Stocks Slightly Higher on Positive U.S Economic News

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.30%. 

Stocks this morning are slightly higher on better-than-expected U.S. economic news, including July capital goods orders and July pending home sales.  Also, a 5% jump in Intuit is supporting technology stocks after the company reported better-than-expected quarterly earnings results.

Higher T-note yields today are limiting the upside in stocks. The 10-year T-note yield rose to an 8-week high today at 3.113%.  T-note yields are rising as the market braces for the possibility of hawkish comments from the Fed at Friday’s annual Fed symposium at Jackson Hole, Wyoming. Recent Fed commentary signals the Fed will continue its aggressive rate-hike plan to tame inflation. 

Today’s U.S. economic news is supportive of stocks. July capital goods new orders nondefense ex-aircraft, a proxy for capital spending, rose +0.4% m/m, slightly stronger than expectations of +0.3% m/m.  Also, July pending home sales fell -1.0% m/m, a smaller decline than expectations of -2.6% m/m.

Today’s stock movers…

Intuit (INTU) is up more than +5% today to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 net revenue of $2.41 billion, better than the consensus of $2.34 billion. 

Homebuilders are moving higher after today’s report that U.S. July pending home sales July fell less than expected.  As a result, Lennar (LEN) and DR Horton (DHI) are up more than +2%, and PulteGroup (PHM) is up more than +1%.

U.S.-listed Chinese stocks are climbing today on expectations for the Chinese government to boost stimulus measures.  State broadcaster CCTV reported today that China’s State Council had readied a 19-point policy package to help keep economic conditions within a reasonable range, citing a meeting chaired by Premier Li Keqiang.  JD.com (JD) is up more than +6% to lead gainers in the Nasdaq 100.  Also, Pinduoduo (PDD) is up more than +5%, and Alibaba Group Holding (BABA) is up more than +3%.  Baidu (BIDU) and NetEase (NTES) are up more than +2%. 

Advanced Auto Parts (AAP) is down more than -8% today to lead losers in the S&P 500 after it reported Q2 comparable sales unexpectedly fell -0.6%, weaker than the consensus of a +2.4% increase.  The company also cut its full-year adjusted EPS estimate to $12.75-$13.25 from a prior estimate of $13.30-$13.85

Higher T-note yields today are undercutting stocks.  NXP Semiconductor NV (NXPI) is down nearly 2%, leading losers in the Nasdaq 100.  Also, Qualcomm (QCOM), Nvidia (NVDA), Broadcom (AVGO), Advanced Micro Devices (AMD), Microchip Technology (MCHP), Applied Materials (AMAT), and Lam Research (LRCX) are down more than -1%.

Across the markets…

Sep 10-year T-notes (ZNU22) today are down -9 ticks, and the 10-year T-note yield is up +4.8 bp at 3.095%.  Sep T-notes this morning fell to an 8-week low, and the 10-year T-note yield rose to an 8-week high of 3.113%.  T-note yields are rising as the market braces for the possibility of hawkish comments from the Fed at Friday’s annual Fed symposium at Jackson Hole, Wyoming.

Also, higher European government bond yields today are pressuring T-note prices.  The 10-year German bund yield today rose to a 7-week high of 1.388%, and the UK 10-year gilt yield climbed to a 2-1/4 month high at 2.707%.  In addition, supply pressures are weighing on T-note prices as the Treasury later today will auction $22 billion of 2-year floating-rate notes and $45 billion of 5-year T-notes.

The dollar index (DXY00) this morning is up +0.28% and is trading just below Tuesday’s 1-1/4 month high.  Higher T-note yields today have strengthened the dollar’s interest rate differentials.  Also, the stronger-than-expected U.S July capital goods orders report was supportive of the dollar.   In addition, ongoing weakness in the Chinese yuan is boosting the dollar as the yuan fell to a 2-year low today of 6.8695 yuan/USD. 

EUR/USD (^EURUSD) today is down -0.46% and just above Tuesday’s nearly 20-year low against the dollar.  The strength in the dollar today is undercutting the euro.  Also, the euro is being undercut by concern that the ongoing energy crisis in Europe will throw the Eurozone economy into recession. European nat-gas prices are up +7% today and are just below Monday’s 5-1/2 month high.

USD/JPY (^USDJPY) today is up +0.19%.  The yen is moderately weaker today, pressured by the rise in the 10-year T-note yield to a 1-1/2 month high.  Also, divergent central bank policies are weighing on the yen, with the Fed continuing its rate-hike cycle while the BOJ maintains QE and record low-interest rates.

October gold (GCV22) is down -4.4 (-0.25%), and September silver (SIU22) is down -0.196 (-1.03%).  Precious metals this morning are moderately lower on a stronger dollar.  Higher global bond yields today are also pressuring gold prices.  In addition, gold prices are being undercut by the continued liquidation of long gold positions by funds after long gold positions in ETFs fell to a 6-month low on Tuesday.

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