Stocks Move Higher After Today's CPI Report

The S&P 500 Index ($SPX) (SPY) today is up +0.58%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +1.52%.

After starting the day in the red, stocks have rebounded this afternoon.  As reported in today’s US consumer price report, core consumer prices in August rose +3.2% y/y, unchanged from July and well above the Fed’s +2.0% target. 

US MBA mortgage applications rose +1.4% in the week ended September 6, with the purchase mortgage sub-index up +1.8% and the refinancing mortgage sub-index up +0.9%.  The average 30-year fixed rate mortgage fell -14 bp to a 19-month low of 6.29% from 6.43% in the prior week.

US Aug CPI eased to +2.5% y/y from +2.9% y/y in July, right on expectations and the smallest increase in 3-1/2 years.  However, Aug CPI ex-food and energy was unchanged from July at +3.2% y/y, right on expectations.

In the wake of last night’s debate, the odds on the betting website PredictIt of Vice President Harris winning the presidency rose to 56% from 53% before the debate. 

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 19% for a -50 bp rate cut at that meeting.

Overseas stock markets today are lower.  The Euro Stoxx 50 is down -0.04%.  China's Shanghai Composite fell to a 7-month low and closed down -0.82%.  Japan's Nikkei Stock 225 closed down by -1.49%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up by +5 ticks.  The 10-year T-note yield is down -2.1 bp at 3.622%.  Dec T-notes today rallied to a 15-month high, and the 10-year T-note yield fell to a 15-month low of 3.603%.  Strength in European government bonds today is providing carryover support to T-notes.  Also, today’s slide in stocks has boosted safe-haven demand for T-notes.

T-notes fell back from their best levels after the US Aug core CPI rose +3.2% y/y, right on expectations but well above the Fed’s 2.0% price target.  The core CPI report knocked the chances of a 50 bp rate cut at next week’s FOMC meeting down to 17% from 50% last Friday.   Supply pressures are also negative for T-notes as the Treasury will auction $39 billion 10-year T-notes later today.  Losses in T-notes are limited due to carryover support from 

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 5-week low of 2.092% and is down -3.8 bp at 2.093%.  The 10-year UK gilt fell to a 5-week low of 3.745% and is down -7.1 bp at 3.748%.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.

US Stock Movers

Bank stocks are under pressure for a second day after JPMorgan Chase President Pinto said Tuesday that analysts are too optimistic in projecting next year's expenses and net interest income.  As a result, Discover Financial Services (DFS) is down more than -4%.  Also, Capital One Financial (COF), Regions Financial (RF), Citizens Financial Group (CFG), Cincinnati Financial Corp (CINF), and M&T Bank (MTB) are down more than -3%.

Health insurance stocks with Medicare Advantage plans are falling for a second day after Leerink Partners published a report Tuesday that said those plans might have a tougher time earning high-quality “star ratings” that drive bonus payments.  As a result, Humana (HUM) is down more than -5% to lead losers in the S&P 500, and UnitedHealth Group (UNH) is down more than -2% to lead losers in the Dow Jones Industrials.  Also, CVS Health Corp (CVS) is down more than -3%, and Elevance Health (ELV) is down more than -1%.

Albemarle (ALB) is up more than +8% to lead gainers in the S&P 500 as lithium stocks rallied after UBS said CATL curtailed lithium production at its Jiangxi operation. 

Starbucks (SBUX) is up more than +1% to lead gainers in the Nasdaq 100 after CEO Niccol said he is open to exploring a new joint venture partnership structure in China.

Trump Media & Technology (DJT) is down more than -14% following last night’s Harris-Trump debate, as the odds on the betting website PredictIt of Vice President Harris winning the presidency rose to 56% from 53% before the debate. 

GameStop (GME) is down more than -16% after reporting Q2 net sales of $798.3 million, weaker than the consensus of $895.5 million.   

Palantir Technologies (PLTR) is down more than -2% after a trading update showed exchange-traded funds managed by Cathie Wood’s Ark Investment Management sold 124,626 shares of Palantir. 

Rollins Inc (ROL) is down more than -4% on negative carryover from a -20% plunge in peer Rentokil after it issued a surprise downgrade to its full-year growth estimates. 

Morgan Stanley (MS) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy. 

Viridian Therapeutics (VRDN) is up more than +8% after Needham & Co. raised its price target on the stock to $48 from $30.

AES Corp (AES) is up more than +4% after Jeffries initiated coverage on the stock with a recommendation of buy and a price target of $20. 

Viking Therapeutics (VKTX) is up more than +7% after JPMorgan Chase initiated coverage on the stock with a recommendation of overweight and a price target of $80.

William-Sonoma (WSM) is up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $156.   

Earnings Reports (9/11/2024)

Designer Brands Inc (DBI), Oxford Industries Inc (OXM), Vera Bradley Inc (VRA).

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