Stocks Climb as Chinese Stimulus Measures Boost Risk Sentiment

The S&P 500 Index ($SPX) (SPY) today is up by +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.17%.

Stocks today are moderately higher, with the Dow Jones Industrials posting a new all-time high.  Global stocks are climbing on carryover support from a +4% surge in Chinese stocks today after China announced additional stimulus measures.   

Risk sentiment was buoyed in stocks today after the PBOC announced a broad package of stimulus measures. The PBOC cut the seven-day reverse repurchase rate by -20 bp to 1.50% from 1.70% and lowered the reserve requirement ratio for large banks by 50 bp to 9.50% from 10.00%, which will boost liquidity in the banking system by 1 trillion yuan ($142 billion).  The PBOC also reduced the minimum down payment ratio to 15% for second-home buyers from 25%.  In addition, the PBOC said it would provide at least 800 billion yuan ($113 billion) of liquidity support for stocks as it will set up a swap facility allowing securities, funds, and insurance companies to tap the PBOC to buy stocks.

The markets are awaiting today’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 51% for a -50 bp rate cut at that meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 rose to a 3-week high and is up +0.87%. China's Shanghai Composite rallied to a 3-week high and closed up sharply by +4.15%.   Japan's Nikkei Stock 225 climbed to a 3-week high and closed up +0.57%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -10 ticks.  The 10-year T-note yield is up +3.6 bp to 3.783%.  Dec T-notes today fell to a 2-week low, and the 10-year T-note yield rose to a 2-1/2 week high of 3.808%.  Today’s global stock market rally has reduced safe-haven demand for T-notes after China boosted stimulus measures.  Also, an increase in inflation expectations is undercutting T-note prices after the 10-year breakeven inflation rate today rose to a 1-3/4 month high of 2.188%.  Also, supply pressures are undercutting T-notes as the Treasury will auction $183 billion T-notes this week, beginning with today’s $60 billion auction of 2-year T-notes. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +3.3 bp to 2.189%.  The 10-year UK gilt yield rose to a 3-week high of 3.996% and is up +6.7 bp to 3.990%.

The German Sep IFO business confidence index fell -1.2 to an 8-month low of 85.4, weaker than expectations of 86.0.

ECB Governing Council member Muller said ECB policymakers may lack sufficient data to make a decision on interest rates in October, but "It will be easier to decide in December because then we'll have a full picture with an updated outlook." 

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 59% for the October 17 meeting.

US Stock Movers

Semiconductor stocks are moving higher today and boosting the overall market.  ON Semiconductors (ON), NXP Semiconductors NV (NXPI), and Microchip Technology (MCHP) are up more than +2%.  Also, Applied Materials (AMAT), Analog Devices (ADI), KLA Corp (KLAC), Lam Research (LRCX), Qualcomm (QCOM), and Texas Instruments (TXN) are up more than +1%. 

US-listed Chinese stocks are rallying today after the PBOC announced a slew of stimulus measures to boost the Chinese economy, housing sector, and stock market.  PDD Holdings (PDD) is up more than +7% to lead gainers in the Nasdaq 100.  Also,  JD.com (JD) is up more than +9%.  In addition, NetEase (NTES), Alibaba Group Holding Ltd (BABA), and Yum China (YUMC) are up more than +6%.

Mining and metals stocks are climbing today after copper prices jumped more than +2% to a 2-1/4 month high when China boosted stimulus measures. As a result, Alcoa (AA) is up more than +7%.  Also, Albemarle (ALB), Freeport McMoRan (FCX), and Southern Copper (SCCO) are up more than +6%.

Salesforce (CRM) is up more than +2% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $325. 

Lowe’s (LOW) is up more than +1% after Oppenheimer & Co. upgraded the stock to outperform from market perform with a price target of $305. 

McKesson Corp (MCK) is down more than -5% to lead losers in the S&P 500 after Baird downgraded the stock to neutral from outperform. 

Visa (V) is down more than -3% to lead losers in the Dow Jones Industrials on news that the US Justice Department’s antitrust division is set to file a lawsuit against the company for a range of anticompetitive conduct.   

Regeneron Pharmaceuticals (REGN) is down more than -3% to lead losers in the Nasdaq 100 after Leerink Partners downgraded the stock to market perform from outperform. 

Autozone (AZO) is down more than -2% after reporting Q4 domestic comparable sales rose +0.2%, well below the consensus of +1.15%. 

Starbucks (SBUX) is down nearly -1% after Jeffries downgraded the stock to underperform from hold with a price target of $76. 

Triumph Group (TGI) is down more than -5% after Bank of America Global Research downgraded the stock to underperform from buy with a price target of $12. 

Earnings Reports (9/24/2024)

AutoZone Inc (AZO), Critical Metals Corp (CRML), KB Home (KBH), Progress Software Corp (PRGS), Stitch Fix Inc (SFIX), Thor Industries Inc (THO), Worthington Enterprises Inc (WOR).

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