Stocks Move Lower After Fed Meeting

Rich Asplund - Barchart - Wed Jun 14, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.6%.

U.S. stocks are lower this afternoon after it was announced that the Federal Reserve chose not to raise interest rates today but signaled 2 more quarter percentage point hikes in the next 6 months.

Earlier in the day the U.S. May PPI report showed price pressures at the producer level slowed more than expected. The Dow Jones Industrials is lower than the other indexes due to weakness in health insurers after UnitedHealth Group warned of rising costs.

U.S. May PPI final demand eased to +1.1% y/y from +2.3% y/y in April, better than expectations of +1.5% y/y and the smallest increase in over two years. Also, May PPI ex-food and energy eased to +2.8% y/y from +3.1% y/y in April, better than expectations of +2.9% y/y and the smallest increase in over two years.

Global bond yields are mixed. The 10-year T-note yield is down -1 bp at 3.817%. The 10-year German bund yield is up +3.6 bp at 2.459%, and the UK 10-year gilt yield is down -1.8 bp at 4.416%.

On the bullish side of stocks, surgery-center operators and medical equipment makers are climbing after executives at the Goldman Sachs Global Healthcare Conference said surgery centers were seeing “strong volumes” and that post-Covid volume trends should remain strong over the next four to five years. Also, Netflix is up more than +2% after Argus Research raised its price target on the stock to $490 from $390.

On the bearish side, health insurance companies retreated in pre-market trading after an executive at UnitedHealth Group said a recent increase in surgeries and other medical care delayed during the pandemic could push expenses higher than anticipated. Also, regional bank stocks are under pressure after Zions Bancorp warned that its net interest margin would fall this quarter as it pays more to hold onto depositors.

Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.59%. China’s Shanghai Composite closed down -0.14%, and Japan’s Nikkei Stock Index closed up +1.47%.

Today’s stock movers…

Surgery-center operators and medical equipment makers are climbing today after executives at the Goldman Sachs Global Healthcare Conference said surgery centers were seeing “strong volumes” and that post-Covid volume trends should remain strong over the next four to five years. As a result, Universal Health Services (UHS) is up more than +5% to lead gainers in the S&P 500. Also, Stryker (SYK), Zimmer Biomet Holdings (ZBH), and Teleflex (TFX) are up more than +4%. In addition, Intuitive Surgical (ISRG) is up more than +3% to lead gainers in the Nasdaq 100. Finally, Boston Scientific (BSX), Edward Lifesciences (EW), and HCA Healthcare (HCA) are up more than +3%.

Estee Lauder (EL) is up more than +2% after President Capital Management upgraded the stock to buy from neutral with a price target of $220.

Jack Henry & Associates (JKHY) is up more than +2% after BTIG LLC initiated coverage on the stock with a buy rating and a price target of $183.

Netflix (NFLX) is up more than +2% after Argus Research raised its price target on the stock to $490 from $390.

Advanced Micro Devices (AMD) is up more than +1% after falling more than -3% on Tuesday as more analysts expressed optimism about the company’s new line of artificial intelligence processors unveiled at an event on Tuesday.

Super Micro Computer (SMCI) is up more than +1% after Loop Capital Markets raised its price target on the stock to $325 from $200.

Health insurance companies retreated in pre-market trading after an executive at UnitedHealth Group said a recent increase in surgeries and other medical care delayed during the pandemic could push expenses higher than anticipated. As a result, Humana (HUM) is down more than -13% to lead losers in the S&P 500. Also, UnitedHealth Group (UNH) is down more than -7% to lead losers in the Dow Jones Industrials. In addition, Centene (CNC) is down more than -7%, Elevance Health (ELV) is down more than -6%, and Cigna Group (CIG) and Molina Healthcare (MOH) are down more than -5%.

Regional bank stocks are under pressure after Zions Bancorp warned that its net interest margin would fall this quarter as it pays more to hold onto depositors. As a result, Zions Bancorp (ZION) is down more than -2%. Also, Comerica (CMA), Huntington Bancshares (HBAN), Fifth Third Bancorp (FITB), KeyCorp (KEY), and M&T Bank (MTB) are down more than -1%.

Catalent (CTLT) is down more than -3% after Jeffries downgraded the stock to hold from buy.

Cinemark (CNK) is down more than -6% after B Riley Securities downgraded the stock to neutral from buy, saying the film slate for 2024/25 looks increasingly uncertain.

Applied Materials (AMAT) is down more than -1% after Needham downgraded the stock to hold from buy.

Across the markets…

September 10-year T-notes (ZNU23) today are up +14 ticks, and the 10-year T-note yield is down -2.7 bp at 3.786%. T-notes this morning are moderately higher on an easing of producer price pressures after the U.S. May PPI rose less than expected. T-notes also have support on the outlook for Fed today to pause its rate hike campaign after the conclusion of today’s FOMC meeting.

The dollar index (DXY00) this morning is down -0.47% and dropped to a 3-1/2 week low. Today’s U.S. May PPI report showed an easing of producer price pressures that knocked T-note yields lower and weighed on the dollar. The PPI report also boosts expectations for the Fed to pause its rate hike campaign after today’s FOMC meeting.

EUR/USD (^EURUSD) today is up by +0.47% and climbed to a 3-1/2 week high. Dollar weakness today is supportive of the euro. Also, today’s economic news that showed Eurozone Apr industrial production rose more than expected was bullish for EUR/USD. In addition, central bank divergence is positive for EUR/USD on the prospects for the Fed to pause raising interest rates today and the ECB to raise interest rates Thursday.

Eurozone Apr industrial production rose +1.0% m/m, stronger than expectations of +0.9% m/m.

The German May wholesale price index fell -2.6% y/y, the steepest pace of decline in nearly three years.

USD/JPY (^USDJPY) today is down by -0.49%. The yen is moving higher today as a decline in T-note yields is bullish for the yen. Gains in the yen may be limited after the Nikkei Stock Index today rallied to a 33-year high, which curbed the safe-haven demand for the yen. Also, expectations for the BOJ to maintain stimulus measures after Friday’s policy meeting are bearish for the yen.

August gold (GCQ3) this morning is up +13.2 (+0.67%), and July silver (SIN23) is up +0.303 (+1.27%). Precious metals prices this morning are moderately higher on a fall in the dollar index to a 3-1/2 week low. Also, lower T-note yields today are bullish for metals prices. In addition, metals are moving higher after the easing of price pressures in today’s U.S. May PPI report bolsters the chance that the Fed will pause its rake hike campaign at today’s FOMC meeting.

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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.