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Rally in Bank Stocks on Dimon Comments Boosts Market

Barchart - Mon May 23, 9:47AM CDT
Stocks-Money-Rates - Wall Street and Broad Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up by +0.60%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) is upn +0.10%. 

U.S. stocks this morning are moderately higher.  A rally in bank stocks today is lifting the overall market after JPMorgan CEO Dimon said that “storm clouds” over the U.S. economy may dissipate.

Signs of increased M&A activity are also positive for the overall market after Bloomberg News reported that Broadcom is in talks to acquire VMware.  In addition, stocks are moving higher today on the prospects of easing global trade tensions after President Biden said he would reconsider the tariffs on Chinese imports imposed by the Trump administration. 

A slump of more than -8% in Autodesk today is limiting gains in the Nasdaq 100 after Deutsche Bank cut its recommendation on the stock. Concern that the pandemic in China may be spreading is negative for stocks as an increase in Covid infections may prompt the Chinese government to extend lockdowns that worsen the global supply chain.  Beijing reported a record number of new Covid infections for its latest outbreak, reviving concern the government may impose broader lockdowns to contain the spread. 

Today’s U.S. economic data was slightly bearish for stocks as the U.S. Apr Chicago Fed national activity index rose +0.11 to 0.47, weaker than expectations of 0.50.

Today’s stock movers…

Bank stocks and credit-card issuers are climbing today and are supporting gains in the overall market after JPMorgan Chase CEO Dimon said the U.S. economy is strong and that “credit looks really good, we’ve never seen it this good.” JPMorgan Chase (JPM) is up more than +3% to lead gainers in the Dow Jones Industrials after raising its estimate for full-year net interest income, excluding its market business, to $56 billion from a previous estimate of $53 billion.

Other bank stocks and credit card issuers are also climbing, with Discover Financial Services (DFS), Bank of America (BAC), and Citigroup (C) up more than +3%, and American Express (AXP), Capital One Financial (COF), Comerica (CMA), and Mastercard (MA) up more than +2%.

Software stocks are climbing today, led by a surge of more than +18% in VMware (VMW) after Bloomberg reported that Broadcom is in talks to acquire the company. Oracle (ORCL), Splunk (SPLK), and Check Point Software Technologies (CHKP) are all up more than +1%.   

AML Holding NV (ASML) is up more than +3% in pre-market trading after the BlackRock International Fund said it boosted its holdings of ASML by 66% to 141,310 shares in April.

Autodesk (ADSK) is down more than -8% today to lead losers in the S&P 500 and Nasdaq 100 after Deutsche Bank cut its recommendation on the stock to hold from buy. 

Broadcom (AVGO) is down nearly -5% today after CFRA downgraded the stock to buy from strong buy, saying the company’s deal to buy VMware “would further leverage Broadcom’s balance sheet.”

Tesla (TSLA) is down more than -2% today after Reuters reported that the company would restore production at its Shanghai factory to pre-lockdown levels by Tuesday, a day later than initially planned. 

Across the markets…

June 10-year T-notes (ZNM22) this morning are down -9 ticks, and the 10-year T-note yield is up +3.8 bp at 2.819%.  T-notes this morning are moderately lower.  A jump in the 10-year UK gilt yield to a 2-week high today of 1.960% is pressuring T-note prices.  Also, a rally in stocks today has curbed the safe-haven demand for T-notes.  An increase in supply pressures is a negative factor for T-notes as the Treasury will auction $159 billion of T-notes and floating-rate notes this week, beginning with Tuesday’s $47 billion auction of 2-year T-notes.

The dollar index (DXY00) this morning is down -0.79% at a 3-1/2 week low. Strength in the yuan is weighing on the dollar as the yuan rallied to a 2-week high today against the dollar when President Biden said he would reconsider the tariffs on Chinese imports imposed by the Trump administration.  Also, a rally in EUR/USD to a 3-1/2 week high is also undercutting the dollar as the euro strengthened on positive Eurozone economic data and hawkish comments from ECB President Lagarde. 

EUR/USD (^EURUSD) today is up +0.79% at a 3-1/2 week high.  EUR/USD is climbing today on an unexpected increase in German business confidence.  Also, hawkish comments today from ECB President Lagarde gave the euro a boost when she said the ECB would likely start to raise interest rates in July and exit sub-zero territory by September.

The German May IFO business climate index unexpectedly rose +1.1 to 93.0, stronger than expectations of a decline to 91.4.

ECB President Lagarde said the Governing Council "is likely to start raising interest rates in July and exit negative interest rates by the end of Q3."

USD/JPY (^USDJPY) today is down -0.20%.  The yen is stronger today on optimism that global trade tensions could ease after President Biden signaled he would consider lifting tariffs on Chinese goods imposed by the Trump administration.   Gains in the yen were limited today from higher T-Note yields. 

June gold (GCM22) this morning is up by +10.8 (+0.59%), and May silver (SIK22) is up by +0.176 (+0.79%).  Precious metals today are moderately higher, with gold at a 1-1/2 week high and silver posting a 2-week high.  A fall in the dollar index today to a 3-1/2 week low is underpinning metals prices.  The upside in gold was limited by higher global bond yields along with hawkish comments today from ECB President Lagarde, who said it is likely the ECB will begin raising interest rates in July.