What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed up +1.85%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.13%.

Stock indexes Friday rallied sharply, with the Nasdaq 100 posting an 8-1/2 month high.  A sharp rebound in regional bank stocks Friday eased concerns about the banking sector.  Also, strong quarterly earnings results from Apple boosted market sentiment and gave the overall market a lift.    

U.S. stocks rallied Friday 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.

U.S. Mar consumer credit rose +$26.514 billion, stronger than expectations of +$17.000 billion and the largest increase in 4 months.

Comments Friday from St. Louis Fed President Bullard were hawkish when he said interest rates would probably have to grind higher as recent reports have not shown much progress on inflation.  He added that he would need to see "meaningful declines in inflation" to be convinced that higher rates aren't necessary.

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 Friday moved higher.  The 10-year T-note yield rose +6.2 bp to 3.441%.  The 10-year German bund yield rose +10.1 bp to 2.291%, and the UK 10-year gilt yield rose +12.8 bp to 3.781%.

On the bullish side for stocks, regional bank stocks rallied sharply as they recovered some of this week’s significant losses.  Also, Apple rose more than +4% to an 8-1/2 month high after reporting Q2 revenue above consensus, raising its quarterly dividend, and announcing a $90 billion stock buyback program.  Live Nation Entertainment closed up more than +15% after reporting Q1 revenue well above consensus.

On the bearish side, Bio-Rad Laboratories closed down more than -16% after reporting Q1 net sales below consensus.  Also, Epam Systems closed down more than -10% after cutting its full-year adjusted EPS estimate.  In addition, Atlassian closed down more than -9% after forecasting Q4 revenue below consensus. 

Overseas stock markets Friday settled mixed.  The Euro Stoxx 50 closed up +1.25%.  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 posted significant gains on Friday as they recovered some of this week’s sharp losses.  PacWest Bancorp (PACW) closed up more than +81%, and Western Alliance Bancorp (WAL) closed up more than +49%. Also, Zions Bancorp (ZION) closed up more than +19% to lead gainers in the S&P 500.  In addition, Comerica (CMA) closed up more than +16%, KeyCorp (KEY) and Truist Financial (TFC) closed up more than +9%, Fifth Third Bancorp (FITB) closed up more than +7%, and Citizens Financial Group (CFG), US Bancorp (USB), and Lincoln National closed (LNC) closed up more than +5%.  

Apple (AAPL) closed 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.

Live Nation Entertainment (LYV) closed up more than +15% after reporting Q1 revenue of $3.10 billion, well above the consensus of $2.26 billion.

Fortinet (FTNT) closed 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. 

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

Johnson Controls International (JCI) closed up more than +6% 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. 

Expedia Group (EXPE) closed up more than +4% after reporting Q1 gross bookings of $29.40 billion, stronger than the consensus of $28.8 billion.

Bio-Rad Laboratories (BIO) closed down more than -16% 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) closed down more than -9% 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) closed down more than -10% after forecasting Q2 revenue of $430 million-$450 million, weaker than the consensus of $455.7 million. 

Epam Systems (EPAM) closed down more than -10% 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) closed down more than -3% after forecasting Q2 adjusted EPS of $9.90-$10.00, weaker than the consensus of $10.46. 

Booking Holdings (BKNG) closed down more than -1% after reporting Q1 adjusted Ebitda of $586 million, weaker than the consensus of $626.9 million. 

Microchip Technology (MCHP) closed down more than -1% 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.”

Across the markets…

June 10-year T-notes (ZNM23) on Friday closed down -27 ticks, and the 10-year T-note yield rose by +6.2 bp to 3.441%.  June T-notes Friday were under pressure from the stronger-than-expected U.S Apr payroll report.  Also, a rally in regional bank stocks Friday has temporarily eased concerns about the sector and reduced safe-haven demand for T-notes. In addition, hawkish comments from St. Louis Fed President Bullard undercut T-notes when he said interest rates would probably have to grind higher as recent reports have not shown much progress on inflation.

Finally, 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.

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