Stocks Lower as Inflation Concerns Push Bond Yields Higher

Rich Asplund - Barchart - Wed Apr 19, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.60%.

U.S. stock indexes this morning are moderately lower on concern that stubborn inflation pressures will force central banks to keep raising interest rates. The UK Mar CPI rose +10.1% y/y, higher than expectations of +9.8% y/y. Also, technology stocks are weighed down by losses in chip makers after ASML Holding NV’s earnings report raised concerns about its demand outlook.

Global bond yields are higher and are bearish for stocks. The 10-year T-note yield rose to a 4-week high of 3.635% and is up +3.4 bp at 3.610%. Also, the 10-year German bund yield climbed to a 1-1/4 month high of 2.540% and is up +2.7 bp at 2.504%. The 10-year UK gilt yield rose to a 6-week high of 3.870% and is up +10.1 bp at 3.847%.

On the bearish side for stocks, CDW Corp is down more than -13% after reporting Q1 preliminary net sales below consensus. Also, Tesla is down more than -2% after cutting prices again on its Model 3 and Model Y vehicles, the second price cut this month. In addition, chip stocks are under pressure on demand concerns after ASML NV reported its Q1 order intake was the lowest since 2020.

On the positive side, Intuitive Surgical is up more than +12% after reporting stronger-than-expected Q1 revenue. Also, Western Alliance Bancorp is up more than +18% to lead regional bank stocks higher after reporting Q1 net interest income above consensus and said Q2 deposits to date are up +$2 billion through April 14.

Overseas stock markets are lower. The Euro Stoxx 50 is down -0.10%. China’s Shanghai Composite closed down -0.68%, and Japan’s Nikkei Stock Index closed down -0.18%.

Today’s stock movers…

CDW Corp (CDW) is down more than -13% to lead losers in the S&P 500 after reporting Q1 preliminary net sales of about $5.10 billion, well below the consensus of $5.57 billion.

Elevance Health (ELV) is down more than -4% after forecasting full-year adjusted EPS above $32.70, below the consensus of $32.79.

Netflix (NFLX) is down more than -3% after reporting Q1 streaming paid memberships of 232.5 million, below the consensus of 233 million. Other video streaming companies fell on the news, with FubuTV (FUBO) down more than -4% and Roku (ROKU) down more than -3%.

Tesla (TSLA) is down more than -2% after cutting prices again on its Model 3 and Model Y vehicles, the second price cut on the vehicles this month. Other electric vehicle makers are falling on the news, with Rivian Automotive (RIVN) down more than -4% to lead losers in the Nasdaq 100 and Lucid Motor (LCID) down more than -4%.

Chip stocks are falling today on demand concerns after ASML NV reported its Q1 order intake was the lowest since 2020. As a result, ASML Holding NV (ASML) is down more than -3%. Also, Global Foundries (GFS), Micron Technology (MU), KLA Corp (KLAC), and Microchip Technology (MCHP) are down more than -2%. In addition, Intel (INTC), Qualcomm (QCOM), NXP Semiconductors NV (NXPI), Applied Materials (AMAT), Lam Research (LRCX), and Marvell Technology (MRVL) are down more than -1%.

Intuitive Surgical (ISRG) is up more than +12% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q1 revenue of $1.70 billion, stronger than the consensus of $1.60 billion.

Abbott Laboratories (ABT) is up more than +6% after reporting Q1 net sales of $9.75 billion, stronger than the consensus of $9.65 billion.

Travelers Cos (TRV) is up more than +5% to lead gainers in the Dow Jones Industrials after reporting Q1 core EPS of $4.11, well above the consensus of $3.58.

Nasdaq Inc (NDAQ) is up more than +3% after reporting Q1 net revenue of $914 million, above the consensus of $911.4 million, and raised its quarterly dividend by 2 cents to 22 cents a share.

United Airlines Holdings (UAL) is up more than +3% after reporting a Q1 adjusted loss per share of -63 cents, narrower than the consensus of -73 cents.

Regional bank stocks are rallying today, with Western Alliance Bancorp (WAL) up more than +18% after reporting Q1 net interest income of $609.9 million, above the consensus of $592.8 million, and said Q2 deposits to date are up +$2 billion through April 14. Also, Zions Bancorp (ZION) is up more than -3%. In addition, Comerica (CMA) and Synchrony Financial (SYF) are up more than +2%. Finally, First Republic Bank (FRC), Regions Financial (RF), Comerica (CMA), and M&T Bank (MTB) are up more than +1%.

Across the markets…

June 10-year T-notes (ZNM23) today are down -10 ticks, and the 10-year T-note yield is up +3.4 bp at 3.610%. June T-notes this morning fell to a 4-week low, and the 10-year T-note yield rose t a 4-week high of 3.635%. A slump in European government bond prices is undercutting T-notes after today’s news showed UK Mar consumer prices rose more than expected. Supply pressures are also weighing on T-note prices as the Treasury will auction $12 billion of reopened 20-year T-bonds later this afternoon.

The dollar index (DXY00) today is up by +0.12%. Higher T-note yields today are giving the dollar a boost. Also, the weakness in stocks today has sparked some liquidity demand for the dollar. In addition, the dollar is climbing on a decline in the yen today to a 1-1/4 month low against the dollar.

EUR/USD (^EURUSD) today is down by -0.15%. A stronger dollar today is weighing on the euro. However, losses in EUR/USD are limited after ECB Chief Economist Lane said the ECB should raise interest rates again next month if the economic backdrop doesn’t shift significantly.

Today’s Eurozone economic news is bullish for EUR/USD after Eurozone Mar new car registrations rose +28.8% y/y to 1.088 million units, the most in 1-3/4 years.

USD/JPY (^USDJPY) today is up by +0.22%. The yen today tumbled to a 1-1/4 month low against the dollar. The yen retreated on speculation the BOJ will maintain its ultra-easy monetary policy after Bloomberg reported that BOJ officials are wary of tweaking or scrapping their yield curve controls at next week’s policy meeting, citing the recent banking turmoil in the U.S. and Europe.

Japan Feb industrial production was revised upward by +0.1 to 4.6% m/m from the initially reported 4.5% m/m, the biggest increase in 8 months.

June gold (GCM3) this morning is down -19.1 (-0.95%), and May silver (SIK23) is up +0.077 (+0.30%). Precious metals prices this morning are mixed, with gold falling to a 2-week low. A stronger dollar today is undercutting metals prices. Also, higher global bond yields are bearish for metals. In addition, hawkish comments today from ECB Chief Economist Lane weighed on metals when he said the ECB should raise interest rates again next month if the economic backdrop doesn’t shift significantly.

Silver garnered support today from news that showed Eurozone Mar new car registrations rose by the most in 1-3/4 years, a positive factor for industrial metals demand.

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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.