Stocks Rise on Strength in Apple and Lower Bond Yields

Rich Asplund - Barchart - Mon Mar 6, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.65%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.39%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.04%.

U.S. stock indexes this morning are moderately higher, with the S&P 500 and Nasdaq 100 climbing to 2-week highs and the Dow Jones Industrials posting a 1-1/2 week high. A jump of more than +2% in Apple is leading technology stocks higher after Goldman Sachs initiated coverage on the stock with a buy rating. Also, the stabilization of T-note yields supports gains in stock indexes, with the 10-year T-note yield down -1.8 bp to 3.934%.

Limiting gains in stock indexes today are concerns about global growth. Chinese leaders at the annual National People’s Congress set a lower-than-expected 5% GDP target for China this year, which implies China is unlikely to add large-scale stimulus to boost economic growth.

Positive corporate news today is giving the overall market a boost. Ciena is up more than +4% after reporting stronger-than-expected Q1 revenue. Also, Domino’s Pizza is up more than +3% on signs of insider buying after an SEC filing showed CEO Weiner bought $1.01 million of the company’s stock on March 2. In addition, CrowdStrike Holdings is up more than +2% after announcing a strategic partnership with Dell Technologies.

On the negative side, energy stocks are under pressure today as WTI crude moves lower on Chinese energy demand concerns. Also, Tesla is down more than -1% after it announced it was cutting the price of its Model S and X electric vehicles for the second time this year. In addition, Freeport McMoRan is down more than -1% as mining stocks fell on Chinese industrial metals demand concerns after Chinese leaders didn’t announce any significant new stimulus measures at the National People’s Congress.

Today’s U.S. news showed Jan factory orders fell -1.6% m/m, stronger than expectations of -1.8% m/m. Also, Jan factory orders ex-transportation rose +1.3% m/m, stronger than expectations of +1.0% m/m.

Overseas stock markets are mixed. The Euro Stoxx 50 today is up +0.46%. China’s Shanghai Composite stock index closed down -0.19%, and Japan’s Nikkei Stock Index closed up +1.11%.

Today’s stock movers…

Apple (AAPL) is up more than +2% to lead gainers in the Dow Jones Industrials after Goldman Sachs initiated coverage on the stock with a buy rating, saying the company’s growing installed base of users underpins the “Apple-as-a-Service” opportunity.

Domino’s Pizza (DPZ) is up more than +3% on signs of insider buying after an SEC filing showed CEO Weiner bought $1.01 million of the company’s stock on March 2.

Ciena (CIEN) is up more than +4% after reporting Q1 revenue of $1.06 billion, well above the consensus of $958.1 million.

CrowdStrike Holdings (CRWD) is up more than +2% after announcing a strategic partnership with Dell Technologies.

Emerson Electric (EMR) is up more than +2% after UBS upgraded the stock to buy from neutral.

Merck & Co (MRK) gained nearly +1% in pre-market trading after Jeffries initiated a buy rating on the stock, saying the company finds itself in the “sweet spot” of execution and value.

Vir Biotechnology (VIR) is up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral.

Energy stocks and energy service providers are falling today, with the price of WTI crude down more than -0.6% on Chinese energy demand concerns after Chinese Premier Li Kequiang announced a GDP target for China this year of around 5%, weaker than expectations of at least 5.5%. APA Corp (APA) and Phillips 66 (PSX) are down more than -2%. Also, Diamondback Energy (FANG), Schlumberger (SLB), Marathon Petroleum (MPC), and Valero Energy (VLO) are down at least 1%.

Incyte Corp (INCY) is down more than -2% after the company said it would discontinue its Phase 3 LIMBER-304 trial following an interim analysis that indicated the trial was unlikely to meet its primary endpoint.

Tesla (TSLA) is down more than -1% after it announced it was cutting the price of its Model S and X electric vehicles for the second time this year.

Freeport McMoRan (FCX) is down more than -1% as mining stocks fell on Chinese industrial metals demand concerns after Chinese leaders didn’t announce any significant new stimulus measures at the National People’s Congress.

Wendy’s (WEN) is down more than -1% after Northcoast Research downgraded the stock to neutral from buy, citing concerns over future sales growth.

Across the markets…

June 10-year T-notes (ZNM23) today are up +4 ticks, and the 10-year T-note yield is down -1.8 bp at 3.934%. June 10-year T-notes this morning are moderately higher on lower European government bond yields and reduced inflation concerns. The 10-year German bund yield is down -5.1 bp to 2.700% on weaker-than-expected Eurozone economic news. Inflation concerns eased today and gave T-note prices a boost after Chinese leaders at the annual National People’s Congress set a lower-than-expected 5% GDP target for China this year, which implies China is unlikely to add large-scale stimulus. However, supply concerns may limit the near-term upside in T-note as the Treasury will auction $90 billion of T-note s and T-bonds this week.

The dollar index (DXY00) today is down by -0.10%. Lower T-note yields today are weighing on the dollar. Also, the strength in stocks today has reduced the liquidity demand for the dollar. In addition, the dollar has support on short covering ahead of Fed Chair Powell’sappearance before the Senate Banking Committee on Tuesday to deliver the semi-annual monetary policy report to Congress.

EUR/USD (^EURUSD) today is up by +0.34%. Hawkish comments today from ECB Chief Economist Lane gave the euro a boost when he said the ECB would probably need to raise interest rates again after raising them by 50 bp at next week’s meeting. Furthermore, easing energy crisis concerns also supports EUR/USD after European nat-gas prices tumbled to a 1-1/2 year low today.

Today’s Eurozone economic news was bearish for the euro. Eurozone Jan retail sales rose +0.3% m/m, weaker than expectations of +0.6% m/m. Also, the Mar Sentix investor confidence index unexpectedly fell -3.1 to -11.1, weaker than expectations of -5.5.

USD/JPY (^USDJPY) today is up by +0.01%. The yen today is little changed. Today’s rally in the Nikkei Stock Index to a 3-month high reduced sade-haven demand for the yen. Also, the action by the BOJ to restrict the use of its securities-lending facility signals it does not plan to widen its 10-year yield range or scrap yield curve control at this week’s policy meeting. However, a decline in T-note yields today is supportive of the yen.

April gold (GCJ3) this morning is up +3.5 (+0.19%), and May silver (SIK23) is up +0.012 (+0.06%). Precious metals prices this morning are slightly higher, with silver posting a 1-week high. A weaker dollar today is bullish for metals prices. Also, lower global bond yields are supportive of metals. However, gains in silver are limited on Chinese industrial metals demand concerns after Chinese leaders at the annual National People’s Congress set a lower-than-expected 5% GDP target for China this year, which implies China is unlikely to add large-scale stimulus.

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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.