Stocks Slightly Higher on the Outlook for Additional Fed Easing

The S&P 500 Index ($SPX) (SPY) today is up by +0.18%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.31%.

Stocks today are mostly higher as the markets look to fresh signs on the scope of further Fed easing after Minneapolis Fed President Kashkari said today that he supports another 50 bp of rate cuts this year.  Also, positive corporate news is boosting stocks, with Intel up more than +3% after Bloomberg reported that Apollo Global Management offered to make a multibillion-dollar investment in the company. 

The US Aug Chicago Fed national activity index rose +0.54 to 0.12, stronger than expectations of -0.20.

Minneapolis Fed President Kashkari said, "The balance of risks has shifted away from higher inflation and toward the risk of a further weakening of the labor market, warranting a lower federal funds rate, and he supports another 50 bp of rate cuts this year.

The markets are awaiting Tuesday’s Conference Board US Sep consumer confidence index, which is expected to climb +0.7 to 104.0.  Also, inflation news on Friday is awaited when the US core PCE price index, the Fed’s preferred inflation gauge, is released.  The consensus is that the Aug core PCE price index rises +0.2% m/m and climbs +2.7% y/y from +2.6% y/y in July.

The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 49% for a -50 bp rate cut at that meeting.

The action by China to boost stimulus may help spur economic growth, which boosts global growth prospects and supports stocks. The PBOC on Sunday cut the 14-day reverse repo rate by -10 bp to 1.85% from 1.95%, and PBOC Governor Pan Gongsheng will hold a press conference Tuesday on financial support for economic development.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.37%.  China's Shanghai Composite climbed to a 2-week high and closed up +0.44%.   Japan's Nikkei Stock 225 did not trade with markets in Japan closed for the Autumnal Equinox Day holiday.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -8 ticks.  The 10-year T-note yield is up +2.3 bp to 3.764%.  Dec T-notes today are moderately lower. Stronger-than-expected US economic news weighed on T-note prices after the Aug Chicago Fed national activity index rose more than expected.  Also, supply pressures are undercutting T-notes as the Treasury will auction $183 billion T-notes this week, beginning with Tuesday’s $60 billion auction of 2-year T-notes.  Losses in T-notes are limited by dovish comments from Minneapolis Fed President Kashkari, who said he supports another 50 bp of rate cuts this year.

European government bond yields today are mixed.  The 10-year German bund yield is down -3.8 bp to 2.169%. The 10-year UK gilt yield rose to a 2-week high of 3.928% and is up +2.0 bp to 3.922%.

The Eurozone Sep S&P manufacturing PMI fell -1.0 to 44.8, weaker than expectations of 45.7 and the steepest pace of contraction in 9 months. 

The Eurozone Sep S&P composite PMI fell -2.1 to 48.9, weaker than expectations of 50.5 and the steepest pace of contraction in 8 months.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 42% for the October 17 meeting.

US Stock Movers

The strength in chip stocks today is supportive of the overall market.  Micron Technology (MU) is up more than +4% to lead gainers in the Nasdaq 100.  Also, ARM Holdings PLC (ARM), KLA Corp (KLAC), and Applied Materials (AMAT) are up more than -1%. 

Intel (INTC) is up more than +2% to lead gainers in the Dow Jones Industrials after Bloomberg reported that Apollo Global Management offered to make a multibillion-dollar investment in the company. 

Vistra (VST) is up more than +5% after Mogan Stanley raised its price target on the stock to $132 from $110.

Ciena (CIEN) is up more than +4% after Citigroup double-upgraded the stock to buy from sell with a price target of $68. 

Bank of NY Mellon (BK) is up more than +1% after Deutsche Bank upgraded the stock to buy from neutral with a price target of $80. 

Lennar (LEN) is up more than +1% after Zellman & Associates upgraded the stock to outperform from market perform. 

General Motors (GM) is down more than -3% to lead losers in the S&P 500 after Bernstein downgraded the stock to market perform from outperform. 

Ulta Beauty (ULTA) is down more than -2% after TD Cowen downgraded the stock to hold from buy. 

Nike (NKE) is down more than -1% to lead losers in the Down Jone Industrials after JPMorgan Chase put the stock on negative catalyst watch ahead of Nike’s Q1 earnings report on October 1.

Analog Devices (ADI) and Microchip Technology (MCHP) are down nearly -1% after Truist Securities downgraded the chipmakers to hold from buy.

Moody’s Corp (MCO) is down more than -1% after Raymond James downgraded the stock to underperform from market perform. 

Earnings Reports (9/23/2024)

AAR Corp (AIR), Aviat Networks Inc (AVNW), Dakota Gold Corp (DC).

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