Strength in Chipmakers Pushes Tech Stocks and the Overall Market Higher

Rich Asplund - Barchart - Thu Mar 30, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.63%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.95%.

U.S. stock indexes this morning are moderately higher, with the S&P 500 posting a 3-1/2 week high, the Dow Jones Industrials posting a 3-week high, and the Nasdaq 100 climbing to a 7-month high. The strength in chipmakers today is boosting technology stocks and the overall market.

U.S. stock indexes also have carry-over support from a rally in European bank stocks after ECB Executive Board member Schnabel said that Eurozone banks had not seen a loss of deposits despite the recent financial stability concerns.

Today’s U.S. economic news was bearish for stocks as it showed weekly jobless claims rose more than expected, and Q4 GDP was revised downward.

Global bond yields are moving higher today on an upward revision to the U.S. Q4 core PCE deflator and the stronger-than-expected German Mar CPI report. As a result, the 10-year T-note yield is up +0.6 bp at 3.570%. Also, the 10-year German bund yield climbed to a 2-week high of 2.399%, and the 10-year UK gilt yield rose to a 1-week high of 3.525%.

U.S. Q4 GDP was revised slightly lower to 2.6% (q/q annualized) from +2.7% as Q4 personal consumption was revised down to +1.0% from +1.4%. Also, the Q4 core PCE deflator was revised upward by +0.1 point to 4.4% from 4.3%

U.S. weekly initial unemployment claims rose +7,000 to 198,000, showing a slightly weaker labor market than expectations of 196,000.

Overseas stock markets are mixed. The Euro Stoxx 50 today is up +1.22%. China’s Shanghai Composite stock index closed up +0.65%, and Japan’s Nikkei Stock Index closed down -0.36%.

Today’s stock movers…

Semiconductor stocks are moving higher today after Wednesday’s upbeat forecasts from Micron Technology and Infineon Technologies bolstered sentiment in the sector. KLA Corp (KLAC) is up more than +3%. Also, Advanced Micro Devices (AMD), ASML Holding NV (ASML), Analog Devices (ADI), Globalfoundries (GFS), Applied Materials (AMAT), Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), and ON Semiconductor (ON) are up more than +2%.

Paycom Software (PAYC) is up more than +4% to lead gainers in the S&P 500 after D.A. Davidson upgraded the stock to buy from neutral.

Intel (INTC) is up more than +2% to lead gainers in the Dow Jones Industrials after Susquehanna Financial raised its price target on the stock to $31 from $26.

U.S.-listed Chinese technology stocks are climbing today after two subsidiaries of JD.com filed for Hong Kong initial public offerings. As a result, JD.com (JD) is up more than +6% to lead gainers in the Nasdaq 100. Also, PDD Holdings (PDD) is up more than +5%, and Alibaba Group Holding (BABA) is up more than +2%.

Kohl’s (KSS) is up more than +6% on signs of insider buying after an SEC filing showed CEO Kingsbury bought $2.02 million of his company’s shares on March 29.

Phillip Morris International (PM) is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral.

Walmart (WMT) is up more than +1% after Evercore ISI upgraded the stock to outperform from inline.

Charles Schwab (SCHW) is down more than -3% to lead losers in the S&P 500 after Morgan Stanley downgraded the stock to equal weight from overweight.

Semtech (SMTC) is down more than -22% after forecasting an adjusted Q1 net loss of -4 cents to -11 cents, well below the consensus for a gain of 43 cents EPS.

Across the markets…

June 10-year T-notes (ZNM23) today are down -2 ticks, and the 10-year T-note yield is up +0.6 bp at 3.570%. June T-notes this morning fell to a 1-week low as improvement in market sentiment has fueled a rally in stocks and curbed safe-haven demand for T-notes. Also, stronger-than-expected German March consumer prices pushed the 10-year German bund yield up to a 2-week high of 2.399%, weighing on T-note prices. Finally, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate today climbed to a 3-week high of 2.369%.

The dollar index (DXY00) today is down by -0.51%. An unexpected downward revision today to U.S. Q4 GDP is weighing on the dollar. Also, stronger-than-expected German inflation news today was hawkish for ECB policy and pushed the euro higher against the dollar. In addition, a rally in stocks today has reduced the liquidity demand for the dollar.

EUR/USD (^EURUSD) today is up by +0.67%. The euro is climbing today after today’s economic news showed German Mar CPI rose more than expected, pushing the 10-year German 10-year bund yield up to a 2-week high and strengthening the euro’s interest rate differentials. Also, reduced European banking concerns support EUR/USD after ECB Executive Board member Schnabel said that Eurozone banks had not seen a loss of deposits despite the recent financial stability concerns.

Eurozone Mar economic confidence unexpectedly fell -0.3 to 99.3, weaker than expectations of an increase to 100.0.

Germany Mar CPI (EU harmonized) eased to +7.8% y/y from +9.3% y/y in Feb but was still above expectations of +7.5% y/y.

Spain Mar CPI (EU harmonized) eased to +3.1% y/y from +6.0% y/y in Feb, the slowest pace of increase in 20 months.

ECB Executive Board member Schnabel said that Eurozone banks have not seen a loss of deposits despite the recent financial stability concerns, and "for now, the banking sector looks rather resilient."

USD/JPY (^USDJPY) today is down by -0.10%. The yen today is slightly higher as Japan’s fiscal year-end and quarter-end on Friday have sparked some repatriation of yen back to Japan. However, higher T-note yields today are limiting the upside in the yen.

April gold (GCJ3) this morning is up +0.08 (+0.04%), and May silver (SIK23) is up +0.209 (+0.89%). Precious metals prices this morning are moderately higher, with silver climbing to an 8-week high. A weaker dollar today is supportive of metals prices. Silver also has support as easing banking concerns is positive for economic growth and industrial metals demand. In addition, fund buying of gold continues as gold holdings in exchange-traded funds (ETFs) rose to an 8-week high Wednesday. However, higher global bond yields today are bearish for metals.

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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.