Stocks Climb on Economic Optimism as China Eases Pandemic Restrictions

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up by +1.27%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.94%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.70%. 

U.S. stock indexes this morning are moderately higher.  Stock indexes are climbing today on an improvement in market sentiment on expectations for global economic activity to pick up as China eases pandemic lockdowns.  U.S. stock indexes also received a boost on a Sunday report from Goldman Sachs that predicts the U.S. economy is on a narrow path to a soft landing. 

Gains in technology stocks are leading U.S stock indexes higher today on carry-over support from a rally in Chinese technology stocks on signs the government may be easing its crackdown on the sector.  The Wall Street Journal reported that Chinese regulators are close to wrapping up their investigation of Didi Global and several other major tech companies, a sign the regulatory crackdown may be ending.

Goldman Sachs predicts the U.S. economy is on a narrow path to a soft landing as improving inflation figures and other factors suggest the Fed may be able to accomplish its aggressive interest rate hike plan without tipping the economy into recession.

Today’s stock movers…

Technology stocks are climbing today to lead the overall market higher.  Alphabet (GOOGL), Lam Research (LRCX), Marvell Technology (MRVL), and ASML Holding NV (ASML) are up more than +3%.  Also, Nvidia (NVDA), Tesla (TSLA), Micron Technology (MU), Crowdstrike Holdings (CRWD), and Intuit (INTU) are up more than +2%. 

Solar stocks are climbing today following reports that President Biden plans to issue a waiver on any new tariffs that the Commerce Department might decide to impose on Southeastern Asian countries as part of its current investigation into Chinese solar companies, which would be supportive of U.S. solar installs.  As a result, array Technologies (ARRY) is up more than +17%, SunRun (RUN) is up more than +8%, SunPower (SPWR) is up more than +6%, and Enphase Energy (ENPH) is up more than +5% to lead gainers in the S&P 500.

Amazon.com (AMZN) is up more than +4% as the company’s 20 for 1 stock split takes effect today. 

Keurig Dr Pepper (KDP) is up more than +4% today after S&P Dow Jones Indices said after the market closed last Friday that the company will be added to the S&P 500 Index on June 21.

U.S.-listed Chinese technology stocks are climbing today on hopes the Chinese government is close to ending its regulatory crackdown on the sector after the Wall Street Journal reported that Chinese regulators are preparing to wrap up their investigation into Didi Global and restore the company’s apps to mobile stores as soon as this week.  Piduoduo (PDD) is up more than +11% today to lead gainers in the Nasdaq 100.  Also, Alibaba Group Holding (BABA) is up more than +8%, and JD.com (JD) is up more than +7%.  In addition, Baidu (BIDU) and NetEase (NTES) are up more than +4%

Twitter (TWTR) is down more than -4% today to lead losers in the S&P 500 after Tesla CEO Musk said in an amended 13D filing that he believes Twitter is breaching their merger agreement by not providing information about spam and fake accounts.

Regeneron Pharmaceuticals (REGN) is down more than -3% today to lead losers in the Nasdaq 100 after Jeffries initiated coverage of the stock with an underperform rating, citing competitive concerns.

Red Robin Gourmet Burgers (RRGB) is down more than -6% today when it was announced after the close of trading last Friday that the company would be removed from the S&P Smallcap 600 Index on June 21. 

Across the markets…

September 10-year T-notes (ZNU22) this morning are down -3 ticks, and the 10-year T-note yield is up +3.3 bp at 2.966%.  Sep T-notes are holding just above last Friday’s 2-1/2 week low, and the 10-year T-note yield is just below last Friday’s 2-1/2 week high of 2.985%.  Strength in stocks today is curbing the safe-haven demand for T-notes.  Also, supply pressures are weighing down T-notes as the Treasury will auction $96 billion of T-notes and T-bonds this week, beginning with Tuesday’s $44 billion auction of 3-year T-notes.

The dollar index (DXY00) this morning is down -0.01%.  The dollar is slightly lower this morning as a rally in stocks reduces the liquidity demand for the dollar.  Also, strength in the yuan weighs on the dollar after the yuan climbed to a 1-month high against the dollar today.  The yuan rallied on expectations for a pickup in Chinese economic activity as the government eased pandemic restrictions and lockdowns. 

EUR/USD (^EURUSD) this morning is down -0.11%.  EUR/USD is under pressure on the expectation the ECB at Thursday’s policy meeting will cut its forecasts for growth in the Eurozone while also raising its outlook for inflation.  The downside in EUR/USD is limited on higher European government bond yields as the 10-year German bund yield climbed to a 7-3/4 year high today at 1.297%. 

USD/JPY (^USDJPY) today is up +0.05% at a 1-month high.  The yen is modestly lower today and is holding just above last month’s 20-year low against the dollar.  Higher T-note yields today are pressuring the yen along with a rally in global equity markets that has curbed the safe-haven demand for the yen. Dovish comments from BOJ Governor Kuroda also weighed on the yen when he said Japan’s economy isn’t in a place appropriate for tightening monetary policy.

BOJ Governor Kuroda said the Japanese economy is still in the middle of a recovery from the pandemic and facing downward pressure from rising commodity prices.  “In this situation, monetary tightening is not at all a suitable measure.”

August gold (GCQ22) this morning is up +1.6 (+0.09%), and July silver (SIN22) is up by +0.332 (+1.52%).  Precious metals today are moderately higher, with silver posting a 1-month high.  A weaker dollar today is supportive of metals prices.  Silver is also climbing today on expectations for a pickup in Chinese economic activity that is supportive of industrial metals demand after the Chinese government eased pandemic restrictions.  However, higher global bond yields today are bearish for gold, and a rally in stocks is limiting gains as it curbs safe-haven demand for precious metals.