What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.37%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.45%.
U.S. stock indexes this morning are mixed. Weakness in technology stocks is dragging the Nasdaq 100 lower. Higher T-note yields today are weighing on technology stocks. Also, semiconductor stocks are lower after Barclays warned that “chip stocks are still in for a substantial reset.” Expectations for tighter Fed policy are undercutting stocks on the outlook for the Fed to raise the fed funds target range by 75 bp at the conclusion of the Tue/Wed FOMC meeting.
Stocks have support from general Q2 earnings optimism. The market is focused on earnings results this week from the mega-tech companies of Alphabet, Apple, and Microsoft. Energy stocks are moving higher today, with the price of crude oil up more than +1%.
Today’s U.S. economic data was negative for stocks after the June Chicago Fed national activity index was unchanged at a 16-month low of -0.19, weaker than expectations of 0.00. Also, the July Dallas Fed outlook for manufacturing activity index fell -4.9 to a 2-year low of -22.6, weaker than expectations of -18.5.
Today’s stock movers…
Energy stocks and energy service providers are climbing today, with the price of crude oil up more than +1%. Valero Energy (VLO), Marathon Oil (MRO), and Diamondback Energy (FANG) are up more than +3%. Also, APA Corp (APA), Haliburton (HAL), Marathon Petroleum (MPC), and Occidental Petroleum (OXY) are up more than +2%.
SVB Financial Group (SIVB) is up more than +5% today to lead gainers in the S&P 500 on dip buying after the stock tumbled to a 19-month low last Friday.
Travelers Cos (TRV) is up more than +2% today to lead gainers in the Dow Jones Industrials after Raymond James upgraded the stock to a strong buy from market perform.
Semiconductor stocks are under pressure today after Barclays said, “we are not buyers of the recent bounce in chip stocks and think they are still in for a substantial reset.” Nvidia (NVDA), Marvell Technology (MRVL), Lam Research (LRCX), and Advanced Micro Devices (AMD) are down more than -3%. Also, Align Technology (ALGN), Micron Technology (MU), and Applied Materials (AMAT) are down more than -1%.
Newmont (NEM) is down more than -10% today to lead losers in the S&P 500 after reporting Q2 adjusted EPS of 46 cents, weaker than the consensus of 65 cents.
IDEXX Laboratories (IDXX) is down more than -4% today to lead losers in the Nasdaq 100 after Stifel downgraded the stock to hold from buy, citing “too many concerns.”
Across the markets…
Sep 10-year T-notes (ZNU22) this morning are down -11 ticks, and the 10-year T-note yield is up +7.3 bp at 2.823%. Strength in stocks along with higher European government bond yields are undercutting T-note prices today. Also, supply pressures are weighing on T-notes as the Treasury will auction $129 billion of T-notes this week, beginning with today’s $45 billion auction of 2-year T-notes.
The dollar index (DXY00) this morning is down by -0.46%. The dollar is moderately lower today as a rally in stocks reduces the liquidity demand for the dollar. Also, strength in EUR/USD today is weighing on the dollar after ECB Governing Council member Kazaks said that stronger rate hikes from the ECB may not be over.
EUR/USD (^EURUSD) is up by +0.27% today. EUR/USD recovered from early losses and is moderately higher on hawkish comments from ECB Governing Council member Kazaks who said the expected September interest rate increase by the ECB should be "quite significant." Kazaks also said, “a too weak euro is a problem." EUR/USD today initially moved lower after a gauge of German investor confidence fell to a 2-year low.
ECB Governing Council member Kazaks said the ECB's 50 bp rate hike last week was not just front loading and that the expected September interest rate increase should be "quite significant" as well. He added, "we do not target the exchange rate, but the exchange rate is an important element driving inflation. A too weak euro is a problem."
Today’s Eurozone economic data was negative for EUR/USD after the German Jul IFO business climate index fell -3.6 to a 2-year low of 88.6, weaker than expectations of 90.1.
USD/JPY (^USDJPY) today is up +0.32%. The yen is under pressure today from higher T-note yields. Also, today’s action by Japan’s Cabinet Office to cut its 2022 Japan GDP estimate is weighing on the yen. In addition, today’s slump in the 10-year JGB bond yield to a 4-1/2 month low of 0.177% has weakened the yen’s interest rate differentials and pressured the yen.
Japan's Cabinet Office today cut its Japan 2022 GDP forecast to 2.0% from a January estimate of 3.2%, saying private consumption was likely to be weaker than previously forecast due to the resurgence of Covid cases and rising prices inflated by the war in Ukraine.
August gold (GCQ22) this morning is down -7.5 (-0.43%), and September silver (SIU22) is down -0.317 (-1.70%.) Precious metals this morning are moderately lower. Expectations for the Fed to raise interest rates by 75 bp at the Tue/Wed FOMC meeting in weighing on metals prices. Gold is also under pressure today from higher U.S and European government bond yields. Ongoing fund liquidation of long gold positions continues to bearish for gold prices as long gold positions in ETFs have dropped for 18 consecutive days to a 4-1/2 month low last Friday. A weaker dollar today is limiting losses in metals.
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