What you need to know…
U.S. stocks this morning are mixed. Energy stocks are climbing today, with crude prices up more than +1% to a 1-month high after Saudi Arabia said it would make an extra 1 million bpd cut in its crude production starting in July. Also, today’s weaker-than-expected U.S. economic reports on May ISM services and Apr factory orders knocked bond yields lower and are supportive of stocks. Market expectations for a +25 bp rate hike at the June 13-14 FOMC meeting fell to 23% today from 28% last Friday.
U.S. Apr factory orders rose +0.4% m/m, weaker than expectations of +0.8% m/m.
U.S. May ISM services index unexpectedly fell -1.6 to a 5-month low of 50.3, weaker than expectations of an increase to 52.4. Also, the May ISM services prices paid sub-index fell -3.4 to 56.2, the slowest pace of increase in 3 years.
Morgan Stanley said, “We think that the downside risk to U.S. earnings is now,” with earnings per share for the S&P 500 set to drop -16% this year. “While a deteriorating liquidity backdrop is likely to put downward pressure on equity valuations over the next three months, we also see EPS disappointment ahead as revenue growth slows and margins contract further.”
Global bond yields are mixed. The 10-year T-note yield is down -0.8 bp at 3.683%. The 10-year German bund yield is up +4.7 bp at 2.359%, and the UK 10-year gilt yield is up +4.3 bp at 4.199%.
On the bullish side for stocks, energy stocks are climbing, with WTI crude up more than +1% at a 1-month high. Also, Palo Alto Networks is up more than +3% after S&P Dow Jones Indices said the company will replace Dish Network in the S&P 500 before the open of trade on June 20. In addition, Tesla is up more than +2% after it reported its total China May deliveries of vehicles rose +2.5% m/m to 77,695 units.
On the bearish side, Epam Systems tumbled more than -17% after cutting its Q2 adjusted EPS estimate. Also, weakness in chip stocks is weighing on technology stocks. In addition, Airbnb is down more than -2% on signs of insider selling after an SEC filing showed director Gebbia sold $37 million of stock.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.71%. China’s Shanghai Composite closed up +0.07%, and Japan’s Nikkei Stock Index closed up +2.20%.
Today’s stock movers…
Energy stocks and energy service providers are rallying today, with WTI crude up more than +1% at a 1-month high. Devon Energy (DVN), Marathon Oil (MRO), and Diamondback Energy (FANG) are up more than +2%. Also, Chevron (CVX), Conoco Phillips (COP), Exxon Mobile (XOM), Occidental Petroleum (OXY), Schlumberger (SLB), and Valero Energy (VLO) are up more than +1%.
Apple (AAPL) is up more than +1% to lead gainers in the Dow Jones Industrials as it is expected to launch a mixed-reality headset at the Worldwide Developers Conference later today.
Palo Alto Networks (PANW) is up more than +3% to lead gainers in the Nasdaq 100 after S&P Dow Jones Indices said the company would replace Dish Network in the S&P 500 before the opening of trade on June 20.
Tesla (TSLA) is up more than +2% after it reported its total China May deliveries of vehicles rose +2.5% m/m to 77,695 units.
ImmunGen (IMGN) is up more than +4% after the company reported results of its Elahere drug in a late-stage trial for the treatment of ovarian cancer showed the drug is superior to chemotherapy.
Southwestern Energy (SWN) is up more than +2% after Citigroup said the company looks like a “logical target” to be acquired by either Coterra Energy or Chesapeake Energy.
Epam Systems (EPAM) is down more than -17% to lead losers in the S&P 500 after cutting its estimate for Q2 adjusted EPS to $2.33-$2.40 from a prior estimate of $2.38-$2.46.
Airbnb (ABNB) is down more than -4% to lead losers in the Nasdaq 100 on signs of insider selling after an SEC filing showed director Gebbia sold $37 million of stock on May 31.
Chip stocks are moving lower today. Globalfoundries (GFS) is down more than -3% to lead losers in the Nasdaq 100. Also, Intel (INTC) is down more than -3% to lead losers in the Dow Jones Industrials. In addition, Marvell Technology (MRVL), Broadcom (AVGO), Microchip Technology (MCHP), Micron Technology (MU), Texas Instruments (TXN), Lam Research (LRCX), and NXP Semiconductors NV (NXPI) are down more than -1%.
Dollar General (DG) is down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight.
Across the markets…
September 10-year T-notes (ZNU23) today are up +4 ticks, and the 10-year T-note yield is down -0.8 bp at 3.683%. T-notes recovered from overnight losses and are modestly higher on today’s weaker-than-expected U.S. economic reports on May ISM services and Apr factory orders. T-notes today initially moved lower after a surge in crude prices by more than +1% to a 1-month high boosted inflation expectations. Also, a jump in European government bond yields today is undercutting T-note prices.
The dollar index (DXY00) this morning is down -0.02%. The dollar today gave up overnight gains and is slightly lower on weaker-than-expected U.S economic reports on May ISM services and Apr factory orders, which are dovish for Fed policy. Strength in stocks today has also curbed the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is up by +0.10%. The euro today is posting moderate gains on hawkish comments from ECB Governing Council member Vujcic who said inflation risks in the Eurozone are tilted to the upside. Gains in EUR/USD today are limited after the Eurozone Jun Sentix investor confidence fell to a 5-month low and after the Eurozone May S&P composite PMI was revised downward.
ECB Governing Council member Vujcic said, “Disinflation in the Eurozone is expected to be gradual, with the risks still tilted upward driven by risks coming from the tight labor market and underlying price pressures in the services sector.”
Eurozone Apr PPI rose +1.0% y/y, weaker than expectations of +1.7% y/y and the slowest pace of increase in 2-1/4 years.
The Eurozone Jun Sentix investor confidence fell -3.9 to a 5-month low of -17.0, weaker than expectations of -15.1.
The Eurozone May S&P composite PMI was revised downward to 52.8 from the initially reported 53.3.
German Apr exports unexpectedly rose +1.2% m/m, stronger than expectations of -2.5% m/m.
USD/JPY (^USDJPY) today is down by -0.41%. The yen today recovered from overnight losses and is moving higher after a reversal in T-note yields to lower from higher sparked short covering in the yen. The yen today was initially under pressure after a rally in the Nikkei Stock Index to a 32-year high curbed safe-haven demand for the yen.
The Japan May Jibun Bank services PMI was revised downward to 55.9 from the initially reported 56.3.
August gold (GCQ3) this morning is up +5.0 (+0.25%), and July silver (SIN23) is down -0.107 (-0.45%). Precious metals prices this morning are mixed. The dollar gave up overnight gains and is slightly lower, which is supportive of metals. Also, a rally in crude oil prices today to a 1-month high has boosted inflation expectations and increased demand for gold as an inflation hedge. On the other hand, today’s weaker-than-expected U.S. economic reports on May ISM services and Apr factory orders fuel concerns about industrial metals demand and is undercutting silver prices.
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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.