Stocks Mixed as Strong U.S. Labor Market to Keep Fed Hawkish

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.07%. 

Stock indexes this morning are mixed.  The overall market is under pressure today after the U.S June payroll report showed job gains above expectations and wage growth higher than expected, which will keep the Fed aggressively tightening monetary policy.   The 10-year T-note yield jumped to a 1-week high of 3.090% on the stronger-than-expected U.S. June payroll report, which added to equity market weakness. A rally in healthcare stocks today lifted the S&P 500 and Dow Jones Industrials into positive territory.

Hawkish comments from Atlanta Fed President Bostic pressured stocks today when he said, "the tremendous momentum in the economy to me suggests that we can move rates by 75 bp at the July FOMC meeting and not see a lot of protracted damage to the broader economy."

U.S. June nonfarm payrolls rose +372,000, stronger than expectations of +265,000.  The June unemployment rate was unchanged at 3.6%, right on expectations.

U.S. June avg hourly earnings rose +5.1% y/y, easing from 5.3% y/y in May and the smallest increase in 6 months, but slightly above expectations of +5.0% y/y.

Today’s stock movers…

Higher T-note yields today are weighing on technology stocks.  Nvidia (NVDA), Netflix (NFLX), Meta Platforms (META), Intuit (INTU),  ASML Holding NV (ASML), Okta (OKTA), and Atlassian Corp Plc (TEAM) are all down more than -2%. 

Cruise line operators are falling today after UBS cut its price target on Carnival to $12 from $23. Carnival (CCL), Royal Caribbean Cruises (RCL), and Norwegian Cruise Line Holdings (NCLH) are all down more than -4%. 

Twitter (TWTR) is down more than -4% today to lead losers in the S&P 500 on a Bloomberg report that said Elon Musk’s $44 billion proposed takeover of the company was in “serious jeopardy.”

PayPal Holdings (PYPL) is down more than -3% today to lead losers in the Nasdaq 100 after Redburn cut its recommendation on the stock to neutral from buy.

Defensive healthcare stocks are climbing today.  UnitedHealth Group (UNH) is up more than +2% today to lead gainers in the Dow Jones Industrials.  Also, Centene (CNC) and Humana (HUM) are up more than +2%.  Elevance Healthcare (ELV), Molina Healthcare (MOH), and Cigna (CI) are up more than +1%.

Across the markets…

Sep 10-year T-notes (ZNU22) this morning are down -12 ticks, and the 10-year T-note yield is up +5.4 bp at 3.049%.  Sep T-notes this morning dropped to a 1-week low, and the 10-year T-note yield climbed to a 1-week high of 3.090%.  Today’s U.S monthly payroll data showed a stronger-than-expected increase in U.S June nonfarm payrolls and a faster-than-expected increase in U.S. June hourly earnings, which bolstered expectations for the Fed to remain aggressive in tightening monetary policy.  Weakenss in stocks today is boosting some safe-haven demand for government debt and is limiting losses in T-notes. 

The dollar index (DXY00) this morning is up +0.03%.  The dollar index this morning climbed to a new 20-year high.  Today's stronger-than-expected U.S. June payroll report and hawkish comments from Atlanta Fed President Bostic are bullish for the dollar.  Weak stocks today have also boosted liquidity demand for the dollar.

EUR/USD (^EURUSD) is down -0.17% today and fell to a new 20-year low.  Dollar strength today is weighing on EUR/USD.  Also, divergence in government bond yields today has weakened the euro’s interest rate differentials and is pressuring the euro, with the 10-year T-note yield climbing to a 1-week high while the 10-year German bund yield is essentially flat.

Italian May industrial production fell -1.1% m/m, a smaller decline than expectations of -1.4% m/m.

USD/JPY (^USDJPY) today is up +0.20% at a 1-week high.  Higher T-note yields today are weighing on the yen. Also, weaker than expected Japanese economic data today is weighing on the yen.  USD/JPY spiked lower briefly in overnight trade after former Japanese Prime Minister Abe was assassinated, which temporarily fueled a spike in the safe-haven demand of the yen.

Today’s weaker-than-expected Japanese economic data was bearish for the yen.  Japan’s May household spending unexpectedly fell -0.5% y/y, weaker than expectations of +2.1% y/y.  Also, the Japan Jun eco watchers expectations outlook survey unexpectedly fell -4.9 to a 4-month low of 47.6, weaker than expectations of an increase to 53.6.

August gold (GCQ22) this morning is down -3.8 (-0.22%), and September silver (SIU22) is down -0.128 (-0.67%).  Precious metals today are moderately lower, with gold falling to a 9-1/2 month low.  A rally in the dollar index today to a new 20-year high is bearish for metals prices.  Also, higher T-note yields today are weighing on gold prices.  In addition, hawkish comments from Atlanta Fed President Bostic today undercut metals prices when he said he favors a 75 bp rate hike at the July FOMC meeting.

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