Stocks Rebound as T-Note Yields Stabilize

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Morning Markets

June S&P 500 futures this morning are currently up by +0.98%.  Dip-buying of stocks is supporting moderate gains in U.S. stock index futures today as June S&P futures recover from Monday’s 13-month low.  Also, strength in technology stocks is supportive for the overall market after tech stock valuations tumbled to a 2-year low on Monday. 

The 10-year T-note yield today is down -6.8 bp at 2.965%, giving technology stocks a boost.  T-note yields are falling on comments from New York Fed President Williams, who said he expects inflation to ease closer to the 2% Fed goal in 2024.  A decline in inflation expectations is also supporting gains in T-note prices after the 10-year breakeven inflation expectations rate fell to a 2-month low today at 2.706%.

New York Fed President Williams said today that the Fed “will move expeditiously in bringing the federal funds rate back to more normal levels this year,” and he sees inflation easing closer to the 2% Fed goal in 2024.

The Euro Stoxx 50 index this morning is up +1.29%.  A rebound in automakers and construction companies is leading the overall market higher today. Better-than-expected Eurozone economic data today sparked short-covering in European stocks after a gauge of German investor confidence unexpectedly rose.  Oversold conditions in European stocks also point to additional gains as the 14-day relative strength index (RSI) of the Euro Stoxx 50 dropped to 27 on Monday, the lowest since March.  The last four times the RSI hit this level, equities rebounded. 

The German May ZEW expectations of economic growth unexpectedly rose +6.7 to -34.3, stronger than expectations of a decline to -43.5.

Italy Mar industrial production was unch m/m, stronger than expectations of -1.5% m/m.

Asian markets today closed mixed, with China’s Shanghai Composite Index closing up +1.06% and Japan’s Nikkei Stock Index closing down -0.58%. The Shanghai Composite Index today recovered from early losses and a 1-week low and moved higher on hopes the government will boost stimulus measures to prop up the economy. 

The PBOC today repeated a pledge to proactively address economic pressures.  It reaffirmed it would focus on supporting small businesses and sectors hit by Covid outbreaks and vowed to use various monetary policy tools to keep overall liquidity ample.  The PBOC highlighted that the average deposit rate declined by -10 bp to 2.37% in the last week of April, which bolstered speculation that the PBOC would soon lower its loan prime rate.

Japan’s Nikkei Stock Index fell to a 1-3/4 month low today, as Japanese technology stocks retreated on negative carry-over from the plunge in U.S. technology stocks Monday. Japanese stocks were also under pressure on concern that ongoing lockdowns in China would depress economic activity and derail demand for Japanese goods. 

Today’s Japanese economic data was supportive for stocks after Japan’s Mar household spending fell -2.3% y/y, the biggest decline in 7 months but stronger than expectations of -3.3% y/y.

Pre-Market U.S. Stock Movers

Major U.S. technology stocks are climbing in pre-market trading on dip-buying after selling off sharply over the past three sessions.  Apple (AAPL), Amazon.com (AMZN), Microsoft (MSFT), Alphabet (GOOGL), Nvidia (NVDA), and Meta Platforms (FB) are all up more than +1%. 

Electric vehicle makers are moving higher in pre-market trading after falling sharply over the past three sessions on the selling of technology and growth stocks.  Tesla (TSLA) and Nikola (NKLA) are up more than +3%.  Also, Lucid Group (LCID) and Rivian Automotive (RIVN) are up more than +2%. 

AMC Entertainment (AMC) climbed more than +3% in pre-market trading after reporting Q1 revenue of $785.7 million, above the consensus of $769.9 million.

Stellantis NV (STLA) rose nearly +4% in pre-market trading after Berenberg initiated coverage of the stock with a buy rating.

Autoliv (ALV) jumped nearly +5% in pre-market trading after UBS upgraded the stock to buy from neutral with a price target of $90. 

Plug Power (PLUG) dropped more than -4% in pre-market trading after reporting Q1 net revenue of $140.8 million, weaker than the consensus of $142.5 million. 

Upstart Holdings (UPST) plunged -47% in pre-market trading after cutting its full-year revenue forecast to $1.25 billion from a prior forecast of $1.40 billion, weaker than the consensus of $1.41 billion.

Peloton Interactive (PTON) sank more than -25% in pre-market trading after forecasting Q4 revenue of $675 million-$700 million, well below the consensus of $820.9 million.

Today’s U.S. Earnings Reports (5/10/2022)

DENTSPLY SIRONA Inc (XRAY), Electronic Arts Inc (EA), Fox Corp (FOXA), Norwegian Cruise Line Holdings (NCLH), Occidental Petroleum Corp (OXY), Sysco Corp (SYY), TransDigm Group Inc (TDG), Welltower Inc (WELL), Wynn Resorts Ltd (WYNN).