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Stocks Gain as FOMC Minutes Reduce Hawkish-Fed Concerns

Barchart - Wed May 25, 3:40PM CDT
Stocks-Money-Rates - NY Stock Exchange -mHdATQY9fIU-unsplash

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.95%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.60%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.48%.

U.S. stock indexes Wednesday rose moderately, with the S&P 500 and Dow Jones Industrials posting 1-week highs.  A +13% jump in Nordstrom boosted the overall market after it raised its 2023 revenue forecast and eased concerns about a slowdown in consumer spending.  Target and Walmart were slammed earlier last week after cutting their growth estimates. 

Also, energy stocks gained Wednesday as the price of natural gas jumped to a 14-year high. 

Stock indexes extended their gains Wednesday afternoon after the minutes of the May 3-4 FOMC meeting gave no signals that the Fed will turn more hawkish to fight inflation.

Stocks Wednesday morning initially moved lower on global growth concerns after Chinese Premier Li Keqiang said China’s economic difficulties are worse than in 2020.  Also, stocks were under pressure after U.S. April core capital goods orders rose less than expected.

Chinese Premier Li Keqiang said today that "economic indicators in China have fallen significantly, and difficulties in some aspects and to a certain extent are greater than when the epidemic hit us severely in 2020."

U.S. Apr capital goods new orders nondefense ex-aircraft rose +0.3% m/m, slightly weaker than expectations of +0.5% m/m.

The minutes of the May 3-4 FOMC meeting said that most Fed officials backed 50 bp rate hikes at the next couple of FOMC meetings and that restrictive policy may become appropriate.  All Fed officials backed plans to start shrinking the balance sheet, and a number of officials backed the sale of mortgage-backed securities (MBS) once the runoff was well underway.

Today’s stock movers…

Homebuilders rallied Wednesday, led by an +8% jump in Toll Brothers (TOL) after it reported Q2 revenue of $2.28 billion, above the consensus of $2.10 billion.   Also, DR Horton (DHI), Lennar (LEN), and PulteGroup (PHM) all closed up more than +5%.

Best Buy (BBY) closed up more than +8% Wednesday to lead gainers in the S&P 500 after reporting Q1 revenue of $10.65 billion, above the consensus of $10.41 billion.

Intuit (INTU) closed up more than +8% Wednesday after raising its full-year revenue forecast to $12.63 billion-$12.67 billion from a previous estimate of $12.17 billion-$12.30 billion, well above the consensus of $12.32 billion.

Nordstrom (JWN) closed up more than +13% Thursday after reporting Q1 net sales of $3.47 billion, above the consensus of $3.26 billion, and raised its 2023 revenue forecast tup up +6% to +8% from a previous estimate of +5% to +7%.  Urban Outfitters (URBN) also rallied more than +13% on the Nordstrom news.

ServiceNow (NOW) closed up more than +7% Thursday after the company raised its financial targets at an analyst day event, and Mizuho Securities said the company “expressed bullishness on its growth prospects.” 

Procter & Gamble (PG) closed down more than -1% Wednesday to lead losers in the Dow Jones Industrials as data from researcher IRI shows U.S. laundry detergent sales volume could be pressured beyond the first half of this year as the increase in oil prices forces companies to raise laundry detergent prices even higher.

Agilent Technologies (A) closed down more than -3% Wednesday to lead losers in the S&P 500 Nasdaq 100 after forecasting Q3 revenue of $1.63 billion-$1.65 billion, weaker than the consensus of $1.66 billion.

Across the markets…

June 10-year T-notes (ZNM22) on Wednesday closed up by +7 ticks, and the 10-year T-note yield rose +0.5 bp to 2.756%.  Jun 10-year T-note futures Wednesday climbed to a 1-1/4 month high, and the 10-year T-note yield fell to a 1-1/4 month low of 2.706%.  The weaker-than-expected U.S. Apr capital goods orders report was supportive for T-note prices.  Also, concern about a slowdown in the global economy was bullish for T-notes after Chinese Premier Li Keqiang said China’s economic difficulties are worse than in 2020.

T-notes maintained their gains Wednesday on strong demand for the Treasury’s $48 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.44, above the 10-auction average of 2.43.  T-notes also pushed higher Wednesday afternoon after the release of the minutes of the May 3-4 FOMC meeting gave no sign that Fed officials were turning more aggressive on tightening monetary policy.