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Stocks Retreat on Risk Aversion Ahead of Wednesday’s US CPI Report

Barchart - Tue Apr 9, 10:25AM CDT

The S&P 500 Index ($SPX) (SPY) this morning is down -0.76%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.78%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.67%. 

Stock indexes this morning are trading lower on risk aversion ahead of Wednesday’s US CPI report.  Also, Nvidia is down more than -4% and is weighing on the broad market.  Weakness in telecommunication stocks is weighing on the Dow Jones Industrials.

Investors are cautious ahead of Wednesday’s US CPI, which could affect expectations for the timing of the Fed’s first rate cut.  The consensus is for the US March headline CPI to rise to +3.4% y/y from Feb’s +3.2% but for the core CPI to ease to +3.7% y/y from Feb’s +3.8%.

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 +3.9% y/y profit growth in Q1, the smallest year-over-year profit growth since 2019.

The markets are discounting the chances for a -25 bp rate cut at 5% for the next FOMC meeting on April 30-May 1 and 55% for the following meeting on June 11-12.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.86%.  China's Shanghai Composite recovered from a 1-week low and closed up +0.052%.  Japan's Nikkei Stock Index closed up +1.08%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +12 ticks.  The 10-year T-note yield is down -5.2 bp at 4.368%.  Bullish factors for T-note prices include strength in European government bond markets and safe-haven demand with today’s weakness in stocks.  Supply pressures are limiting the upside in T-notes as the Treasury will auction $58 billion auction of reopened 3-year T-notes today as part of this week’s $119 billion Treasury auctions of T-notes and T-bonds. 

European government bond yields today are lower.  The 10-year German bund yield is down -6.9 bp at 2.366%. The 10-year UK gilt yield is down -5.5 bp at 4.029%.

In its quarterly Bank Lending Survey, the ECB said demand for corporate loans in the Eurozone saw a "substantial decline" in Q1 as the region continues to reel from elevated borrowing costs.

US Stock Movers

Nvidia (NVDA) is down more than -4% to lead losers in the Nasdaq 100 after Modulus Financial Engineering filed a trademark infringement lawsuit against it over its “Modulus” AI platform. 

Cruise line operators are falling today with Royal Caribbean Cruises Ltd (RCL) down more than -5% to lead losers in the S&P 500.  Also, Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH) are down more than -3%.

Telecommunication stocks are under pressure today, with Verizon Communications (VZ) down more than -2% to lead losers in the Dow Jones Industrials.  Also, AT&T (T), Charter Communications (CHTR), and Comcast (CMCSA) are down more than -1%.

Defense-related stocks are sliding today, with Huntington Ingalls Industries (HII), Martin Marrietta Materials (MLM), Transdigm Group (TDG), and RTX Corp (RTX) down more than -1%.

Cboe Global Markets (CBOE) is down more than -2% after Morgan Stanley downgraded the stock to equal weight from overweight.

Inmode Ltd (INMD) is down more than -7% after cutting its full-year revenue forecast to $485 million-$495 million from a previous forecast of $495 million-$505 million, weaker than the consensus of $498.8 million. 

Neogen (NEOG) is down more than -7% after cutting its full-year revenue forecast to $910 million-$920 million from a previous forecast of $935 million-$955 million, below the consensus of $938.5 million. 

Moderna (MRNA) is up more than +8% to lead gainers in the S&P 500 and Nasdaq 100 after Jeffries said new data from the company’s trial of its experimental vaccine with Merk’s Keytrude in patients with head and neck cancer is “interesting,” saying it validates the individualized neoantigen therapy platform. 

Illumina (ILMN) is up more than +3% after Barclays raised its price target on the stock to $100 from $85.

Chip stocks are moving higher today on a decline in T-note yields. ON Semiconductors (ON) is up more than +3%.  Also, GlobalFoundries (GFS), Marvell Technology (MRVL), Microchip Technology (MCHP), Analog Devices (ADI), and NXP Semiconductors (NXPI) are up more than +1%. 

Amkor Technology (AMKR) is up more than +3% after Needham & Co. initiated coverage of the stock with a recommendation of buy and a price target of $40.

Alkermes Plc (ALKS) is up more than +2% after it said its ALKS 2680 demonstrated clinically meaningful and statistically significant improvements from baseline in mean sleep latency compared to a placebo in a Phase 1b study.

Freeport McMoRan (FCX) is up more than +1% after Bank of America Global Research upgraded the stock to buy from hold with a price target of $59. 

Nasdaq (NDAQ) is up more than +1% after Morgan Stanley named the stock a top pick with US brokers and exchanges.

Newmont (NEM) is up more than +1% after gold prices rose to a new record high and silver climbed to a 2-3/4 year high. 

Earnings Reports (4/9/2024)

Aehr Test Systems (AEHR), Dakota Gold Corp (DC), Liberty Media Corp-Liberty Liv (LLYVA), Neogen Corp (NEOG), PriceSmart Inc (PSMT), RCI Hospitality Holdings Inc (RICK), SMART Global Holdings Inc (SGH), WD-40 Co (WDFC).



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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.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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