Stocks Supported by Optimism About the US Economic Outlook

The S&P 500 Index ($SPX) (SPY) today is up by +0.01%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.18%.

Stocks today are treading water this afternoon. Earlier in the day the S&P 500 climbing to a 2-month high, the Dow Jones Industrials posting a new record high, and the Nasdaq 100 rising to a 2-1/2 week high.  Today's positive corporate and economic news has boosted optimism in the US economic outlook and is pushing stocks higher.  Intel is up more than +3% after the chipmaker won new business from Amazon.com.  Also, Microsoft is up +1% after it raised its quarterly dividend by 10% and announced a new $60 billion stock repurchase program.  Stocks maintained moderate gains after strength in today’s US retail sales and manufacturing production reports supported the outlook for a soft landing. 

Aug retail sales unexpectedly rose +0.1% m/m, stronger than expectations of a -0.2% m/m decline. However, Aug retail sales ex-autos rose only +0.1% m/m, slightly weaker than expectations of +0.2% m/m.

US Aug manufacturing production rose +0.9% m/m, stronger than expectations of +0.2% m/m and the largest increase in 6 months.

The US Sep NAHB housing market index rose +2 to 41, right on expectations.

The markets will look to the 2-day FOMC meeting that begins today to see whether policymakers will decide that a -25 bp cut in the fed funds target range would be adequate for a US economy that has shown signs of losing momentum or whether they will decide on a larger -50 bp rate cut instead.  Post-meeting comments from Fed Chair Powell on Wednesday will also be scrutinized regarding the Fed’s future policy intentions. 

The markets are discounting the chances at 100% for a -25 bp rate cut for the Tue/Wed FOMC meeting and at 64% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 climbed to a 1-1/2 week high and is up +0.79%.  China's Shanghai Composite was closed for the Mid-Autumn Festival holiday.  Japan's Nikkei Stock 225 closed down -1.03%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -6 ticks.  The 10-year T-note yield is up +1.9 bp at 3.636%.  Dec T-notes today gave up early gains and are slightly lower, and the 10-year T-note yield rebounded from a 15-month low of 3.595% and is moderately higher.  The stronger-than-expected US retail sales and manufacturing production reports weighed on T-note prices.  Also, strength in stocks today has reduced safe-haven demand for T-notes. 

T-notes today initially moved higher on heightened speculation the Fed will cut interest rates by -50 bp at this week’s 2-day FOMC meeting.  Swap markets showed the chances of a -50 bp rate cut rose to 64% today from 52% last Friday. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +2.0 bp at 2.142%.  The 10-year UK gilt yield rebounded from a 7-1/2 month low of 3.729% and is up +1.9 bp at 3.778%.

The German Sep ZEW survey expectations of economic growth index fell -15.6 to an 11-month low of 3.6, weaker than expectations of 17.0.

ECB Governing Council member Simkus said the likelihood of an October interest rate cut by the ECB is "very small."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 32% for the October 17 meeting.

US Stock Movers

Intel (INTC) is up more than +6% to lead gainers in the S&P 500, Dow Jones Industrials and Nasdaq 100  after the chipmaker landed Amazon.com’s AWS as a customer for its chip manufacturing business. 

HP Enterprise (HPE) is up more than +5% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $24. 

Airbnb (ABNB) is up more than +4% after Uber won its fight against a state government claim in Australia that ruled its payments to drivers were not wages, which bolstered speculation other businesses with similar payment arrangements to Uber’s may benefit from its win in a long-standing payroll tax dispute.

AppLovin (APP) is up more than +5% after UBS upgraded the stock to buy from neutral with a price target of $145.

Insulet (PODD) is up more than +3% after Piper Sandler raised its price target on the stock to $285 from $230.

GE Vernova (GEV) is up more than +3% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $300. 

Dell Technologies (DELL) is up more than +1% after Mizuho Securities initiated coverage on the stock with a recommendation of outperform and a price target of $135. 

Microsoft (MSFT) is up more than +1% after it raised its quarterly dividend by 10% and announced a new $60 billion stock repurchase program. 

Accenture Plc (ACN) is down more than -4% to lead losers in the S&P 500 after Bloomberg News reported the company plans to push back the bulk of its staff promotions by six months as a weak outlook is curbing IT spending.

Atlassian (TEAM) is down more than -2% to lead losers in the Nasdaq 100 on signs of insider selling after an SEC filing showed CEO Cannon-Brookes sold $1.31 million shares last Friday.

Defense companies are under pressure today on a Bloomberg report that said some of Ukraine’s allies are contemplating how to negotiate a cease-fire between Russia and Ukraine.  As a result, L3Harris Technologies (LHX), Lockheed Martin (LMT), Northrop Grumman (NOC), General Dynamics (GD), and RTX Corp (RTX) are down more than -1%. 

S&P Global Inc (SPGI) is down more than -1% after the stock was removed from Bank of America Global Research’s US number 1 list.

Acushnet Holdings (GOLF) is down more than -2% after Jeffries downgraded the stock to hold from buy. 

Earnings Reports (9/17/2024)

Ferguson Enterprises Inc (FERG).

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