Lower T-Note Yields Boost Technology Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.42%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.68%. 

Stocks on Tuesday settled mixed.  Tuesday's rebound in technology stocks helped the overall market recover from early losses.  Technology stocks rallied after the 10-year T-note yield fell to a 5-week low.  Stock indexes Tuesday morning initially fell on concern that a tighter Fed policy will push the economy into recession.  Also, commodity producers and energy stocks fell on concern that a slowing economy will curb demand for commodities.

U.S. stock indexes initially moved higher in overnight trade on optimism about U.S.-China talks aimed at tariff reductions. U.S. and Chinese officials discussed U.S. economic sanctions and tariffs Tuesday amid reports the Biden administration will soon roll back some of the trade restrictions imposed by former President Trump.  According to a statement Tuesday from China’s Ministry of Commerce, the two sides discussed economic policy and stabilizing global supply chains, and the talks were pragmatic and constructive. 

Morgan Stanley said the U.S. economy is in the middle of a slowdown that's turning out to be worse than expected amid the war in Ukraine and China's Covid Zero policy.

Tuesday’s U.S. economic data was better than expected and supportive for stocks after May factory orders rose +1.6% m/m, stronger than expectations of +0.5% m/m.

The Reserve Bank of Australia (RBA) Tuesday raised its key benchmark interest rate by 50 bp to 1.35%, as expected.  The Australian central bank is among the more than 80 central banks to have raised interest rates this year. 

Today’s stock movers…

Technology stocks Tuesday shook off early losses and rallied after the 10-year T-note yield dropped to a 5-week low.  Zoom Video Communications (ZM) closed up more than +8% to lead gainers in the Nasdaq 100.  Also, DocuSign (DOCU), Okta (OKTA), and Zscaler (ZS) closed up more than +6%.  Alphabet (GOOGL) and Meta Platforms (META) closed up more than +4%, and Amazon.com (AMZN) closed up more than +3%.

Cruise line operators Tuesday recovered from sharp early losses and rallied moderately after crude prices tumbled to a 2-1/2 month low, which should lead to lower fuel costs and boost the profitability of the companies.  Norwegian Cruise Line Holdings (NCLH) closed up more than +9%.  Also, Carnival (CCL) closed up more than +6%, and Royal Caribbean Cruises (RCL) closed up more than +3%. 

Etsy (ETSY) closed up more than +10% Tuesday to lead gainers in the S&P 500.  Etsy added to last Friday’s +9% rally after Raymond James initiated coverage of the stock with a recommendation of outperform. 

Moderna (MRNA) closed up more than +3% Tuesday after Switzerland’s Federal Office of Public Health recommended that people over age 80 have a further Covid booster vaccination and that this autumn, it will recommend all people receive Covid booster shots.

A plunge of more than -8% in crude oil prices Tuesday undercut energy stocks and energy service providers.  Halliburton (HAL) closed by more than -8% to lead losers in the S&P 500.  Also, APA Corp (APA), ConocoPhillips (COP), and Schlumberger (SLB) closed down by more than -7%.  In addition, Marathon Oil (MRO), Diamondback Energy (FANG), and Devon Energy (DVN) closed down more than +6%.  Finally, Chevron (CVX) closed down more than -2% to lead losers in the Dow Jones Industrials.

Utilities and power companies retreated Tuesday.  Excelon (EXC) closed down more than -5% to lead losers in the Nasdaq 100.  Also, Constellation Energy (CEG) and American Electric Power Co (AEP) closed down by more than -4%.  Xcel Energy (XEL) closed down by more than -3%.

Freeport-McMoRan (FCX) closed down more than -6% Tuesday after copper prices tumbled to a 19-month low and silver prices sank to a 2-year low on concern a slowdown in the global economy will undercut demand for industrial metals.

Across the markets…

Sep 10-year T-notes (ZNU22) on Tuesday closed up by +21 ticks, and the 10-year T-note yield fell -6.2 bp to 2.818%.  Sep T-notes Tuesday rallied to a 5-week high, and the 10-year T-note yield fell to a 5-week low of 2.776%.  Recession fears Tuesday slammed stocks early and sparked safe-haven demand for T-notes.  Also, a fall of more than -8% in crude oil prices Tuesday undercut inflation expectations and were bullish for T-notes. 

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