Stocks Slide as Higher T-Note Yields Weigh on Technology Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Thursday closed down -1.21%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -.28%.

U.S. stock indexes Thursday posted moderate losses.  A jump in T-note yields Thursday undercut technology stocks and weighed on the overall market.  T-note yields rose, and stocks fell after hawkish comments Thursday from New York Fed President Williams bolstered speculation the Fed will raise interest rates aggressively to tame rising inflation pressures.  U.S. economic data Thursday and Q1 corporate earnings results were mixed for stocks.  However, losses in the Dow Jones Industrials were limited after Nike jumped more than +4% after the company’s management expressed optimism about its China business.

U.S. weekly initial unemployment claims rose +18,000 to 185,000, showing a weaker labor market than expectations of +170,000.

U.S. Mar retail sales rose +0.5% m/m, weaker than expectations of +0.6% m/m, although Feb retail sales were revised upward to +0.8% m/m from +0.3% m/m.  Mar retail sale ex-autos rose +1.1% m/m, stronger than expectations of +1.0% m/m and Feb retail sales ex-autos were revised upward to +0.6% m/m from +0.2% m/m.

The U.S. Mar import price index ex-petroleum rose +1.1% m/m, stronger than expectations of +1.0% m/m.

The University of Michigan U.S. Apr consumer sentiment unexpectedly rose +6.3 to 65.7, stronger than expectations of a decline to 59.0.

New York Fed President Williams said speeding up the pace of interest-rate increases to include hikes in increments of a half-percentage point is a "reasonable option" for the Fed given how low rates are now.

Today’s stock movers…

Higher T-note yields Thursday weighed on technology stocks.  Atlassian Corp Plc (TEAM) closed down by more than -5%.  Also, DocuSign (DOCU), F5 (FFIV), Nvidia (NVDA), Datadog (DDOG), Advanced Micro Devices (AMD), and KLA Corp (KLAC) closed down by more than -4%.  In addition, Apple (APPL), Tesla (TSLA), Broadcom (AVGO), and Lam Research (LRCX) closed down by more than -3%.

State Street (STT) closed down more than -8% Thursday to lead losers in the S&P 500 after it said it would delay a share repurchase program in an effort to be financially conservative.

WW Grainger (GWW) closed down more than -6% Thursday after Morgan Stanley cut its recommendation on the stock to underweight from equal-weight.

Wells Fargo (WFC) closed down more than -4% Thursday to lead losers in the S&P 500 after it reported Q1 revenue of $17.59 billion, below the consensus of $17.77 billion. 

Nike (NKE) closed up more than +4% Thursday to lead gainers in the S&P 500, and Dow Jones Industrials after the company’s management said it sees its China business on track to deliver “sequential improvement” in fiscal Q4 despite Covid restrictions in the country. 

Caterpillar (CAT) closed up more than +4% Thursday after Deutsche Bank maintained its buy rating on the stock and raised its price target to $250 from $242.

Huntington Ingalls (HII) closed up more than +4% Thursday after Cowen raised its recommendation on the stock to outperform from market perform.

U.S. Bancorp (USB) closed up more than +3% Thursday after reporting Q1 EPS of 99 cents, stronger than the consensus of 94 cents.

Delta Air Lines (DAL) closed up more than +3% Thursday after Barclay’s raised its recommendation on the stock to overweight from equal-weight, citing “surprisingly strong” Q2 guidance. 

Across the markets…

June 10-year T-notes (ZNM22) on Thursday closed down by -27.5 ticks, and the 10-year T-note yield rose +12.8 bp to 2.827%.  Jun T-notes Thursday retreated after U.S. import prices in March rose more than expected and after comments from New York Fed President Williams bolstered expectations for a 50 bp rate hike from the Fed next month.  Higher German bund yields also weighed on T-note prices after ECB President Lagarde warned that price rises have become more widespread and that upside risks to the inflation outlook have increased.