The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.74%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.65%. 

Stock indexes Thursday finished mostly higher, with the Nasdaq 100 posting a 1-week high.  Strength in technology stocks led the overall market higher Thursday as Apple closed up more than +4% after it said it plans to overhaul its entire Mac computer line with in-house processors designed to highlight artificial intelligence. Also, chip stocks rallied Thursday on speculation that upcoming Q1 earnings results will show strong demand for microchips. 

Stocks found support Thursday after US producer prices rose at a slower-than-expected pace in March. Stocks also garnered support Thursday after the ECB held interest rates steady for a fifth consecutive meeting, signaling that cooling inflation will soon allow it to begin cutting interest rates. 

A bearish factor for stocks was higher bond yields.  The 10-year T-note yield Thursday rose to a new 4-3/4 month high on hawkish comments from New York Fed President Williams, Richmond Fed President Barkin, and Boston Fed President Collins, who said the Fed could take its time before cutting interest rates. Also, weekly US jobless claims fell more than expected to a 5-week low, a hawkish factor for Fed policy.

US Mar PPI final demand rose +0.2% m/m and +2.1% y/y, slightly weaker than expectations of +0.3% m/m and +2.2% y/y. However, Mar PPI ex-food and energy accelerated to +2.4% y/y from +2.0% y/y in Feb, slightly stronger than expectations of +2.3% y/y and the largest increase in 7 months.

US weekly initial unemployment claims fell -11,000 to a 5-week low of 211,000, showing a stronger labor market than expectations of 215,000.

New York Fed President Williams said the Fed has made “tremendous progress” toward better balance on its inflation and employment goals, but there’s no need to cut interest rates in the “very near term.” 

Richmond Fed President Barkin said the Fed still has some work to do to contain price pressures and can "take its time" before cutting interest rates.

Boston Fed President Collins said recent data have eased concerns about an "imminent need" to adjust interest rates, though she still expects rate cuts to begin later this year.

Q1 corporate earnings season begins in earnest this Friday with results from big banks, including JPMorgan Chase, Citigroup, and Wells Fargo.  The consensus is that S&P 500 companies will post an average of +3.8% y/y profit growth in Q1, the third straight quarter of expansion.

The markets are discounting the chances for a -25 bp rate cut at 3% for the next FOMC meeting on April 30-May 1 and 25% for the following meeting on June 11-12.

Overseas stock markets on Thursday settled mixed.  The Euro Stoxx 50 closed down -0.68%.  China's Shanghai Composite recovered from a 1-1/2 week low and closed up +0.23%.  Japan's Nikkei Stock Index closed down -0.35%.

Interest Rates

June 10-year T-notes (ZNM24) on Thursday closed down -3 ticks.  The 10-year T-note yield rose +2.4 bp to 4.568%.  June T-notes Thursday fell to a 4-3/4 month low, and the 10-year T-note yield rose to a 4-3/4 month high of 4.589%.  T-notes moved lower Thursday after US weekly initial unemployment claims fell more than expected to a 5-week low, a sign of labor market strength and a hawkish factor for Fed policy.  Also, weak demand for the Treasury’s $22 billion auction of reopened 30-year T-bonds weighed on prices as the auction had a bid-to-cover ratio of 2.37, below the 10-auction average of 2.41.

T-notes briefly moved higher Thursday morning as some short-covering emerged after the US PPI report was slightly weaker than expected.

European government bond yields on Thursday moved higher. The 10-year German bund yield climbed to a 6-week high of 2.483% and finished up +2.8 bp at 2.463%.  The 10-year UK gilt yield rose to a 6-week high of 4.246% and finished up +5.2 bp at 4.201%.

The ECB, as expected, kept its deposit facility rate unchanged at 4.00% and said, "If the Governing Council's updated assessment of the inflation outlook were to further increase confidence that inflation is converging to the 2% target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction."

ECB President Lagarde said risks to the growth outlook are tilted to the downside, and inflation will fluctuate and then decline to the ECB's target.

US Stock Movers

Paramount Global (PARA) closed up more than +7% to lead gainers in the S&P 500 after Adweek reported the company is exploring the sale of its VidCon unit.

Apple (AAPL) closed up more than +4% to lead gainers in the Dow Jones Industrials after it said it plans to overhaul its entire Mac computer line with in-house processors designed to highlight artificial intelligence. 

Atlassian (TEAM) closed up more than +4% to lead gainers in the Nasdaq 100 after Barclays upgraded the stock to overweight from equal weight with a price target of $275.

Chip stocks rallied Thursday on speculation that upcoming Q1 earnings results will show strong demand for microchips.  As a result, Nvidia (NVDA),  Broadcom (AVGO), and Micron Technology (MU) closed up more than +4%.  Also, GlobalFoundries (GFS) closed up more than +3%.  In addition, Qualcomm (QCOM), Lam Research (LRCX), and Advanced Micro Devices (AMD) closed up more than +2%. 

Nike (NIKE) closed up more than +3% after Bank of America upgraded the stock to buy from neutral with a price target of $113.

Alpine Immune Sciences (ALPN) closed up more than +37% after Vertex Pharmaceuticals agreed to acquire the company for about $4.9 billion, or $65 per share. 

Janux Therapeutics (JANX) closed up more than +12% after it said it is exploring options, including a potential sale, after receiving takeover interest from larger pharmaceutical companies. 

Constellation Brands (STZ) closed up more than +1% after reporting Q4 comparable EPS of $2.26, above the consensus of $2.10, and forecasting 2025 comparable EPS of $13.50-$13.80, stronger than the consensus of $13.43.

Globe Life (GL) is down more than -53% to lead losers in the S&P 500 after Fuzzy Panda said it is short the stock on its allegation that company executives disregarded widespread insurance fraud.

CarMax (KMX) closed down more than -9% after reporting Q4 net sales and operating revenue of $5.63 billion, weaker than the consensus of $5.82 billion. 

Fastenal (FAST) closed down more than -6% to lead losers in the Nasdaq 100 after reporting Q1 net sales of $1.90 billion, below the consensus of $1.91 billion. 

Gen Digital (GEN) closed down more than -6% after Barclays downgraded the stock to equal weight from overweight.

Morgan Stanley (MS) closed down more than -3% after the Wall Street Journal reported that numerous US regulators are scrutinizing the company’s efforts to prevent potential money laundering by wealthy clients. 

Kenvue (KVUE) closed down more than -3% after Bernstein initiated coverage on the stock with a recommendation of underperform and a price target of $18. 

Avita Medical (RCEL) closed down more than -28% after cutting its Q1 commercial revenue estimate to $11.0 million-$11.3 million from a previous estimate of $14.8 million-$15.6 million. 

Regeneron Pharmaceuticals (REGN) closed down more than -1% after the US Department of Justice said it filed a complaint against the company for allegedly manipulating Medicare reimbursement rates for treating wet AMD.

Earnings Reports (4/12/2024)

BlackRock Inc (BLK), Citigroup Inc (C), JPMorgan Chase & Co (JPM), Progressive Corp/The (PGR), State Street Corp (STT), and Wells Fargo & Co (WFC).

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