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Stocks Close Higher as Bond Yields Decline

Barchart - Mon Aug 28, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.63%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.74%.

Stocks on Monday posted moderate gains.  Stocks moved higher Monday, and bond yields fell on carryover support from last Friday when Fed Chair Powell said the Fed is prepared to raise interest rates further if needed but "will proceed carefully" on whether to hike again, opening the door to a potential Fed pause.  Also, M&A activity supports stocks after Kimco Realty purchased RPT Realty for about $2 billion.  In addition, 3M Co. rose more than +5% after agreeing to pay $5.5 billion to resolve lawsuits related to military earplugs.

Global stocks have carryover support from today’s rally in the Shanghai Composite to a 2-week high after China took several measures to boost its markets, including cutting the levy it imposes on stock trades, among other measures.

Monday’s U.S. economic news was positive for stocks after the August Dallas Fed manufacturing outlook level of general business activity rose +2.8 to a 5-month high of -17.2, stronger than expectations of -19.0.

The markets are discounting the odds at 23% for a +25 bp rate hike at the September 20 FOMC meeting and 67% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields on Monday were mixed.  The 10-year T-note yield fell -2.9 bp to 4.206%.  The 10-year German bund yield rose +0.3 bp to 2.564%.  The 10-year UK gilt did not trade Monday, with UK markets closed for the Summer Bank holiday. 

Overseas stock markets on Monday settled higher.  The Euro Stoxx 50 closed up +1.36%.  China’s Shanghai Composite Index closed up +1.13%. Japan’s Nikkei Stock Index closed up +1.73%.

Today’s stock movers…

Boston Scientific (BSX) closed up more than +5% to lead gainers in the S&P 500 after a study of its Farapulse system to treat patients with atrial fibrillation met its primary efficacy and safety endpoints.

3M Co (MMM) closed up more than +5% to lead gainers in the Dow Jones Industrials after Bloomberg News reported the company has tentatively agreed to pay $5.5 billion to resolve more than 300,000 lawsuits claiming it sold the U.S. military defective combat earplugs.

Regional bank stocks moved higher Monday.  Ziona Bancorp (ZION), Comerica (CMA), Citizens Financial Group (CFG), and Truist Financial (TFC) closed up more than +2%.  Also, Fifth Third Bancorp (FITB), Huntington Bancshares (HBAN), M&T Bank (MTB), US Bancorp (USB), and Regions Financial (RF)closed up more than +1%, 

Hawaiian Electric (HE) closed up more than +44% after releasing a statement saying its power lines to Lahaina were not energized when a fire broke out there August 8.

RPT Realty (RPT) closed up more than +17% after Kimco Realty said it would purchase the company in an all-stock transaction valued at about $2 billion.

Zimmer Biomet Holdings (ZBH) closed up nearly +2% after it said last Friday it would maintain its quarterly cash dividend at 24 cents per share.

Moderna (MRNA) closed up more than +1% after President Biden last Friday said the White House would request additional money from Congress to fund the next round of coronavirus vaccine shots. 

Micron Technology (MU) closed up more than +2%, and Intel (INTC) closed up more than +1% after Reuters reported that U.S. Commerce Secretary Raimondo raised concerns about several U.S. business issues with China’s Commerce Minister, including Micron Technology and Intel.

CrowdStrike Holdings (CRWD) closed down more than -3% to lead losers in the Nasdaq 100 after Morgan Stanley downgraded the stock to equal weight from overweight. 

Novocure Ltd (NVCR) closed down more than -37% after it said a late-stage trial of its ovarian cancer drug did not meet its primary endpoint of overall survival at the final analysis.   

Progressive Corp (PGR) closed down -0.75% on signs of insider selling after an SEC filing showed CFO Sauerland sold $1.57 million shares last Thursday. 

Atmos Energy (ATO) closed down -0.75% after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Across the markets…

September 10-year T-notes (ZNU23) Monday closed up +6.5 ticks, and the 10-year T-note yield fell -2.9 bp to 4.206%.  Sep T-notes Monday moved higher on carryover support from last Friday when comments from Fed Chair Powell left open the possibility of a pause in the Fed’s rate hike campaign.  Also, easing inflation expectations supported T-note prices after the 10-year breakeven inflation rate Monday fell to a 1-week low of 2.303%.

T-note prices maintained their gains Monday on strong demand for the Treasury’s 2-year and 5-year T-note auctions.  The $45 billion 2-year T-note auction had a bid-to-cover ratio of 2.94, well above the 10-auction average of 2.72.  Also, the $46 billion 5-year T-note action had a bid-to-cover ratio of 2.54, better than the 10-auction average of 2.52.

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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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