Stocks Jump as Bank Stock Rebound and Apple Soars

Rich Asplund - Barchart - Fri May 5, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +1.43%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.37%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.45%.

U.S. stocks this morning are moderately higher as an easing of U.S. banking concerns is pushing regional bank stocks sharply higher. Also, strong quarterly earnings results from Apple are boosting market sentiment and giving the overall market a lift.

U.S. stocks are climbing today despite a jump in bond yields from the stronger-than-expected U.S. Apr payroll report. The strength in the U.S. labor market is bolstering optimism that tighter Fed policy may achieve a soft landing and not push the U.S. economy into recession.

U.S. Apr nonfarm payrolls rose +253,000, stronger than expectations of +185,000. Also, the Apr unemployment rate unexpectedly fell -0.1 to a 54-year low of 3.4%, showing a stronger labor market than expectations of an increase to 3.6%. The report was hawkish for Fed policy.

U.S. Apr average hourly earnings rose +0.5% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y.

The U.S. debt ceiling impasse is a bearish factor for stocks. Treasury Secretary Yellen on Monday said the Treasury Department may run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised. Bipartisan Congressional leaders are scheduled to meet with President Biden on Tuesday, May 9, to discuss whether there is a way to move forward on the debt ceiling.

Global bond yields are higher. The 10-year T-note yield is up +5.6 bp at 3.435%. The 10-year German bund yield is up +8.9 bp at 2.279%, and the UK 10-year gilt is up +11.5 bp at 3.768%.

On the bullish side for stocks, regional bank stocks are rallying today as they recover some of this week’s sharp losses. Also, Apple is up more than +4% after reporting Q2 revenue above consensus, raising its quarterly dividend, and announcing a $90 billion stock buyback program. Live Nation Entertainment is up more than +12% after reporting Q1 revenue well above consensus.

On the bearish side, Bio-Rad Laboratories is down more than -17% after reporting Q1 net sales below consensus. Also, Atlassian is down more than -11% after forecasting Q4 revenue below consensus. Monolithic Power Systems is down more than -12% after forecasting weaker0thana-expected Q2 revenue.

Overseas stock markets are mixed. The Euro Stoxx 50 is up +1.03%. China’s Shanghai Composite closed down -0.48% and Japan’s Nikkei Stock Index was closed for Children’s Day.

Today’s stock movers…

Regional bank stocks are rallying today as they recover some of this week’s sharp losses. PacWest Bancorp (PACW) is up more than +44%, and Western Alliance Bancorp (WAL) is up more than +28%. Also, Zions Bancorp (ZION) is up more than +14% to lead gainers in the S&P 500. In addition, Comerica (CMA) is up more than +11%, KeyCorp (KEY) is up more than +7%, and M&T Bank (MTB), First Horizon (FHN), and Truist Financial (TFC) are up more than +5%.

Apple (AAPL) is up more than +4% to lead gainers in the Dow Jones Industrials after reporting Q2 revenue of $94.84 billion, stronger than the consensus of $92.60 billion. The company also raised its quarterly dividend by +4% to 24 cents a share and announced plans for $90 billion in stock repurchases.

Fortinet (FTNT) is up more than +5% to lead gainers in the Nasdaq 100 after reporting Q1 revenue of $1.26 billion, above the consensus of $1.20 billion, and raising guidance on its full-year revenue forecast to $5.43 billion-$5.49 billion from a previous estimate of $$5.37 billion-$5.43 billion.

Live Nation Entertainment (LYV) is up more than +12% after reporting Q1 revenue of $3.10 billion, well above the consensus of $2.26 billion.

Expedia Group (EXPE) is up more than +7% after reporting Q1 gross bookings of $29.40 billion, stronger than the consensus of $28.8 billion.

Cigna (CI) is up more than +7% after reporting Q1 adjusted operating EPS of $5.41, better than the consensus of $5.23.

A jump in WTI crude prices by more than +4% today is lifting energy stocks. Diamondback Energy (FANG) is up more than +5%. Also, Devon Energy (DVN), Hess Corp (HES), Haliburton (HAL), and Marathon Oil (MRO) are up more than +4%. In addition, APA Corp (APA), ConocoPhillips (COP), and Occidental Petroleum (OXY) are up more than +3%.

Johnson Controls International (JCI) is up more than +5% after narrowing its full-year adjusted EPS estimate to $3.50-$3.60 from a prior estimate of $3.30-$3.60, the midpoint stronger than the consensus of $3.51.

Bio-Rad Laboratories (BIO) is down more than -17% to lead losers in the S&P 500 after reporting Q1 net sales of $676.8 million, below the consensus of $690.8 million.

Atlassian (TEAM) is down more than -11% to lead losers in the Nasdaq 100 after forecasting Q4 revenue of $900 million-$920 million, below the consensus of $920.5 million.

Monolithic Power Systems (MPWR) is down more than -12% after forecasting Q2 revenue of $430 million-$450 million, weaker than the consensus of $455.7 million.

Epam Systems (EPAM) is down more than -9% after cutting its full-year adjusted EPS estimate to $10.60-$10.80 from a previous estimate of $11.15-$11.35.

Mettler-Toledo International (MTD) is down more than -3% after forecasting Q2 adjusted EPS of $9.90-$10.00, weaker than the consensus of $10.46.

Microchip Technology (MCHP) is down more than -2% on concerns about building inventories after the company CFO said it “rescheduled significant amounts of backlog to later quarters to help customers with their inventory positions, which resulted in building inventory on our balance sheet.”

Warner Bros Discovery (WBD) is down more than -2% after reporting a Q1 loss per share of -44 cents, much steeper than the consensus of -3.6 cents.

Across the markets…

June 10-year T-notes (ZNM23) today are down -23 ticks, and the 10-year T-note yield is up +5.6 bp at 3.435%. Jun T-notes this morning are under pressure from the stronger-than-expected U.S Apr payroll report. Also, a rally in regional bank stocks today has temporarily eased concerns about the sector and reduced safe-haven demand for T-notes. In addition, bond dealers may be preparing for an increase in supply as they set short hedges in T-notes ahead of next week’s May quarterly refunding, where the Treasury will auction $96 billion of T-notes and T-bonds.

The dollar index (DXY00) today is up by +0.18%. The dollar today is moderately higher as the better-than-expected U.S. Apr payroll report pushed T-note yields higher. Also, weaker-than-expected Eurozone economic news today has undercut the euro to benefit the dollar.

EUR/USD (^EURUSD) today is down by -0.25%. Dollar strength today is undercutting the euro. Also, today’s Eurozone economic news is weighing on EUR/USD euro after Eurozone Mar retail sales fell more than expected, and German Mar factory orders posted their largest decline in nearly three years. Limiting losses in the euro was hawkish comments from ECB Governing Council member Muller who said Thursday's interest rate hike by the ECB won't be the last.

Weaker-than-expected Eurozone economic news is bearish for EUR/USD. Eurozone Mar retail sales fell -1.2% m/m, weaker than expectations of -0.2%. Also, German Mar factory orders fell -10.7% m/m, weaker than expectations of -2.3% m/m and the biggest decline in nearly three years. In addition, the German Apr S&P construction PMI fell -0.9 to 42.0, the steepest pace of contraction in 4 months.

ECB Governing Council member Muller said Eurozone inflation is still far above the ECB's 2% target, indicating Thursday's interest rate hike won't be the last.

USD/JPY (^USDJPY) today is up by +0.50%. The yen today is under pressure on rising T-note yields and dollar strength. Also, an easing of U.S. banking concerns has sparked a rally in regional bank stocks today and curbed safe-haven demand for the yen. Trading activity in the yen is muted, with Japanese markets closed today for the Children’s Day holiday.

June gold (GCM3) this morning is down -42.7 (-2.08%), and July silver (SIN23) is down -0.697 (-2.66%). Precious metals prices this morning are sharply lower. A stronger-than-expected U.S. Apr payrolls report pushed the dollar and bond yields higher and sparked long liquidation in metals. Metal also declined as the strength in the U.S. labor market dampened speculation the Fed would cut interest rates late this year. Silver prices also fell on industrial metals demand concerns after German Mar factory orders fell more than expected by the most in nearly three years.

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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.