Stocks Close Moderately Higher on Strength in Technology Shares

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.59%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.55%. 

U.S. stock indexes on Wednesday posted moderate gains, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 posting 1-1/4 month highs.  A broad rally in technology stocks Wednesday led the overall market higher as cloud software stocks climbed when Bernstein upgraded stocks in the sector.  Also, streaming service stocks rose after Netflix reported it lost fewer streaming customers in Q2 than feared.

A bearish factor for stocks is concern that an energy crisis in Europe could send the region into recession and undercut global growth prospects.  Russian President Putin warned that if a pipeline part for the Nord Steam link that was caught up in sanctions isn’t returned to Russia, then gas flows to Europe will be cut to 20% of capacity as early as next week.

Also weighing on stocks was Wednesday’s news that U.S. June existing home sales fell -5.4% m/m to a 2-year low of 5.12 million, weaker than expectations of 5.35 million.

Citigroup, in a report to clients Tuesday, warned that a global recession is a “clear and present danger,” estimating a 50% probability of a recession over the next 12 to 18 months.

Today’s stock movers…

Strength in cloud software stocks is leading gains in technology stocks today and is bullish for the overall market.  Atlassian Corp Plc (TEAM) closed up more than +11% to lead gainers in the Nasdaq 100 after Bernstein rated the stock outperform. Also, Datadog (DDOG) closed up more than +8% after Bernstein initiated coverage of the stock with an outperform rating and a price target of $172.  In addition, Okta (OKTA) closed up more than +7% after Bernstein rated the stock market perform. 

A broad rally in technology stocks Wednesday was a bullish factor for stocks.  Nvidia (NVDA), Meta Platforms (META), Advanced Micro Devices (AMD), Intuit (INTU), and Applied Materials (AMAT) closed up more than +4%. Also,  Amazon.com (AMZN), Lam Research (LRCX), Adobe (ADBE), and NXP Semiconductors (NXPI) closed up more than +3%. 

Netflix (NFLX) closed up more than +7% Wednesday after reporting it lost 970,000 paid streaming customers in Q2, less than the consensus of 2 million.  Other streaming stocks also gained on the news, with Walt Disney (DIS) and Paramount Global (PARA) closing up more than +3%. 

Cruise line operators Wednesday moved higher on reduced pandemic concerns after the Centers for Disease Control (CDC) said that the agency’s Covid-19 Program for cruise ships is “no longer in effect.”  Royal Caribbean Cruises (RCL) and Carnival (CCL) closed up more than +7%, and Norwegian Cruise Line Holdings (NCLH) closed up more than +4%. 

Baker Hughes (BKR) closed down more than -8% Wednesday to lead losers in the S&P 500 after reporting Q2 revenue of 5.00 billion, below the consensus of $5.35 billion. 

Biogen (BIIB) closed down more than -5% Wednesday to lead losers in the Nasdaq 100 after the law firm Greene LLP said Biogen agreed to pay $900 million to resolve claims regarding “unlawfully” paid kickbacks to physicians and other healthcare professionals.

Merck & Co (MRK) closed down more than -2% to lead losers in the Dow Jones Industrials after it reported its Phase 3 trial of its Keynote-412 for the treatment of patients with unresected locally advanced head and neck squamous cell carcinoma did not meet its primary endpoint.

Elevance Health (ELV) closed down more than -7% Wednesday after Cowen said the company’s Q2 earnings results “fall shy of high expectations” set by managed-care bellwether UnitedHealth Group’s report last week. 

Across the markets…

Sep 10-year T-notes (ZNU22) on Wednesday closed down -6 ticks, and the 10-year T-note yield rose +0.9 bp to 3.03%.  T-notes Wednesday gave up an early advance and posted moderate losses as a rally in stocks curbed safe-haven demand for T-notes.  T-notes Wednesday initially moved higher on strength in German bunds after German June producer prices rose less than expected.

Losses in T-notes Wednesday were contained by strong demand for the Treasury’s $14 billion auction of 20-year T-bonds that had a bid-to-cover ratio of 2.65, above the 10-auction average of 2.51.

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