What you need to know…
Stocks are trading mixed today. Rising T-note yields today are weighing on technology stocks and the overall market. Better-than-expected U.S. economic data on July manufacturing and July industrial production pushed the 10-year T-note yield up +7.8 bp to 2.866%. Also, concerns about the global economy are weighing on U.S. stock indexes today after Monday’s economic data from China and the U.S point to a slowdown in growth.
A rally in big-box retailers today is keeping the Dow Jones Industrials in positive territory and limiting the downside in the overall market. Today, Walmart jumped more than +5% after reporting better-than-expected Q2 EPS and modestly improving its full-year sales forecast.
U.S. July manufacturing production rose +0.7% m/m, stronger than expectations of +0.3% m/m and the biggest increase in 4 months. Also, July industrial production rose +0.6% m/m, stronger than expectations of +0.3% m/m.
U.S. housing data today was mixed. On the negative side, July housing starts fell -9.6% m/m to a 17-month low of 1.446 million, weaker than expectations of 1.527 million. Conversely, July building permits, a proxy for future construction, fell -1.3% m/m to 1.674 million, stronger than expectations of 1.640 million.
Today’s stock movers…
Higher T-note yields today are weighing on technology stocks and the overall market. Illumina (ILMN), Datadog (DDOG), Align Technology (ALGN), Okta (OKTA), and Zscaler (ZS) are all down by more than -3%. Also, Fortinet (FTNT) and ASML Holding NV (ASML) are down more than -2%.
Zoom Video Communications (ZM) is down more than -7% today to lead losers in the Nasdaq 100 after Citigroup downgraded the stock to sell from neutral, saying it sees “new hurdles to sustaining growth.”
U.S.-listed Chinese stocks are moving lower today after Tencent Holdings said it plans to sell most of its stake in food delivery company Meituan in an effort to appease Chinese regulators. Pinduoduo (PDD) is down more than -3%. Also, JD.com (JD), Alibaba Group Holding (BABA), and Baidu (BIDU) are down more than -2%.
Walmart (WMT) is up more than +5% today to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q2 adjusted EPS of $1.77, above the consensus of $1.63, and raising its full-year adjusted EPS estimate to down -9% to -11% from a previous estimate of down -11% to -13%. Other big-box retailers are moving higher on the news, with Ross Stores (ROST) up more than +2% to lead gainers in the Nasdaq 100. Also, Target (TGT), Best Buy (BBY), and Costco Wholesale (COST) are up more than +1%.
Home Depot (HD) is up more than +2% today after reporting Q2 comparable sales rose +5.8%, stronger than the consensus of +4.56%, and the company said that Q2 strength has continued into Q3.
Across the markets…
Sep 10-year T-notes (ZNU22) today are down -11 ticks, and the 10-year T-note yield is up +7.8 bp at 2.866%. Higher European government bond yields are weighing on T-note prices this morning. Also, stronger than expected U.S. July manufacturing and July industrial production are undercutting T-note prices.
The dollar index (DXY00) today is up by +0.18% and posted a 2-1/2 week high. Higher T-note yields today are supporting the dollar along with stronger-than-expected U.S. economic data on July manufacturing and July industrial production. Also, stock weakness today has boosted the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is down -0.01% and fell to a 2-1/2 week low. An unexpected decline in German investor confidence to a 13-year low today is weighing on EUR/USD. Also, concerns that an energy crisis could send the EU into recession are undercutting the euro. Energy prices in Europe have been soaring after Russia cut gas supplies to Europe, slamming the region’s economy.
The German Aug ZEW survey expectations of economic growth unexpectedly fell -1.5 to a 13-year low of -55.3, weaker than expectations of an increase to -52.7.
USD/JPY (^USDJPY) today is up +0.95% at a 4-session high. Higher T-note yields today are undercutting the yen. Also, a rally in Japan’s Nikkei Stock Index today to a 7-1/2 month high reduced the safe-haven demand for the yen. Weaker-than-expected Japanese economic data was bearish for the yen after the Japan June tertiary industry activity index unexpectedly fell -0.2% m/m, weaker than expectations of +0.4% m/m.
October gold (GCV22) is down -6.0 (-0.34%), and September silver (SIU22) is down -0.182 (-0.90%). Gold and silver this morning fell to a 1-week low and are moderately lower. A rally in the dollar index to a 2-1/2 week high today is undercutting metals prices. Higher global bond yields today are also weighing on gold prices. In addition, the ongoing liquidation of long gold positions by funds is also undercutting gold prices after long gold positions in ETFs fell to a 5-1/2 month low Monday.
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