Stocks Move Higher in Afternoon Trade

Rich Asplund - Barchart - Mon Jan 29, 10:13AM CST

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.76%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.59%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.12%.

Stock indexes this morning are hire as the markets await earnings reports this week from mega-cap technology stocks and updates on the outlook for interest rates from the Federal Reserve and the Bank of England (BOE).

The markets are awaiting earnings reports from Apple, Alphabet, Amazon.com, and Microsoft this week. Also, the results of central bank meetings this week could move the markets, with the 2-day FOMC meeting beginning tomorrow and the Bank of England (BOE) meeting on Thursday.

The U.S. Jan Dallas Fed manufacturing outlook survey fell -17.0 to an 8-month low of -27.4, weaker than expectations of -11.0.

The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 51% for that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields today are lower. The 10-year T-note yield is down -2.9 bp at 4.108%. The 10-year German bund yield fell to a 1-1/2 week low of 2.229% and is down -6.3 bp at 2.236%. The 10-year UK gilt yield is down -6.7 bp at 3.897%.

Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.05%. China’s Shanghai Composite Index closed down -0.92%. Japan’s Nikkei Stock Index closed up +0.77%.

Today’s stock movers…

ResMed (RMD) is up more than +3% to lead gainers in the S&P 500 after rival device maker Phillips said it’s suspending the sale of its sleep apnea devices and ventilators in the U.S.

Western Digital (WDC) is up more than +2% after Kyodo News reported that Kioxia Holdings is exploring ways to revive merger talks with the company.

Crowdstrike Holdings (CRWD) is up more than +2% after JMP Securities raised its price target on the stock to $320 from $235.

Archer-Daniels-Midland (ADM) climbed more than +2% in pre-market trading after saying it would delay performance bonuses to some executives until its financial statements were completed and audited.

Builders FirstSource (BLDR) is up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral.

SoFi Technologies (SOFI) is up more than +21% after reporting Q4 net income of $48 million, well above the consensus of $9.9 million and the company's first profit since going public in 2021.

ZoomInfo Technologies (ZI) is up more than +6% after Bank of America Global Research upgraded the stock to buy from neutral.

Salesforce Inc (CRM) is up more than +1% to lead gainers in the Dow Jones Industrials after CMB International Capital Corp initiated coverage on the stock with a buy recommendation and a price target of $329.

Warner Bros Discovery (WBD) is down more than -2% to lead losers in the S&P 500 after Wells Fargo Securities downgraded the stock to equal weight from overweight.

IRobot (IRBT) is down more than -10% after Amazon.com abandoned its planned $1.4 billion acquisition of the company when European Union regulators threatened to block the deal. The company then said that CEO Angle was stepping down and it would implement an operational restructuring plan and cut about 31% of its workforce.

Brown-Forman (BF/B) is down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight.

FedEx (FDX) is down more than -1% after WirelessWerx IP LLC sued the company for unlawfully using its proprietary location-tracking technology.

WestRock (WRK) and Packaging Corp (PKG) are down more than -1% after Seaport Research Partners downgraded the companies to neutral from buy.

Baker Hughes (BKR) is down more than -1% after Wolfe Research downgraded the stock to peer perform from outperform.

Across the markets…

March 10-year T-notes (ZNH24) this morning are up +12 ticks, and the 10-year T-note yield is down -2.9 bp at 4.108%. Mar T-note prices this morning are moderately higher. T-notes garnered support this morning on positive carryover from a rally in 10-year German bunds to a 1-1/2 week high on dovish ECB comments. Also, heightened geopolitical risks in the Middle East are boosting safe-haven demand for T-notes after three U.S. servicemen were killed and 25 others injured in a drone attack on a U.S. base near the Syrian border.

The dollar index (DXY00) today is up by +0.28%. The dollar today is supported by weakness in the euro in dovish ECB comments. Also, expectations that the Fed will leave monetary policy unchanged after the 2-day FOMC meeting on Wednesday is underpinning the dollar. A decline in T-note yields today is limiting the dollar’s upside.

EUR/USD (^EURUSD) is down by -0.42% and fell to a 6-week low. The euro is under pressure today as dovish ECB comments bolstered speculation that the ECB will begin to cut interest rates as soon as April. ECB Vice President Guindos said inflation risks are to the downside, and ECB Governing Council member Centeno said the ECB should lower interest rates sooner rather than later.

ECB Vice President Guindos said, "There has been good news regarding the evolution of inflation, and that, sooner or later, will end up being reflected in the monetary policy."

ECB Governing Council member Centeno said the ECB should lower interest rates sooner rather than later as he sees "a lot of evidence that inflation is falling in a sustained way."

ECB Governing Council member Kazimir said June is more likely than April for the first ECB interest rate cut as "acting hastily based on short-term surprises without having more clarity about the medium term would be risky."

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 25% for its next meeting on March 7 and have fully discounted (102%) the chance for that rate cut at the following meeting on April 11.

USD/JPY (^USDJPY) is down by -0.11%. The yen today is moving higher on weakness in T-note yields. Also, higher Japanese government bond yields today supported the yen on expectations that the BOJ will soon end its negative interest rate policy.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 28% for its next meeting on March 19 and at 67% for the following meeting on April 26.

February gold (GCG24) today is up +5.8 (+0.29%), and Mar silver (SIH24) is up +0.048 (+0.21%). Gold and silver prices this morning are moderately higher, with silver posing a 1-1/2 week high. Geopolitical risks have boosted safe-haven demand for precious metals on concern about the escalation of conflict in the Middle East after three U.S. servicemen were killed in a drone attack on a base near the Syrian border. Also, a decline in European and U.S. government bond yields supports precious metals. In addition, gold prices rose on dovish comments from ECB Vice President Guindos and ECB Governing Council member Centeno, which bolstered speculation the ECB would cut interest rates sooner rather than later.

On the negative side for precious metals is today’s strength in the dollar. Also, gold is under pressure from the ongoing long liquidation of gold by funds after long gold holdings in ETFs fell to a 4-year low last Friday.

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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.