  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) on Tuesday rose by +13 ticks.  The 10-year T-note yield fell -5.8 bp to 3.642%.  Dec T-notes saw support from the sharp sell-off in crude oil prices, which helped knock the 10-year breakeven inflation expectations rate down by -1.6 bp to a 5-week low of 2.208%.  T-notes initially moved lower due to supply pressures, as the Treasury auctioned $58 billion of 3-year T-notes as part of this week's $119 billion auction package of T-notes and T-bonds. 

European government bond yields Tuesday moved lower.  The 10-year German bund yield fell -3.8 bp to 2.131%.  The 10-year UK gilt yield fell -3.7 bp to 3.819%.

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

US Stock Movers

Tesla (TSLA) rallied +4.58% and posted the second largest gain in the Nasdaq 100 after Deutsche Bank named the stock a top pick with a buy recommendation and a price target of $295.

Other mega-cap tech stocks helped lead the broad market higher with a +2.4% rally in Amazon.com (AMZN) and a +2.1% rally in Microsoft (MSFT).  Oracle (ORCL) rallied +11.44% and led gainers in the S&P 500 after reporting Q1 adjusted revenue of $13.31 billion, better than the consensus of $13.26 billion. 

Chip stocks were strong on Tuesday, led by a +5.25% rally in Broadcom (AVGO).  Marvell (MRVL) closed up +3.9%, AMD (AMD)  closed +3.4%, and NVIDIA (NVDA) closed up +1.5%. 

Bank stocks were hammered Tuesday 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.  JPMorgan Chase (JPM) fell -4.78% on Tuesday, Goldman Sachs (GS) fell -3.98%, and Citigroup (C) fell -2.25%.  Other financial losers included Synchrony Financial (SYF) with a -3.78% loss, Capital One Financial (COF) with a -2.82% loss, and Discover Financial Services (DFS) with a -1.82% loss. 

Tuesday's -4.3% slump in WTI crude oil to a 16-month low undercut energy stocks.  Diamondback Energy (FANG) fell -4.31% and led losers in the Nasdaq 100. Exxon Mobil (XOM) fell by -3.23%, and Devon Energy (DVN) fell by -2.41%.  Schlumberger (SLB), Hess Corp (HES), Marathon Oil (MRO), Occidental Petroleum (OXY), and Chevron (CVX) all fell by more than -1%.

Mission Produce (AVO) rallied +22% after reporting Q3 revenue of $324 million, well above the consensus of $231 million.

Calavo Growers (CVGW) rallied +11% after reporting Q3 adjusted EPS of 57 cents, stronger than the consensus of 43 cents. 

Johnson Controls International (JCI) rallied +2.98% after Bank of America Global Research upgraded the stock to buy from neutral. 

Hewlett Packard Enterprise (HPE) fell -8.13% 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) fell -1.70% after B Riley Securities initiated coverage of the stock with a sell rating and a price target of $300. 

AngloGold Ashanti Plc (AU) fell -4.28% after announcing that it agreed to buy Centamin Plc for about $2.5 billion. 

StepStone Group (STEP) fell -3.59% after announcing that it offered 4.1 million class A shares via Goldman Sachs. 

Earnings Reports (9/11/2024)

Designer Brands Inc (DBI), Oxford Industries Inc (OXM), Vera Bradley Inc (VRA).

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