What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.71%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.62%.
U.S. stock indexes this morning are moderately lower. Stocks are lower today on concern about the economic implications of today’s U.S. weaker-than-expected economic data and today’s +50 bp rate hike by the European Central Bank (ECB).
Energy stocks are under pressure today, with crude oil down more than -4% on demand concerns. Airline stocks are also falling today after United Airlines Holdings said it is limiting flights for the rest of this year and curtailing growth plans in 2023 due to labor shortages and traffic control issues.
Stocks are seeing underlying support from today’s decline in the 10-year T-note yield by -8.8 bp to 2.929%. Also, Tesla is up more than +6% after reporting better-than-expected Q2 earnings.
U.S. weekly initial unemployment claims unexpectedly rose +7,000 to an 8-month high of 251,000, showing a weaker labor market than expectations of a decline to 240,000.
The U.S. July Philadelphia Fed business outlook survey unexpectedly fell -9.0 to -12.3, weaker than expectations of an increase to 0.8 and the steepest pace of contraction in 2 years.
U.S. Jun leading indicators fell -0.8% m/m, weaker than expectations of -0.6% m/m and the biggest decline in 2 years.
Today’s stock movers…
Carnival (CCL) is down more than -13% today to lead losers in the S&P 500 after launching a $1 billion share offering. Other cruise line operators declined as well, with Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises (RCL) down more than -9%.
Airline stocks are sharply lower today, with United Airlines Holdings (UAL) dropping more than -9% after it reported Q2 adjusted EPS of $1.43, well below the consensus of $1.88, and said it is limiting flights for the rest of this year and curtailing growth plans in 2023 due to labor shortages and traffic control issues. Other airlines are weaker as well, with American Airlines Group (AAL) down more than -8% and Delta Air Lines (DAL) down more than -3%.
Energy stocks and energy service providers are falling today, with the price of crude down more than -4%. Valero Energy (VLO) is down more than -7%. Also, Phillips 66 (PSX), Marathon Oil (MRO), and Baker Hughes (BKR) are down more than -5%. In addition, Devon Energy (DVN), Schlumberger (SLB), Diamondback Energy (FANG), Exxon Mobil (XOM), and ConocoPhillips (COP) are down more than -3%.
Allstate (ALL) is down more than -8% today after it reported Q2 catastrophe losses of $1.11 billion pretax.
Danaher (DHR) is up more than +7% to lead gainers in the S&P 500 after reporting Q2 sales of $7.75 billion, well above the consensus of $7.32 billion.
Tesla (TSLA) is up more than +6% today to lead gainers in the Nasdaq 100 after reporting Q2 adjusted EPS of $2.27, better than the consensus of $1.83.
CSX (CSX) is up more than +3% today after reporting Q2 revenue of $3.82 billion, stronger than the consensus of $3.66 billion.
Las Vegas Sands (LVS) is up more than +3% today after reporting Q2 net revenue of $1.05 billion, better than the consensus of $970.6 million.
Across the markets…
Sep 10-year T-notes (ZNU22) this morning are up +24 ticks, and the 10-year T-note yield is down -8.8 bp at 2.929%. Sep T-notes recovered from a 3-week low, and the 10-year T-note yield fell back from a 1-1/2 week high of 3.079%. T-note prices this morning initially fell to a 3-week low after 10-year German bunds dropped to a 2-1/2 week low when the ECB raised interest rates by a more than expected 50 bp. However, T-note prices recovered their losses and moved higher on the weaker-than-expected U.S. unemployment claims and Philadelphia Fed reports.
The dollar index (DXY00) this morning is down by -0.18%. Weaker-than-expected U.S. economic data today is weighing on the dollar after weekly jobless claims unexpectedly rose to an 8-month high and the July Philadelphia Fed business outlook survey unexpectedly contracted at its steepest pace in 2 years. Also, strength in EUR/USD is undercutting the dollar as the euro rose to a 2-week high today after the ECB raised interest rates more than expected.
EUR/USD (^EURUSD) is up by +0.13% today. EUR/USD today climbed to a 2-week high after the ECB raised interest rates by +50 bp. Also, expectations that the ECB will remain aggressive in tightening monetary policy are supportive for the euro after the ECB said "further normalization of interest rates will be appropriate" and that it will decide on further interest rate hikes "meeting-by-meeting.”
EUR/USD fell back from its best levels today on political turmoil in Italy after Italian Prime Minister Draghi resigned today. Italian President Mattarella accepted the resignation and will meet with leaders of parliament to agree on the next steps, which will likely include snap elections in Italy as early as October.
The ECB raised its deposit facility rate by 50 bp to 0%, a bigger increase than expectations of a 25 bp hike. The ECB also raised its main refinancing rate by 50 bp to 0.5%, more than expectations of a 25 bp rate increase.
USD/JPY (^USDJPY) today is up +0.07%. The yen is slightly lower today after the BOJ kept its monetary policy unchanged as expected and cut its 2022 Japan GDP estimate. Also, dovish comments from BOJ Governor Kuroda undercut the yen when he said, "we have no intention at all of raising interest rates under the yield curve control framework.” Losses in the yen were limited by strong Japanese trade data that showed Japan June exports rose +19.4% y/y, stronger than expectations of +17.0% y/y and the biggest increase in 7 months.
The BOJ, as expected, maintained its policy balance rate at -0.1% and kept its 10-year JGB yield target at about 0%.
The BOJ cut its Japan 2022 GDP forecast to 2.4% from a previous forecast of 2.9% and raised its 2022 core CPI forecast to 2.3% from a previous forecast of 1.9%.
BOJ Governor Kuroda said, "we have no intention at all of raising interest rates under the yield curve control framework. We also have zero intention of expanding the 0.25% range on either side of the yield target. Right now, we need to continue to tenaciously pursue monetary easing."
August gold (GCQ22) this morning is up +3.7 (+0.22%), and September silver (SIU22) is down -0.098 (-0.52%.) Precious metals this morning are mixed. A stronger dollar today is bearish for metals prices. Gold prices initially spiked to a 1-1/4 year low today after the ECB raised interest rates by a more than expected 50 bp. Ongoing fund liquidation of long gold positions continues to weigh on gold prices as long gold positions in ETFs have dropped for 16 consecutive days to a 4-1/2 month low Wednesday. Gold prices recovered their losses today, and silver prices retreated on weaker-than-expected U.S. economic data. Silver also fell after the BOJ cut its Japan 2022 GDP estimate, a sign of weaker industrial metals demand.
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