What you need to know…
The S&P 500 Index ($SPX) (SPY) this morning is down by -1.98%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.95%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -3.43%.
U.S. stock indexes this morning are sharply lower. Global growth concerns are weighing on stocks today on disappointing U.S. economic data and after China’s Shanghai Composite sank more than -2% when UBS and JPMorgan Chase cut their 2022 China GDP forecasts, citing a contraction in economic activity from China’s pandemic lockdowns.
Snapchat plunged more than -38% today and is undercutting social media stocks and digital advertisers after it warned that it would not meet profit and revenue estimates for Q2. The plunge in Snap also weighed on other social media stocks and digital advertisers, with Trade Desk down more than -17% and Meta Platforms down more than -9%.
Today’s U.S. economic data was bearish for stocks. The May S&P Global manufacturing PMI fell -1.7 to 57.5, weaker than expectations of 57.7. Also, Apr U.S. new home sales plunged -16.6% m/m to a 2-year low of 591,000, weaker than expectations of 749,000. In addition, the May Richmond Fed manufacturing survey fell by -23 points to a 2-year low of -9, weaker than expectations of 10.
UBS cut its China 2022 GDP forecast to 3.0% from 4.2%, citing the impact of its Covid Zero policy. Meanwhile, JPMorgan Chase cut its 2022 China GDP forecast to 3.7% from 4.3%, citing a deep contraction in Q2 because of China's Covid restrictions.
Today’s stock movers…
Snap (SNAP) plunged more than -38% today after warning of deteriorating macroeconomic trends and saying it is unlikely to meet revenue and profit forecasts for Q2.
Social media stocks and other digital advertisers are falling today after Snap cut its forecasts. Pinterest (PINS) is down -21%, Trade Desk (TTD) is down -17%, Roku (ROKU) is down more than -13%, Mega Platforms (FB) is down more than -9%, and Alphabet (GOOGL) is down more than -6%.
Dexcom (DXCM) is down more than -10% today to lead losers in the S&P 500 and Nasdaq 100 on reports that it is in talks to acquire medical-device company Insulet.
Tesla (TSLA) is down more than -3% today amid news that it may take at least until later this week to resume full production at its China factory.
Abercrombie & Fitch (ANF) is down more than -28% today to lead losers in the S&P 600 Smallcap Index after reporting an unexpected Q1 adjusted loss of -27 cents, weaker than the consensus of a 6 cent EPS increase
Walt Disney (DIS) is down more than -4% today to lead losers in the Dow Jones Industrials on a disappointing debut for its “Downton Abbey: A New Era” movie that generated only $16 million in domestic ticket sales over the weekend, below the $20 million forecasted by Boxoffice Pro.
Best Buy (BBY) is up more than +3% today to lead gainers in the S&P 500 after reporting Q1 revenue fell -8.5% y/y to $10.6 billion, better than the consensus of $10.4 billion.
Albemarle (ALB) is up more than +1% today after raising its full-year net sales forecast to $5.8 billion-$6.2 billion from a prior forecast of $5.2 billion-$5.6 billion, above the consensus of $5.22 billion.
O’Reilly Automotive (ORLY) is up more than +1% to lead gainers in the Nasdaq 100 on signs of insider buying after a filing with the SEC showed that CFO Fletcher bought $501,000 of the company’s stock.
Across the markets…
June 10-year T-notes (ZNM22) this morning are up +12 ticks, and the 10-year T-note yield is down -4.3 bp at 2.808%. T-notes this morning are moderately higher as a slump in stocks boosts safe-haven demand for government debt. Global growth concerns are also boosting T-note prices after UBS and JPMorgan Chase both cut their 2022 China GDP estimates. Further upside in T-notes may be limited by supply pressures as the Treasury today will auction $47 billion of 2-year T-notes as part of this week’s auction package of $159 billion of T-notes and floating-rate notes.
The dollar index (DXY00) this morning is down -0.10% at a 4-week low. The dollar today extended Monday’s losses on strength in EUR/USD, which rallied to a 4-week high on hawkish ECB comments. Lower T-note yields today are also undercutting the dollar. A sell-off in stocks today is limiting losses in the dollar.
EUR/USD (^EURUSD) today is up +0.22% at a 4-week high. EUR/USD strengthened today as hawkish comments from ECB President Lagarde and ECB Governing Council member Holzmann nearly cemented expectations for an ECB rate hike in July. EUR/USD fell back from its best levels on weaker than expected Eurozone May manufacturing data.
ECB President Lagarde said a recession is not an ECB baseline for the Eurozone with unemployment "at rock bottom rates" and large household savings. She added that the Eurozone has reached a "turning point" in monetary policy and will be out of negative interest rates before the end of Q3.
ECB Governing Council member Holzmann said Eurozone inflation will be above 2% in 2023 and 2024, and a 50 bp rate hike by the ECB in July would be "appropriate."
The Eurozone May S&P Global manufacturing PMI fell -1.1 to a 1-1/2 year low of 54.4, weaker than expectations of 54.7. The Eurozone May S&P Global composite PMI fell -0.9 to 54.9, weaker than expectations of 55.1.
USD/JPY (^USDJPY) today is down -0.92% at a 5-week low. The yen is rallying today on weaker T-note yields. Also, a sell-off in stocks today has boosted the safe-haven demand for the yen. A stabilization in Japan’s service sector is also supportive for the yen as today’s data showed the Japan May Jibun Bank services PMI rose +1.0 to a 5-month high of 51.7.
The Japan May Jibun Bank manufacturing PMI fell -0.3 to 53.2.
The Japan May Jibun Bank services PMI rose +1.0 to 51.7, the fastest pace of expansion in 5 months.
June gold (GCM22) this morning is up by +11.5 (+0.62%), and May silver (SIK22) is up by +0.252 (+1.16%). Precious metals today are moderately higher but holding just below Monday’s 2-week highs. Metals are seeing support after the dollar index dropped to a 4-week low. Gold is also finding support today from lower global bond yield and a slide in stocks that has boosted safe-haven demand for gold. Hawkish ECB comments today are limiting the upside in gold prices.
