Inflation Report Sparks Mixed Market Reaction

The S&P 500 Index ($SPX) (SPY) today is down by +0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.45%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.36%.

Stocks today are mixed, with the Dow Jones Industrials climbing to a new record high.   Today’s US personal spending and income reports were weaker-than-expected and Fed-friendly.  Also, the Aug core PCE price index, the Fed’s preferred inflation gauge, came in right on expectations, knocking T-note yields lower and supporting stocks. An upward revision to the University of Michigan US Sep consumer sentiment index to a 5-month high supported stocks.  However, chip stocks turned lower today, weighing on the Nasdaq 100.

US Aug personal spending rose +0.2% m/m, slightly weaker than expectations of +0.3% m/m.  Aug personal income rose +0.2% m/m, weaker than expectations of +0.4% m/m.

The US Aug core PCE price index rose +2.7% y/y, which was right on expectations.

The University of Michigan’s Sep US consumer sentiment index was revised upward by +1.1 to a 5-month high of 70.1, stronger than expectations of 69.4.

Global equity markets have carryover support from today’s +2% rally in Chinese stocks to a 3-1/2 month high.  China's Shanghai Composite has rallied more than +12% this week after government leaders boosted stimulus measures and pledged to support fiscal spending and revive economic growth.

The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 54% for a -50 bp rate cut at that meeting.

Overseas stock markets today are moving higher.  The Euro Stoxx 50 rallied to a 3-1/2 month high and is up +0.65%.  China's Shanghai Composite climbed to a 3-1/2 month high and closed up by +2.88%.   Japan's Nikkei Stock 225 rose to a 2-month high and closed up +2.32%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +4 ticks.  The 10-year T-note yield is down -3.4 bp at 3.762%.  T-note prices are climbing on positive carryover from today’s rally in 10-year German bunds to a 1-1/2 week high.  Also, today’s weaker-than-expected US Aug personal spending and income reports were bullish for T-notes.  In addition, the US Aug core PCE price index came in right on expectations, a dovish factor for Fed policy.  T-note prices fell back from their best levels after the University of Michigan’s Sep US consumer sentiment index was revised upward to a 5-month high.

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-1/2 week low of 2.109% and is down -5.0 bp at 2.133%.  The 10-year UK gilt yield is down -3.0 bp at 3.980%.

The Eurozone Sep economic confidence indicator fell -0.3 to 96.2, weaker than expectations of 96.5.

The ECB's Eurozone Aug 1-year inflation expectations eased to a 3-year low of +2.7% from +2.8% in July, right on expectations.  The Aug 3-year inflation expectations eased to +2.3% from +2.4% in July, right on expectations.

The French Sep CPI (EU harmonized) eased to +1.5% y/y from +2.2% y/y in Aug, better than expectations of +1.9% and the smallest increase in 3 years. 

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 84% for the October 17 meeting.

US Stock Movers

Chip stocks gave up early gains today and turned lower, weighing on the Nasdaq 100.  Marvell Technology (MRVL) is down more than -3% to lead losers in the Nasdaq 100.  Also, Nvidia (NVDA) and Broadcom (AVGO) are down more than -2%.  In addition, KLA Corp (KLAC), Lam Research (LRCX), Micron Technology (MU), and ASML Holding NV (ASML) are down more than -1%.   

Wynn Resorts (WYNN) is up more than +5% to lead gainers in the S&P 500 after Mogan Stanley upgraded the stock to overweight from equal weight with a price target of $104.   

Generac Holdings (GNRC) is up more than +3% after Hurricane Helene knocked out power to more than 4 million people in the southeastern US, likely boosting the company’s generator sales.

Biomea Fusion (BMEA) is up more than +3% after Truist Securities upgraded the stock to buy from hold with a price target of $54. 

Establishment Labs Holdings (ESTA) is up more than +18% after it received FDA approval for its Motiva breast implants. 

TransMedics Group (TMDX) is up more than +10% after S&P Dow Jones Indices said the company would replace Ensign Group in the S&P SmallCap 600 before the opening of trading on October 1.

Bristol Myers Squibb (BMY) is up more than +2% after gaining FDA approval for its Cobenfy drug to treat patients with schizophrenia. 

Amgen (AMGN) is up more than +1% after Cantor Fitzgerald initiated coverage on the stock with a recommendation of overweight with a price target of $405.

HP Inc (HPQ) is down more than -3% after Bank of America downgraded the stock to neutral from buy. 

Costco Wholesale (COST) is down more than -1% after reporting Q4 net sales of $78.19 billion, below the consensus of $78.59 billion. 

Cassava Sciences (SAVA) is down more than -13% after the company said two of its former executives agreed to pay more than $40 million to settle SEC charges that they made misleading statements about the results of an Alzheimer’s drug trial. 

Intuit (INTU) is down more than -1% after forecasting full-year adjusted EPS of $19.16-$19.36, with a mid-point below the consensus of $19.34.

Summit Therapeutics (SMMT) is down more than -7% after Citigroup downgraded the stock to neutral from buy. 

Earnings Reports (9/27/2024)

NANO Nuclear Energy Inc (NNE) and Spire Global Inc (SPIR).

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