Stocks Mixed as the 10-Year T-note Yield Climbs Back Above 3%

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is down by -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.39%. 

U.S. stock indexes this morning are mixed.  Global economic concerns are weighing on stocks today after the OECD cut its 2022 global GDP forecast.  Stocks are also seeing downward pressure from inflation concerns as crude oil prices today climbed to a 3-month high.  The 10-year T-note is up +3.3 bp today at 3.007% as the yield climbs back above the 3.00% level. 

A slide of more than -3% in Intel today is weighing on the overall market after Citigroup said it was cutting its full-year sales estimate for the company after it warned of slower business this quarter during a technology conference. 

The Organization for Economic Cooperation and Development (OECD) cut its 2022 global GDP forecast to 3.0% from a 4.5% estimate in December.

Today’s stock movers…

Altria Group (MO) is down more than -6% today to lead losers in the S&P 500 after Morgan Stanley downgraded the stock to underweight, citing increasing macro pressures and competitive risks.

Charles River Laboratories (CRL) is down more than -3% today after cutting its Q2 non-GAAP EPS growth estimate to low-to-mid-single-digit growth from a prior view of mid-to-high-single-digit growth. 

Intel (INTC) is down more than -3% today to lead losers in the Dow Jones Industrials and Nasdaq 100 after Citigroup said it was cutting its full-year sales estimate for the company to $71.9 billion from a previous estimate of $74.4 billion and said “we now expect Intel to negatively pre-announce or miss Q2 guidance.”   Other chipmakers are falling as well, with NXP Semiconductors NV (NXPI), Micron Technology (MU), Marvell Technology (MRVL), Microchip Technology (MCHP), and Texas Instruments (TXN) all down more than -1%. 

Homebuilders are weaker today after weekly data from the MBA showed mortgage applications fell -6.5% last week, the fourth consecutive decline.  DR Horton (DHI), Lennar (LEN), Toll Brothers (TOL), and PulteGroup (PHM) are all down more than -1%.

U.S.-listed Chinese stocks are climbing today after China approved the second batch of video games this year, signaling an easing of its regulatory crackdown and supporting China’s internet sector.  Pinduoduo (PDD) is up more than +4% to lead gainers in the Nasdaq 100.  Also, Alibaba Group Holding (BABA) and JD.com (JD) are up more than +4%.  In addition, NetEase (NTES) is up more than +3%, and Baidu (BIDU) is up more than +1%. 

Moderna (MRNA) is up more than +3% today after it said its Covid-19 vaccine that targets omicron generated a “superior” immune response against the variant compared to its original shot that could pave the way for another round of booster shots in the fall.

Across the markets…

September 10-year T-notes (ZNU22) this morning are down -7 ticks, and the 10-year T-note yield is up +3.3 bp at 3.007%.  A jump in European government bond yields is weighing on T-note prices today after the 10-year German bund yield rose to an 8-year high of 1.363%.  Supply pressures are also weighing on T-note prices as the Treasury will auction $33 billion of 10-year T-notes later today as part of this week’s sale of $96 billion of T-notes and T-bonds.

The dollar index (DXY00) this morning is up +0.06%.  The dollar this morning is slightly higher and holding just below Tuesday’s 2-week high.  Higher T-note yields today are supporting the dollar along with weakness in stocks, which has boosted the liquidity demand for the dollar.  In addition, the yen continues to sink as it plunged today to a new 20-year low against the dollar.

EUR/USD (^EURUSD) this morning is up +0.31%.  EUR/USD is climbing today on a jump in European government bond yields.  The 10-year German bund yield climbed to an 8-year high today, which strengthens the euro’s interest rate differentials.  Also, short-covering is pushing EUR/USD higher today ahead of tomorrow’s ECB meeting, where the central bank is expected to announce the end of QE and provide a timeline for interest rate hikes.  Today’s Eurozone economic data was mixed for EUR/USD.

Eurozone Q1 GDP was revised upward to +0.6% q/q and +5.4% y/y from the previously reported +0.3% q/q and +5.1% y/y.

German Apr industrial production rose +0.7% m/m, weaker than expectations of +1.2% m/m.

USD/JPY (^USDJPY) today is up +1.14% at a new 20-year high.  The yen continues to sink and dropped to a new 20-year low against the dollar today.  Central bank divergence is the main bearish factor hammering the yen with the BOJ maintaining QE and record low-interest rates while other global central banks end their QE programs and begin raising interest rates.  Today’s Japanese economic data was actually bullish for the yen but had a limited effect on the currency.

Japan Q1 GDP was revised upward to -0.5% (q/q annualized) from the previously reported -1.1%.

The Japan May eco watchers outlook survey rose +2.2 to a 6-month high of 52.5, stronger than expectations of 51.5.

August gold (GCQ22) this morning is up +5.5 (+0.30%), and July silver (SIN22) is down by -0.088 (-0.40%).  Precious metals today are mixed, with silver falling to a 1-week low.  A stronger dollar today is bearish for metals prices. Also, the action by the OECD today to cut their 2022 global GDP forecast is bearish for industrial metals demand and silver prices.  Weakness in stocks today is boosting safe-haven demand for precious metals.  However, higher global bond yields today are negative for gold.