Today the S&P 500 index ($SPX) (SPY) rose +0.48%, the Dow Jones Industrial Average index ($DOWI) (DIA) fell -0.17%, and the Nasdaq 100 index ($IUXX) (QQQ) rose +1.12%.
Stock indexes were mostly higher today, with the S&P 500 and Nasdaq 100 hitting their highest levels in a week and a half. Strength in semiconductor stocks today is driving gains in technology stocks, which is positive for the overall market. Corporate news today was also positive for technology stocks, with Hewlett Packard Enterprise reporting better-than-expected second-quarter earnings and CrowdStrike Holdings reporting better-than-expected first-quarter EPS. A 3% drop in Cisco Systems weighed on the Dow Jones Industrial Average.
Today's US economic news was mixed on both the bond and stock sides. The May ADP employment report came in weaker than expected, suggesting a slowdown in the US labor market and providing dovish support for Fed policy. However, the May ISM services index grew better than expected, providing hawkish support for Fed policy.
U.S. MBA mortgage applications fell 5.2% in the week ending May 31. The mortgage purchase subindex fell 4.4% and the mortgage refinance subindex fell 6.8%. The average 30-year fixed rate mortgage increased 0.02 basis points to 7.07% from 7.05% the previous week.
US ADP employment increased by +152,000 in May, below expectations of +175,000.
The U.S. ISM Services Index rose +4.4 to 53.8 in May, beating the 51.0 expected and the highest level in nine months. The ISM Payments Price Sub-Index fell -1.1 to 58.2 in May, below the 59.0 expected.
Markets are focused on the ECB meeting on Thursday, where the central bank is expected to cut its key refinancing rate by 25 basis points to 4.25%. Additionally, the May U.S. employment report, due on Friday, will provide clues about the strength of the labor market and could determine when the Fed can begin to cut interest rates. The consensus is that nonfarm payrolls rose by 190,000 in May and the unemployment rate remained unchanged at 3.9% in May.
Markets are pricing in a 1% chance of a 25bp rate cut at the FOMC meeting on June 11-12, and a 16% chance at the next meeting on July 30-31.
Stocks are being supported by generally strong first-quarter earnings results. First-quarter revenue is expected to grow 7.1% year over year, well above expectations of a 3.8% increase ahead of earnings season. About 81% of S&P 500 companies beat first-quarter earnings expectations, according to data compiled by Bloomberg Intelligence.
Overseas stock markets were mixed today. The Euro Stoxx 50 rose to its highest level in a week, up +1.53%. China's Shanghai Composite Index closed down -0.83%. Japan's Nikkei 225 closed down -0.89%.
Interest level
The September 10-year Treasury note (ZNU24) is up +3 ticks today. The 10-year Treasury yield is down -1.4 basis points to 4.312%. September Treasury notes rose to a three-week high today while the 10-year Treasury yield fell to a two-month low of 4.307%. Treasuries recovered from overnight losses as the US May ADP Payrolls change came in below expectations, signaling a slowdown in the labor market and was dovish for Fed policy. Treasuries fell from their record highs today as the May ISM Services Index rose more than expected.
European government bond yields were mixed today. The 10-year German Bund yield fell to a two-week low of 2.501% and was down -2.7bp to 2.507%. The 10-year UK Government Bond yield was up +1.4bp to 4.192%.
The euro area's producer price index fell -1.0% m/m and -5.7% y/y in April, below expectations of -0.7% m/m and -5.3% y/y.
The euro area's S&P composite PMI for May was revised down 0.1 point to 52.2 from the previously announced 52.3.
Swaps markets are pricing in a 99% chance that the ECB will cut rates by 25 bps at Thursday's meeting. If the ECB cuts rates by 25 bps on Thursday as expected, markets are pricing in a 0% chance of another cut at the July 18 meeting and a 65% chance of a 25 bps cut at the September 12 meeting.
US stock trends
Strength in semiconductor stocks today is driving gains in technology stocks, which is a positive for the broader market, with Lam Research (LRCX) up over +4%, Marvell Technology (MRVL) and Broadcom (AVGO) up over +3%, and Nvidia (NVDA), Micron Technology (MU), Qualcomm (QCOM) and NXP Semiconductors NV (NXPI) all up over +2%.
Hewlett Packard Enterprise (HPE) rose more than 12%, the top gainer in the S&P 500 index, after the company reported second-quarter net revenue of $7.2 billion, well above the consensus estimate of $6.89 billion, and forecast second-quarter net revenue of $7.4 billion to $7.8 billion, the midpoint of which beat the consensus estimate of $7.45 billion.
ASML Holdings NV (ASML) rose more than 7%, the top gainer on the Nasdaq 100 index, after the company said it would ship its latest high-NA extreme ultraviolet chipmaking equipment to Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel by the end of the year.
CrowdStrike Holdings (CRWD) rose more than 7% after the company reported first-quarter adjusted EPS of 93 cents, beating the consensus estimate of 90 cents, and raised its 2025 adjusted EPS forecast to $3.93-$4.03 from its previous estimate of $3.77-$3.97, beating the consensus estimate of $3.94.
Applied Materials (AMAT) rose more than 4%, and KLA Corporation (KLAC) rose more than 3% after Barclays raised its weightings in both stocks to equal weight from underweight.
Illumina (ILMN) rose more than 2% after Nephron Research LLC upgraded the company's shares to hold from sell.
Meta Platforms (META) rose more than 2% after Raymond James raised its price target on the stock to $550 from $525.
Intel (INTC) rose more than 1%, the top gainer on the Dow Jones Industrial Average, after Apollo said it would buy a 49% stake in a joint venture related to Intel's Fab 34 for $11 billion.
Dollar Tree (DLTR) fell more than 6%, the top decliner in the S&P 500 and Nasdaq 100, after the company reported first-quarter net sales of $4.17 billion, below the consensus estimate of $4.24 billion.
Brown-Forman (BF/B) fell more than 4% after reporting fourth-quarter net sales of $964 million, below the consensus estimate of $1.03 billion.
Cisco Systems (CSCO) fell more than 3% after an investor day, the top decliner in the Dow Jones Industrial Average. Citigroup said the company's “outlook suggests little acceleration in its core business.”
Campbell Soup (CPB) shares fell more than 1% after the company lowered its full-year adjusted EPS forecast to $3.07-$3.10 from its previous estimate of $3.09-$3.15.
American Express (AXP) fell more than 1% after Bloomberg reported that eBay will drop the acceptance of American Express cards as a payment method, citing “unacceptably high fees.”
Earnings Report (June 5, 2024)
Brown-Forman Corp (BF/B), Campbell Soup Co (CPB), ChargePoint Holdings Inc (CHPT), Dollar Tree Inc (DLTR), Five Below Inc (FIVE), Lululemon Athletica Inc (LULU), Ollie's Bargain Outlet Holding (OLLI), Smartsheet Inc (SMAR), Thor Industries Inc (THO), and Victoria's Secret & Co (VSCO).
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On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart's disclosure policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
