Stocks Push Higher on Chip Stock Strength and Positive Economic News

The S&P 500 Index ($SPX) (SPY) today is up by +0.59%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.81%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.42%.

Stocks today are moderately higher, with the S&P 500 and the Nasdaq 100 posting 2-week highs and the Dow Jones Industrials posting a 1-1/2 week high.  Strength in chip stocks today is lifting the overall market.  Also, a decline in bond yields today supports stocks on dovish comments from former New York Fed President Dudley, who said there’s “a strong case for a 50 bp rate cut” at next week’s FOMC meeting.  Signs of easing price pressures are also bullish for bonds and stocks after today’s news showed the US Aug import price index ex-petroleum unexpectedly fell -0.1% m/m, weaker than expectations of a +0.2% m/m increase. Stocks extended their gains after the University of Michigan US Sep consumer sentiment index rose more than expected to a 4-month high, supporting the prospects for a soft landing.

The University of Michigan US Sep consumer sentiment index rose +1.1 to a 4-month high of 69.0, stronger than expectations of 68.5.

News on inflation expectations was mixed.  The University of Michigan US Sep 1-year inflation expectations unexpectedly eased to a 3-3/4 year low of 2.7% from 2.8% in Aug.  However, the Sep 5-10 year inflation expectations unexpectedly rose to a 10-month high of 3.1% from 3.0% in Aug.

Corporate news today is mixed for stocks.  On the positive side, Uber Technologies is up more than +5% on the news it will be the sole supplier of driverless rides on Alphabet’s Waymo cars in Austin and Atlanta. Also, RH is up more than +22% and is boosting online retailers after reporting better-than-expected Q2 adjusted EPS.  On the negative side, Adobe is down more than -8% after forecasting weaker-than-expected Q4 revenue.  Also, Boeing is down -0.47% after the company’s workers in Seattle walked off the job for the first time since 2008.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 49% for a -50 bp rate cut at that meeting.

Overseas stock markets today settled mixed.  The Euro Stoxx 50 rose to a 1-week high and is up +0.74%.  China's Shanghai Composite fell to a 7-1/4 month low and closed down -0.48%.  Japan's Nikkei Stock 225 closed down by +0.68%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +3 ticks.  The 10-year T-note yield is down -1.3 bp to 3.661%.  Dec T-notes are climbing today on dovish comments from former New Tork Fed President Dudley, who said “there’s a strong case for a 50 bp rate cut” at next week’s FOMC meeting.  T-notes also found support after the Aug import price index ex-petroleum unexpectedly fell, a dovish factor for Fed policy.  In addition, short covering is propping up T-notes as bond dealers cover short hedges put on during this week’s $119 billion Treasury auction slate of T-notes and T-bonds.

T-note prices fell back from their bet levels after the   University of Michigan US Sep consumer sentiment index rose more than expected to a 4-month high.  Also, an increase in inflation expectations undercut T-notes after the 10-year breakeven inflation rate rose to a 1-week high today at 2.089%.

European government bond yields today are mixed.  The 10-year German bund yield is up +0.2 bp to 2.153%. The 10-year UK gilt is down -0.7 bp to 3.774%.

Eurozone Jul industrial production fell -0.3% m/m, right on expectations.

ECB President Lagarde said she is open to considering an interest rate cut in October if the Eurozone economy suffers a major setback, but a cut at the December ECB meeting is more likely as we will have more comprehensive information available on the economy by then. 

ECB Governing Council member Holzmann said the October ECB meeting might not be the time for another rate cut, but there could be room for another rate cut at the December meeting.

ECB Governing Council member Kazaks said a slump in the Eurozone economy would be required for the ECB to cut interest rates at its next meeting in October.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 47% for the October 17 meeting.

US Stock Movers

Chip stocks are climbing today to support gains in the broader market.  Micron Technology (MU) is up more than +4%, and ON Semiconductor (ON) is up more than +3%.  Also, Applied Materials (AMAT), Microchip Technology (MCHP), and Lam Research (LRCX) are up more than +2%.  In addition, KLA Corp (KLAC), Texas Instruments (TXN) GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), and Intel (INTC) are up more than +1%. 

Uber Technologies (UBER) is up more than +6% on news it will be the sole supplier of driverless rides on Alphabet’s Waymo cars in Austin and Atlanta that will begin next year.

ARM Holdings Plc (ARM) is up more than +6% after Raymond James initiated coverage on the stock with a recommendation of outperform and a price target of $160. 

Oracle (ORCL) is up more than +3% after raising its 2026 sales outlook to $66 billion from $65 billion, above the consensus of $64.5 billion, and forecasting annual revenue will climb to at least $104 billion in fiscal 2029.

RH (RH) is up more than +22% after reporting Q2 adjusted EPS of $1.69, stronger than the consensus of $1.60.  Also, Wayfair (W) is up more than +10%, and Etsy (ETSY) is up more than +8% to lead gainers in the S&P 500 on the news. 

Summit Therapeutics (SMMT) is up more than +11%, adding to Thursday’s 20% surge after it raised $235 million from investors in a private placement on the heels of promising late-stage trial data from its lung cancer drug ivonescimab.

Vistra Corp (VST) is up more than +3% after Jeffries named the stock its top pick in the power sector with a buy recommendation and a price target of $99.

GE Vernova (GEV) is up more than +4% after BMO Capital Markets initiated coverage on the stock with a recommendation of outperform and a price target of $245. 

SL Green Realty (SLG) is up more than +2% after Citigroup upgraded the stock to neutral from sell. 

Adobe (ADBE) is down more than -8% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q4 revenue of $5.50 billion-$5.55 billion, below the consensus of $5.60 billion. 

Boeing (BA) is down -0.47% to lead losers in the Dow Jones Industrials after the company’s workers in Seattle walked off the job for the first time since 2008.

Moderna (MRNA) is down more than -3%, adding to Thursday’s -12% plunge after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $70. 

Garmin Ltd (GRMN) is down more than -7% after Barclays downgraded the stock to underweight from equal weight with a price target of $133.

GE Healthcare (GEHC) is down more than -1% after holder Morgan Stanley offered 10 million shares in a secondary underwritten public offering.

Axon Enterprise (AXON) is down more than -1% on signs of insider selling after an SEC filing showed CFO Bagley sold $1.64 million of shares on Thursday.

Earnings Reports (9/13/2024)

Dakota Gold Corp (DC), Selectquote Inc (SLQT), Spire Global Inc (SPIR).

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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.