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Stocks Partially Recover as Powell Eases Rate-Hike Fears

Barchart - Fri May 13, 9:45AM CDT
Stocks-Money-Rates - Wall Street and Broad Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up by +1.88%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +2.79%. 

U.S. stocks this morning are moderately higher, led by strength in technology stocks as they recover some of this week’s losses.  An easing of rate-hike worries sparked a rally in stock indexes in overnight trade after Fed Chair Powell late Thursday pushed back against speculation of steeper Fed rate hikes.  Today’s U.S. economic data was mixed for stocks.

Carry-over support from a +0.96% rally in China’s Shanghai Composite is bullish for U.S. stocks after Shanghai said it plans to end pandemic lockdowns by May 20.

Late Thursday, Fed Chair Powell reaffirmed the Fed is likely to raise interest rates by 50 bp at each of its next two meetings and said the Fed isn't "actively considering" a 75 bp move.

The U.S. Apr import price index ex-petroleum rose +0.4% m/m, weaker than expectations of +0.7% m/m.

The University of Michigan’s May U.S. consumer sentiment index fell -6.1 to a more than 10-year low of 59.1, weaker than expectations of 64.0.

Today’s stock movers…

Technology stocks today are soaring and leading the overall market higher.  Zoom Video Communications (ZM) and Zscaler (ZS) are up more than +9%.  Also, Crowdstrike Holdings (CRWD), Atlassian Corp Plc (TEAM), and Okta (OKTA) are up more than +8%.  In addition, Nvidia (NVDA), Splunk (SPLK), and Dexcom (DXCM) are up more than +6%. 

U.S.-listed Macau casino stocks are climbing today after Shanghai said it seeks to end pandemic lockdowns by May 20.  Wynn Resorts (WYNN) is up more than +9% to lead gainers in the S&P 500.  Also, Las Vegas Sands (LVS) is up more than +8%, and Caesars Entertainment (CZR) and Penn National Gaming (PENN) are up more than +6%.  In addition, MGM Resorts International (MGM) is up more than +5%.   

U.S.-listed Chinese stocks are rallying today after Shanghai said it would end pandemic lockdowns and start reopening the city by May 20.   Baidu (BIDU) is up more than +9%.  Also, Pinduoduo (PDD) is up more than +7% and JD.com (JD) and Alibaba Group Holding (BABA) are up more than +6%.  In addition, NetEase (NTES) is up more than +5%. 

Twitter (TWTR) is down more than -9% today to lead losers in the S&P 500 after Elon Musk said his deal to buy the company is “temporarily on hold pending details supporting calculation that spam/fake accounts on Twitter represent less than 5% of users.” 

United Parcel Service (UPS) is down -1% today after JPMorgan Chase cut its recommendation on the stock to neutral from overweight. 

Across the markets…

June 10-year T-notes (ZNM22) this morning are down -22 ticks, and the 10-year T-note yield is up +5.1 bp at 2.899%.  A sharp rally in U.S. stock indexes today has curbed the safe-haven demand for T-notes. Higher European government bond yields today are also weighing on T-note prices.  The 10-year German bund yield is up +8.4 bp at 0.924%, and the 10-year UK gilt yield is up +6.0 bp at 1.721%.   

The dollar index (DXY00) this morning is up +0.11%.  The dollar this morning recovered from early losses and pushed up to a new 19-year high.  A jump in T-note yields today is supporting the dollar.  Also, weakness in European currencies is benefitting the dollar as EUR/USD fell to a 5-1/4 year low and GBP/USD dropped t a 2-year low.  In addition, concern about Chinese economic growth is weighing on the yuan, which fell to a 19-month low today against the dollar.  Gains in the dollar were limited as a rally  in stocks today has reduced liquidity demand for the dollar. 

EUR/USD (^EURUSD) today is down -0.10%.  EUR/USD today is falling for the fourth consecutive session and posted a new 5-1/4 year low.  Geopolitical tensions in Europe continue to weigh on the euro after Germany said Russia reduced gas flows to the country in retaliation for EU sanctions on Russia.  Losses in EUR/USD were limited after today’s data showed Eurozone Mar industrial production fell less than expected.

Eurozone Mar industrial production fell -1.8% m/m, a smaller decline than expectations of -2.0% m/m.

USD/JPY (^USDJPY) today is up +0.73%.  The yen is weaker today on strength in T-note yields, with the 10-year year T-note yield up +5.1 bp at 2.899%.  The yen is also under pressure after Japan’s Nikkei Stock Index today rose +2.64%, which reduced the safe-haven demand for the yen.

June gold (GCM22) this morning is down by -22.5 (-1.23%), and May silver (SIK22) is down by -0.148 (-0.71%).  Precious metals today are moderately lower, with gold falling to a 3-month low and silver tumbling to a 1-3/4 year low.  A rally in the dollar index today to a new 19-year high today is undercutting metals prices. Higher global bond yields today and strength in stocks are also weighing on gold prices.  Silver is also under pressure on concerns that China’s economic growth and demand for industrial metals will suffer as pandemic lockdowns continue. 

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.