Stocks Moderately Higher as T-Note Yields Fall

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up by +0.53%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.85%. 

Stock indexes today are moderately higher as a decline in T-note yields is supporting stocks.  The 10-year T-note yield fell to a 1-1/2 week low today of 3.015%.  Also, a decline in inflation expectations is bullish for stocks after the 10-year breakeven inflation rate dropped to a 4-month low today at 2.470%.  Finally, stocks maintained moderate gains after Fed Chair Powell said today that the U.S. economy is “well-positioned” to handle higher interest rates.

Stocks have negative carry-over from a drop in the Euro Stoxx 50 today to a 3-1/2 month low.  Also, weaker-than-expected U.S. economic data today is limiting the upside in stocks after weekly jobless claims fell less than expected and a gauge of U.S. manufacturing activity slowed more than expected to a nearly 2-year low.   

U.S. weekly initial unemployment claims fell -2,000 to 229,000, showing a slightly weaker labor market than expectations of 226,000.

The U.S.Q1 current account deficit was a record -$291.4 billion, wider than expectations of -$275.0 billion.

The U.S. Jun S&P Global manufacturing PMI fell -4.6 to a nearly 2-year low of 52.4, weaker than expectations of 56.0.

Today’s stock movers…

Homebuilders are moving higher today, led by a +5% jump in KB Home (KBH) after it reported Q2 revenue of $1.72 billion, above the consensus of $1.65 billion.  Also, Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) are up more than +3%. 

U.S.-listed Chinese technology companies are climbing today on signs that China’s regulatory crackdowns are easing.  Pinduoduo (PDD) is up more than +7% to lead gainers in the Nasdaq 100.  Also, Alibaba Group Holding (BABA) is up more than +6%, and Baidu (BIDU) and JD.com (JD) are up more than +4%. 

FactSet Research Systems (FDS) is up more than +3% today after reporting Q3 revenue of $488.8 million, better than the consensus of $476 million. 

Merck & Cop (MRK) is up more than +2% today to lead gainers in the Dow Jones Industrials after the U.S. Centers for Disease Control on Immunization Practices unanimously voted to include Merk’s Vaxneuvance as a recommended option for vaccinations in infants and children, the first new pneumococcal vaccine for pediatric populations to be recommended in almost ten years. 

Travel-related stocks are falling today after Morgan Stanley lowered its price targets on several stocks due to concerns about travel demand going forward.  Booking Holdings (BKNG) is down more than -4% to lead losers in the Nasdaq 100 after Morgan Stanley cut its price target on the stock to $2,100 from $2,820.  Also, Airbnb (ABNB) is down -3% after Morgan Stanley cut its price target on the stock to $100 from $145, and Expedia Group (EXPE) is down more than -2% after its price target was cut to $140 from $210.  

Robert Half International (RHI) is down more than -6% today to lead losers in the S&P 500 after Bank of America cut its recommendation on the stock by two notches to underperform from buy. 

Airline stocks and hotels are moving lower today after Raymond James said U.S. airlines’ demand is seen moderating in the second half of the year.  United Airlines Holdings (UAL) is down more than -4%.  Also, Delta Air Lines (DAL), Wynn Resorts (WYNN), MGM Resorts International (MGM), American Airlines Group (AAL), and Alaska Air Group (ALK) are all down more than -3%. 

Across the markets…

Sep 10-year T-notes (ZNU22) this morning are up +1-5/32 points, and the 10-year T-note yield is down -13.4 bp at 3.022%.  Sep T-notes today climbed to a 2-week high, and the 10-year T-note yield fell to a 1-1/2 week low of 3.015%.  A rally in German bunds today led T-notes higher after weaker than expected Eurozone economic data pushed 10-year German bunds up to a 1-1/2 week high.  Also, a fall in inflation expectations supports T-note prices after the 10-year breakeven inflation rate today dropped to a 4-month low of 2.470%.

The dollar index (DXY00) this morning is up +0.13%.  The dollar today is modestly higher.  Weakness in EUR/USD is supporting gains in the dollar.  However, the upside in the dollar is limited due to lower T-note yields and weaker-than-expected U.S economic data on weekly jobless claims and Q1 current account deficit.

EUR/USD (^EURUSD) is down -0.45% today.  Economic concerns are weighing on the euro today after Eurozone June PMI data on manufacturing and service activity fell more than expected.  Lower European government bond yields are also weighing on EUR/USD after the 10-year German bund yield fell to a 1-1/2 week low today at 1.417%.

The Eurozone Jun S&P Global manufacturing PMI fell -2.6 to a 1-3/4 year low of 52.0, weaker than expectations of 53.8.  Also, the Eurozone Jun S&P Global composite PMI fell -2.9 to a 16-month low of 51.9, weaker than expectations of 54.0.

USD/JPY (^USDJPY) today is down -1.20%.  USD/JPY today is moderately lower as a decline in T-note yields boosts the yen.  The 10-year T-note yield dropped to a 1-1/2 week low today and sparked short-covering in the yen.  The yen also rallied today after Takehiko Nakao, former head of foreign exchange policy at Japan’s finance ministry, said “unilateral intervention shouldn’t be eliminated as a possibility” to stem the yen’s slide.

August gold (GCQ22) this morning is down -0.5 (-0.03%), and July silver (SIN22) is down -0.091 (-0.42%).  Precious metals today are slightly lower, with silver posting a 1-week low.  A stronger dollar and expectations for additional Fed rate hikes are weighing on metals today after Fed Chair Powell on Wednesday said that “ongoing rate increases will be appropriate.”  Silver prices also fell after today’s data showed Eurozone and U.S. manufacturing activity declined more than expected, a bearish sign for industrial metals demand.  A decline in global bond yields today limited losses in gold.

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