What you need to know…
The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.99%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.31%.
Stock indexes Thursday settled moderately higher, with the S&P 500 posting a 9-1/2 month high and the Dow Jones Industrials posting a 1-week high. Stocks rallied Thursday as U.S. default concerns eased after the House late Wednesday passed a bill to raise the debt ceiling. Also, inflation concerns subsided and knocked T-note yields lower, which boosted technology stocks after the May U.S. ISM prices paid sub-index contracted by the most in 5 months.
Stocks extended their gains and bond yields fell further Thursday after Philadelphia Fed President Harker signaled his support for pausing Fed rate hikes. He said, "I do believe that we are close to the point where we can hold rates in place and let monetary policy do its work to bring inflation back to the target in a timely manner." Market expectations for a +25 bp rate hike at the June 13-14 FOMC meeting fell to 24% Thursday from 37% Wednesday afternoon.
The debt ceiling agreement struck by White House negotiators and Republican leaders last Saturday was passed by the House late Wednesday in a 314-117 vote. The bill now goes to the Senate for a possible vote later Thursday.
U.S. stock indexes have carryover support from a rally in European stocks on an easing of inflation concerns after Eurozone May CPI slowed more than expected and posted its smallest increase in 15 months.
The U.S. May ADP employment change rose +278,000, stronger than expectations of +170,000.
U.S. weekly initial unemployment claims rose +2,000 to 232,000, showing a stronger labor market than expectations of 235,000.
U.S. Q1 nonfarm productivity was revised upward to -2.1% from -2.7%, better than expectations of -2.4%. Also, Q1 unit labor costs were revised downward to +4.2% from the initially reported +6.3%, better than expectations of +6.0%.
The U.S. May ISM manufacturing index fell -0.2 to 46.9, slightly weaker than expectations of 47.0. The May ISM prices paid sub-index fell -9.0 to 44.2, a bigger decline than expectations of 52.3 and the weakest level in 5 months.
Global bond yields fell and supported stocks. The 10-year T-note yield fell to a 2-week low of 3.563% and finished down -3.8 bp at 3.605%. The 10-year German bund yield fell to a 2-1/2 week low of 2.230% and finished down -3.3 bp at 2.249%, and the UK 10-year gilt yield fell to a 1-week low of 4.093% and finished down -6.7 bp at 4.116%.
On the bullish side for stocks, chip stocks rallied after the 10-year T-note yield fell to a 2-week low. Also, Match Group closed up more than +10% on signs of insider buying after an SEC filing showed CEO Kim purchased $1.08 million worth of shares on Wednesday. NetApp closed up more than +8% after reporting stronger-than-expected Q4 adjusted EPS.
On the bearish side, Dollar General closed down more than -19% after reporting Q1 comparable sales below consensus and lowering guidance on its 2024 comparable sales forecast. Also, Salesforce.com closed down more than -4% after forecasting 2024 revenue below consensus. Lucid Group closed down more than -16% after it said it was raising about $3 billion in a common stock offering.
Overseas stock markets Thursday settled mostly higher. The Euro Stoxx 50 closed up +0.94%. China’s Shanghai Composite closed unchanged, and Japan’s Nikkei Stock Index closed up +0.84%.
Today’s stock movers…
A decline in the 10-year T-note yield to a 2-week low Thursday sparked a rally in chip stocks. ON Semiconductor (ON) closed up more than +5%. Also, Nvidia (NVDA) and Marvell Technology (MRVL) closed up more than +4%. In addition, Qualcomm (QCOM) and KLA Corp (KLAC) closed up more than +2%.
Match Group (MTCH) closed up more than +10% to lead gainers in the S&P 500 on signs of insider buying after an SEC filing showed CEO Kim purchased $1.08 million worth of shares on Wednesday.
NetApp (NTAP) closed up more than +8% after reporting Q4 adjusted EPS of $1.54, stronger than the consensus of $1.34.
Hormel Foods (HRL) closed up more than +5% after forecasting full-year EPS of $1.70-$1.82, the midpoint above the consensus of $1.74.
U.S.-listed Chinese stocks rose as economic concerns in China eased after the China May Caixin manufacturing PMI unexpectedly rose +1.4 to 50.9, stronger than expectations of no change at 49.5. As a result, JD.com (JD) closed up more than +6% to lead gainers in the Nasdaq 100. Also, Baidu (BIDU) closed up more than +6%, and PDD Holdings (PDD) closed up more than +5%. In addition, Baba Group Holding (BABA) closed up more than +4%.
Pure Storage (PSTG) closed up more than +19% after reporting Q1 revenue of $589.3 million, above the consensus of $560.6 million.
Veeva Systems (VEEV) closed up more than +19% after reporting Q1 revenue of $526.3 million, above the consensus of $515.7 million, and raising its 2024 revenue forecast to $2.36 billion-$2.37 billion from a prior forecast of $2.35 billion-$2.36 billion.
Dollar General (DG) closed down more than -19% to lead losers in the S&P 500 after reporting Q1 comparable sales rose +1.6%, below the consensus of +3.81%, and lowered guidance on its 2024 comparable sales forecast to +1% to +2% from a prior view of +3% to +3.5%, well below the consensus of +3.28%. Dollar Tree (DLTR) also closed down more than -3% on the news.
Advanced Auto Parts (AAP) closed down more than -6% after JPMorgan Chase downgraded the stock to neutral from overweight, and Bank of America downgraded it to neutral from buy.
Salesforce.com (CRM) closed down more than -4% to lead losers in the Dow Jones Industrials after forecasting 2024 revenue of $34.5 billion-$34.7 billion, the midpoint below the consensus of $34.63 billion.
Lucid Group (LCID) closed down more than -16% to lead losers in the Nasdaq 100 after it said it was raising about $3 billion in a common stock offering.
Okta Inc (OKTA) closed down more than -17% after reporting better-than-expected Q1 EPS but noted weakness in the outlook for current remaining performance obligations as a concern.
NRG Energy (NRG) closed down more than -4% after Guggenheim Securities said the company’s sale of its 44% stake in the South Texas nuclear power plant to Constellation Energy was a “surprise.”
Across the markets…
September 10-year T-notes (ZNU23) on Thursday closed up +8.5 ticks, and the 10-year T-note yield fell by -3.8 bp to 3.605%. Sep T-notes Thursday rallied to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 3.563%. T-notes found support Thursday on positive carryover from a rally in 10-year German bunds to a 2-1/2 week high. Also, inflation concerns receded and gave T-note prices a lift after the May ISM prices paid sub-index fell more than expected and after the 10-year breakeven inflation rate dropped to a 2-1/4 month low today of 2.148%. In addition, comments from Philadelphia Fed President Harker gave T-notes a boost when he signaled his support for pausing Fed rate hikes. T-note prices fell back from their best levels after the S&P 500 rose to a 9-1/2 month high and curbed the safe-haven demand for T-notes.
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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