What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up by +0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.16%.
Stock indexes this morning are mixed, with the S&P 500 and Dow Jones Industrials at 2-week highs. The broader market is moderately higher today on optimism that Chinese growth will pick up after China eased some pandemic restrictions. Airlines and travel stocks are moving higher after China cut in half the time that new arrivals must spend in quarantine. Stocks also found support in comments from New York Fed President Williams, who said the U.S. economy is strong and a recession is not in his base case.
U.S. stock indexes have carry-over support from a rally in China’s Shanghai Composite to a 3-1/2 month high today. The action by China to cut its mandatory quarantine period to 10 days from three weeks for inbound travelers should boost economic activity and ease supply-chain turmoil in the country, which is favorable for global growth.
Losses in technology stocks today are dragging the Nasdaq 100 lower as higher T-note yields weigh on technology stocks. Gains in the overall market were also limited after today’s data showed U.S. June consumer confidence fell more than expected to a 16-month low.
U.S. Apr S&P CoreLogic composite-20 home price index unexpected rose at a record +21.23% y/y, stronger than expectations of a decline to +21.05% y/y.
The Conference Board U.S. Jun consumer confidence index fell -4.5 to a 16-month low of 98.7, weaker than expectations of 100.0.
The U.S. Jun Richmond Fed manufacturing survey unexpectedly fell -10 to a 2-year low of -19, weaker than expectations of an increase to -7.
New York Fed President Williams said the U.S. economy is strong, and a recession is not in his base case. He added that the Fed has a path to bring inflation down, and he sees the Fed hiking to somewhat restrictive rates in 2023.
Today’s stock movers…
Airline and hotel stocks are climbing today after China reduced quarantine times for inbound travelers by half. Wynn Resorts (WYNN) is up by +7% to lead gainers in the S&P 500. Also, Las Vegas Sands (LVS), United Airlines Holdings (UAL), and American Airlines (AAL) are up more than +6%. In addition, Delta Air Lines (DAL), Host Hotels & Resorts (HST), Caesars Entertainment (CZR), and MGM Resorts International (MGM) are up more than +5%.
Boeing (BA) is up more than +5% to lead gainers in the Dow Jones Industrials after SpiceJet of India said it plans to take delivery of at least seven Boeing 737 Max jets this year.
Qualcomm (QCOM) is up more than +3% today to lead gainers in the Nasdaq 100 after Bank of America added the stock to its U.S. 1 list, a collection of its best investment ideas.
Energy stocks and energy service providers are moving higher today, with crude prices up more than +1% at a 1-week high. Occidental Petroleum (OXY) is up more than +6%. Also, Valero Energy (VLO), Marathon Oil (MRO), and Diamondback Energy (FANG) are up more than +5%. In addition, Schlumberger (SLB) and ConocoPhillips (COP) are up more than +4%.
Nike (NKE) is down more than -3% today to lead losers in the S&P 500 and Dow Jones Industrials after it said full-year gross margins would be flat to down 50 basis points due to weak sales in China.
Technology stocks are under pressure today as T-note yields climb. Datadog (DDOG) and Advanced Micro Devices (AMD) are down more than -2% to lead losers in the Nasdaq 100. Also, Adobe (ADBE), Nvidia (NVDA), Amazon.com (AMZN), and Crowdstrike Holdings (CRWD) are down more than -1%.
Across the markets…
Sep 10-year T-notes (ZNU22) this morning are down -6 ticks, and the 10-year T-note yield is up +2.1 bp at 3.221%. A rally in stocks today and higher European government bond yields are pressuring T-note prices today. Also, supply pressures are weighing on T-notes as the Treasury will auction $40 billion 7-year T-notes later today as part of this week’s $133 billion Treasury auction package.
The dollar index (DXY00) this morning is up +0.40%. The dollar this morning shook off early losses and moved higher on hawkish comments from New York Fed President Williams, who said he sees the Fed hiking to somewhat restrictive rates in 2023. Higher T-note yields today are also supportive of the dollar. The dollar today initially moved lower after a rally in global equity markets reduced the liquidity demand for the dollar.
EUR/USD (^EURUSD) is down -0.54% today. The euro retreated today on concerns about the Eurozone economy after Italian Prime Minister Draghi warned that the Eurozone needs a contingency plan if Russia shuts off natural gas flows to Europe. Today’s data that showed weaker than expected consumer sentiment in France and Germany also weighed on EUR/USD.
German Jul GfK consumer confidence fell -1.2 to a record low -27.4 (data from 2005), weaker than expectations of -27.3.
The France Jun consumer confidence indicator fell -3 to a 9-year low of 82, weaker than expectations of 84.
ECB President Lagarde said we would allow interest rates to rise "as far as necessary," complementing efforts to stabilize inflation at the 2% target.
ECB Governing Council member Kazaks said, "if we see that the situation has worsened, that inflation is high, and we see negative news in terms of inflation expectations, then in my view, front-loading interest rate hikes would be a reasonable choice."
USD/JPY (^USDJPY) today is up +0.58%. USD/JPY today is moderately higher and just below last Wednesday’s 23-year high. Higher T-note yields today are undercutting the yen. Also, a rally in global stock markets has reduced the safe-haven demand for the yen.
August gold (GCQ22) this morning is down -4.6 (-0.25%), and July silver (SIN22) is down -0.103 (-0.49%). Precious metals today are moderately lower. Dollar strength today is weighing on metals prices. Also, a rally in stocks has curbed safe-haven demand for precious metals, and higher global bond yields are undercutting gold prices. Precious metals maintained moderate losses this morning on hawkish comments from New York Fed President Williams.
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