What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.15%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.04%.

Stocks on Monday posted modest gains, with the Nasdaq 100 climbing to a 1-1/2 week high.  Stocks rose slightly amid another busy week of earnings results, with Apple and Amazon.com among those reporting this week.  A rally in WTI crude to a 3-1/2 month high Monday lifted energy stocks and gave a boost to the overall market.

The Q2 earnings season is off to a solid start, with 48% of the S&P 500 firms already reporting results.  Of those companies who reported Q2 results, 82% have surpassed consensus expectations, the largest beat percentage since Q3 of 2021.

U.S. stocks Monday had positive carryover from strength in global bourses.  China’s Shanghai Composite rallied to a 2-1/2 month high Monday after economic news showed China’s manufacturing activity unexpectedly rose this month.  Also, the Euro Stoxx 50 climbed to a 15-year high Monday as recession concerns receded after Eurozone Q2 GDP expanded more than expected. 

Monday’s minor U.S. economic reports were mixed for stocks. On the positive side, the Jul Dallas Fed manufacturing outlook level of general business activity rose +3.2 to -20.0, stronger than expectations of -22.5.  Conversely, the Jul MNI Chicago PMI rose +1.3 to 42.8, weaker than expectations of 43.5.

Upbeat Fed comments were supportive of stocks.  On Sunday, Minneapolis Fed President Kashkari said the inflation outlook in the U.S. is "quite positive" and that "the base case scenario seems to be that we'll have a slowing economy, but that we would avoid a recession." Also, Chicago Fed President Goolsbee said Monday that monthly inflation readings are coming in "quite good," but he hasn't yet decided on whether to support pausing interest-rate increases at the next FOMC meeting.

The markets are discounting the odds at 17% for a +25 bp rate hike at the September 20 FOMC meeting. 

Global bond yields are lower.  The 10-year T-note yield fell -0.4 bp to 3.947%.  The 10-year German bund yield fell -0.1 bp to 2.492%.  The 10-year UK Gilt yield fell -1.7 bp to 4.309%. 

Overseas stock markets Monday settled higher.  The Euro Stoxx 50 closed up +0.11%.  China’s Shanghai Composite Index today closed up +0.46%.  Japan’s Nikkei Stock Index closed up +1.26%.

Today’s stock movers…

Johnson & Johnson (JNJ) closed down more than -3% to lead losers in the Dow Jones Industrials after a judge dismissed the company’s second attempt at using its bankruptcy case to press thousands of cancer victims to drop their lawsuits and accept a $8.9 billion settlement.

Baxter International (BAX) closed down more than -3% after it issued an Urgent Medical Device Correction for its Spectrum V8 and Spectrum IQ infusion pumps in the U.S. and Puerto Rico due to an increase in reported false upstream occlusion alarms following software upgrades.

Agilent Technologies (A) closed down more than -3% after Barclays downgraded the stock to underweight from equal weight.

Waters (WAT) closed down more than -3% after Barclays downgraded the stock to equal weight from overweight.

CSX Corp (CSX) closed down more than -1% after RBC Capital Markets downgraded the stock to sector perform from outperform. 

Old Dominion Freight Line (ODFL) closed down more than -1% in sympathy after peer Yellow Corp said it was shutting down its operations and planning to file for bankruptcy.

Walt Disney (DIS) closed up more than +3% to lead gainers in the Dow Jones Industrials after the Financial Times and Puck News reported that Kevin Mayer and Tom Staggs, both of who were previously positioned as CEO Bob Iger's successors, have returned to the company to consult him.

Adobe (ADBE) closed up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight.

Hasbro (HAS) closed up more than +2% after Bank of America upgraded the stock to buy from neutral with a price target of $85.

Energy stocks rallied Monday, with the price of WTI crude climbing more than +1% to a 3-1/2 month high.  As a result, Chevron (CVX) closed up more than +3%.  Also, Exxon Mobil (XOM), Haliburton (HAL), and Schlumberger (SLB) closed up more than +2%.  In addition, ConocoPhillips (COP), Devon Energy (DVN), Occidental Petroleum (OXY), Phillips 66 (PSX), and Diamondback Energy (FANG) closed up more than +1%.

ON Semiconductor (ON) closed up more than +2% after reporting Q2 revenue of $2.09 billion, above the consensus of $2.02 billion.

Warner Bros Discovery (WBD) closed up more than +2% after the company’s “Barbie” movie grossed more than $500 million in global sales in its first week.

Newell Brands (NWL) closed up more than +1%, adding to last Friday’s +8% gain after it reported a Q2 normalized operating profit of $201 million, stronger than the consensus of $144.8 million.

Across the markets…

September 10-year T-notes (ZNU23) Monday closed up +2 ticks, and the 10-year T-note yield fell -0.4 bp to 3.947%.  Sep T-notes Monday rose modestly on some positive Fed comments on inflation.   Minneapolis Fed President Kashkari said the inflation outlook in the U.S. is "quite positive," and Chicago Fed President Goolsbee said monthly inflation readings are coming in "quite good."  Also, a weaker-than-expected Jul MNI Chicago PMI report was bullish for T-notes.  T-note prices were undercut by supply pressures as the Treasury is expected to boost its quarterly refunding operation to $102 billion from $96 billion at Wednesday’s quarterly refunding announcement.

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