What you need to know…
The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.57%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.32%.
U.S. stock indexes Monday recovered from 1-1/4 month lows and settled moderately higher. A decline in the 10-year T-note yield Monday to a 1-week low sparked gains in mega-cap technology stocks. Also, M&A activity gave stocks a boost after Elon Musk agreed to buy Twitter for $44 billion. In addition, the PBOC Monday increased stimulus measures in an attempt to boost liquidity after it cut the amount of foreign exchange reserves needed to be held by financial institutions by 1 percentage point to 8%. Finally, an easing of inflation expectations Monday was supportive for stocks after the 10-year breakeven inflation rate fell to a 1-week low.
Stock indexes Monday morning initially opened lower and dropped to 1-1/4 month lows on negative carry-over from a -5% plunge in the Shanghai Composite to a 1-3/4 year low on concern the global economy will slow as China ramps up pandemic restrictions to contain a worsening Covid outbreak. Also, energy stocks slumped Monday after crude prices fell more than -3% to a 1-1/2 week low.
Today’s stock movers…
A decline in T-note yields Monday boosted mega-cap technology stocks. Alphabet (GOOGL), Microsoft (MSFT), and Qualcomm (QCOM) closed up more than +2%.
Homebuilding stocks gained Monday after the 10-year T-note yield dropped to a 1-week low, which could boost housing demand as mortgage rates decline. PulteGroup (PHM) closed up more than +4%, and DR Horton (DHI) and Lennar (LEN) closed up more than +3%.
Vaccine stocks rallied Monday on concern about the spread of Covid in China. Moderna (MRNA) closed up more than +7% Monday to lead gainers in the S&P 500 and Nasdaq 100. Also, BioNTech SE (BNTX) closed up by more than +6%, and Pfizer (PFE) closed up by more than +1%.
Cybersecurity stocks moved higher Monday after Morgan Stanley raised its price target on Palo Alto Networks to $823 from $670. Fortinet (FTNT) closed up more than +6%. Also, Zcaler (ZS) closed up +5%, and Palo Alto Networks (PANW) and Crowdstrike Holdings (CRWD) closed up more than +4%.
Twitter (TWTR) closed up more than +5% Monday after Elon Musk agreed to buy the company in a $44 billion deal.
Penn National Gaming (PENN) closed up more than +4% Monday after Morgan Stanley upgraded the stock to overweight from equal-weight.
A decline of more than -3% in crude oil prices Monday to a 1-1/2 week low undercut energy stocks. Schlumberger (SLB) is down more than -7%. Also, Haliburton (HAL) closed down by more than -6%, and ConocoPhillips (COP) and Baker Hughes (BKR) closed down by more than -4%. In addition, Exxon Mobil (XOM), Occidental Petroleum (OXY), Diamondback Energy (FANG), Phillips 66 (PSX), Devon Energy (DVN), and Marathon Oil (MRO) closed down by more than -3%.
Charles River Laboratories (CRL) closed down more than -7% Monday to lead losers in the S&P 500 after Jeffries downgraded the stock to hold from buy.
Verizon Communications (VZ) closed down more than -3% Monday to lead losers in the Dow Jones Industrials after Goldman Sachs downgraded the stock to neutral from buy.
Across the markets…
June 10-year T-notes (ZNM22) on Monday closed up by +21.5 ticks, and the 10-year T-note yield fell -9.1 bp to 2.808%. Jun T-note prices Monday rallied to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 2.758%. T-note prices were boosted by concern that the pandemic lockdowns in China will weigh on Chinese economic growth and undercut the global economy. A decline in inflation expectations Monday was also supportive for T-notes after the 10-year breakeven inflation rate fell to a 1-week low of 2.897%. T-notes fell back from their best levels Monday after U.S. stocks recovered from early losses and moved higher.
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