Stocks Jump as Recession Fears Ease

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up by +2.25%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.91%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +2.73%. 

Stock indexes today are sharply higher, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 posting 2-week highs.  Comments today from St. Louis Fed President Bullard that recession fears are overdone have sparked a rally in stocks.  Also, inflation concerns receded after the University of Michigan’s 5-10 year inflation expectations rate fell to 3.1% from a 14-year high of 3.3%.  Stocks extended their gains after U.S. May new home sales unexpectedly rose.

St. Louis Fed President Bullard said he favors "front-loading" of rate hikes to contain inflation, and "it is a little early to have the debate about recession probabilities in the U.S."

U.S. May new home sales unexpectedly rose +10.7% m/m to 696,000, stronger than expectations of a decline to 590,000.

The University of Michigan U.S. Jun consumer sentiment index was revised downward by -0.2 to a record low of 50.0 from the originally reported 50.2.

Today’s stock movers…

Technology stocks are climbing today to lead the overall market higher.  Datadog (DDOG), Crowdstrike Holdings (CRWD), Meta Platforms (META), and ASML Holding NV (ASML) are up more than +6%.  Also, Lam Research (LRCX), Marvell Technology (MRVL), Microchip Technology (MCHP), and Zscaler (ZS) are up more than +5%.

Cruise-line operators are rallying today after Carnival reported a Q2 loss of -$1.61 per share, a smaller loss than expectations of -$1.83.  Royal Caribbean Cruises (RCL) is up more than +9% to lead gainers in the S&P 500.  Also, Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH) are up more than +8%.

Casino and hotel stocks are climbing after earnings results from Carnival today suggest that travel demand is strong.   Airbnb (ABNB) is up more than +6% to lead gainers in the Nasdaq 100, and Wynn Resorts (WYNN) is up more than +8%.  Also, Caesars Entertainment (CZR), Penn National Gaming (PENN), and MGM Resorts International (MGM) are up more than +7%.  In addition, Expedia Group (EXPE), American Airlines Group (AAL), and Host Hotels & Resorts (HST) are up more than +6%.   

CalAmp (CAMP) is down more than -23% today after reporting Q1 revenue of $64.7 million, well below the consensus of $69.4 million. 

Across the markets…

Sep 10-year T-notes (ZNU22) this morning are down -7 ticks, and the 10-year T-note yield is up +2.8 bp at 3.113%.  Strength in stocks today is weighing on T-note prices.  Also, comments today from St. Louis Fed President Bullard weighed on T-notes when he said he favors “front-loading” on Fed rate hikes.  T-notes recovered most of their losses on reduced inflation fears after the University of Michigan’s 5-10 year inflation expectations rate fell to 3.1% from an earlier reading of 3.3%. 

The dollar index (DXY00) this morning is down -0.32%.  The dollar today is moderately lower as a rally in stocks has reduced the liquidity demand for the dollar.   Also, strength in EUR/USD is weighing on the dollar.

EUR/USD (^EURUSD) is up +0.26% today.  EUR/USD is moving moderately higher today on comments from ECB President Lagarde, who told EU leaders at a summit in Brussels today that the ECB “will take” the required steps to tame undesirably high inflation. 

The German Jun IFO business climate fell -0.7 to 92.3, weaker than expectations of 92.8.

USD/JPY (^USDJPY) today is up +0.16%.  USD/JPY today is moderately higher.  The yen is under pressure today from higher T-note yields.  The yen also weakened as a sharp rally in stocks today has reduced the safe-haven demand for the yen.

Japan May national CPI ex-fresh food & energy rose +0.8% y/y, right on expectations.

Japan May PPI services prices rose +1.8% y/y, stronger than expectations of +1.7% y/y and the fastest pace of increase in 2 years.

August gold (GCQ22) this morning is down -1.3 (-0.07%), and July silver (SIN22) is down -0.122 (-0.58%).  Precious metals today are moderately lower, with gold falling to a 1-week low and silver dropping to a 6-week low.  Comments today from St. Louis Fed President Bullard weighed on metals when he said he favors “front-loading” Fed rate hikes.  Also, strength in stocks today has curbed safe-haven demand for precious metals. A weaker dollar today is limiting losses in metals. 

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