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Stocks Climb as Global Growth Concerns Ease

Barchart - Tue May 17, 9:45AM CDT
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What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up by +1.25%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.90%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.53%. 

U.S. stocks this morning are moderately higher and posted 1-week highs.  An easing of global growth concerns has sparked a rally in global equity markets today.  In addition, U.S. stocks have carry-over support today from a rally in Chinese technology stocks on optimism that China may ease a year-long crackdown on the sector.  Finally, hopes that lockdowns in Shanghai may soon be ended fueled gains in the overall market after Shanghai reported no community Covid infections for a third day. 

A +1.2% rally in the Euro Stoxx 50 today is giving U.S. stocks a boost after the Eurozone economy grew more than expected in Q1.  Also, positive comments today from St. Louis Fed President Bullard were bullish for stocks, along with stronger-than-expected U.S. economic data on April retail sales and April manufacturing production.

St. Louis Fed President Bullard said a "super-strong" U.S. labor market will help support consumer spending and keep the economy on track, and he sees a "fairly good performance for the U.S. economy through 2022 and 2023."

U.S. Apr retail sales rose +0.9% m/m, slightly weaker than expectations of +1.0% m/m, but Mar was revised upward to +1.4% m/m from the previously reported +0.5% m/m.  Apr retail sales ex-autos rose +0.6% m/m, stronger than expectations of +0.4% m/m.

U.S. Apr manufacturing production rose +0.8% m/.m, stronger than expectations of +0.4% m/m.

The U.S. May NAHB housing market index fell -8 to a 23-month low of 69, weaker than expectations of 75.

Today’s stock movers…

Paramount Global (PARA) is up more than +13% today to lead gainers in the S&P 500 after Warren Buffet’s Berkshire Hathaway reported a stake in the company. 

Take-Two Interactive Software (TTWO) is up more than +8% today after reporting Q4 adjusted EPS of $1.09, better than the consensus of 99 cents. 

Citigroup (C) is up more than +7% today after a quarterly 13-F filing showed Warren Buffet’s Berkshire Hathaway took a stake in the company. 

Advanced Micro Devices (AMD) is up more than +4% today after Piper Sandler upgraded the stock to overweight from neutral.

Airline stocks are climbing today, led by a +5% jump in United Airlines Holdings (UAL) after it raised its outlook for Q2 passenger revenue to increase 25% over the 2019 level, stronger than an April forecast of 17% above the 2019 level.  Also, American Airlines (AAL), Delta Air Lines (DAL), and Alaska Air Group (ALK) are up more than +4%, and Southwest Airlines (LUV) is up more than +3%.  

U.S.-listed Chinese technology stocks are climbing today on optimism that a meeting between Chinese government regulators and top corporate executives will result in China easing its year-long clampdown on the sector.   Pinduoduo (PDD) is up more than +9% to lead gainers in the Nasdaq 100.  Also, Alibaba Group Holding (BABA) is up more than +7%, and (JD) and Baidu (BIDU) are up more than +4%.  In addition, NetEase (NTES) is up more than +2%.

Walmart (WMT) is down more than -8% to lead losers in the S&P 500 and Dow Jones Industrials after cutting its full-year EPS growth forecast to a decline of about -1%, weaker than a previous estimate of a mid-single-digit increase.  Other retailers also fell on the news, with Kroger (KR), General Mills (GIS), and Dollar General (DG) down more than -3%. 

Across the markets…

June 10-year T-notes (ZNM22) this morning are down -22 ticks, and the 10-year T-note yield is up +8.2 bp at 2.966%.  Higher European government bond yields are weighing on T-notes, with the 10-year German bund yield up +11.1 bp at 1.048%.  A rally in global equity markets today is also reducing safe-haven demand for government debt.  T-note losses accelerated this morning after data showed U.S. Apr retail sales and Apr manufacturing production rose more than expected.   

The dollar index (DXY00) this morning is down -0.66% at a 1-week low.  A rally in stocks this morning is curbing the liquidity demand for the dollar.   Also, strength in GBP/USD weighs on the dollar as the British pound climbed to a 1-1/2 week high today on stronger-than-expected UK labor market data.  In addition, EUR/USD pushed higher today and weighed on the dollar on hawkish ECB comments and better-than-expected Eurozone economic data. 

EUR/USD (^EURUSD) today is up +0.92%.  EUR/USD is moving moderately higher after today’s data showed Eurozone Q1 GDP rose more than expected.  Also, hawkish comments from ECB Governing Council member Knot gave the euro a boost when he raised the prospect of a 50 bp rate hike by the ECB.

Eurozone Q1 GDP rose +0.3% q/q and +5.1% y/y, stronger than expectations of +0.2% q/q and +5.0% y/y.

ECB Governing Council member Knot said he supports a quarter-point increase by the ECB in July, but a larger magnitude increase should not be ruled out if inflation risks worsen.

USD/JPY (^USDJPY) today is up +0.43%.  The yen is moderately lower today and under pressure from higher T-note yields.  Also, strength in global equity markets today has curbed the safe-haven demand for the yen. In addition, dovish comments today from BOJ Deputy Governor Amamiya weighed on the yen when he said less stimulus from the BOJ would push back its price goal.

Japanese economic data today was bullish for the yen after the Japan Mar tertiary industry index rose +1.3% m/m, stronger than expectations of +1.1% m/m and the biggest increase in 5 months.

BOJ Deputy Governor Amamiya said a reduction in BOJ stimulus would add to downward pressure on the economy and push attainment of the BOJ's price goal further into the future. 

June gold (GCM22) this morning is up by +9.7 (+0.53%), and May silver (SIK22) is up by +0.154 (+0.71%).  Precious metals today are moderately higher.  A slide in the dollar index today to a 1-week low is boosting metals prices. Silver found support today on signs of strength in global demand for industrial metals after Eurozone Q1 GDP expanded more than expected and after U.S. Apr manufacturing production rose more than expected.  However, gains in gold are limited by higher global yields and strength in stocks, which curbs safe-haven demand for gold.