Market Update
Currently, the S&P 500 Index is showing a slight increase of 0.25%, while the Dow Jones Industrial Average is down 0.09%. Meanwhile, the Nasdaq 100 Index has risen by 0.58%. E-Mini S&P Futures saw a rise of 0.21% in September, and E-Mini Nasdaq Futures increased by 0.56% during the same period.
Stock indexes are nearing their highs, with the S&P 500 reaching a four-month peak and the Nasdaq 100 setting a new all-time record. Investors are awaiting the second day of testimony from Federal Reserve Chairman Powell regarding the economy. Improved sentiment in the markets can be attributed to reduced geopolitical risks in the Middle East, particularly regarding a potential ceasefire between Israel and Iran.
In the U.S., mortgage applications rose by 1.1% for the week ending June 20. The subindex for purchase mortgages declined by 0.4%, yet the refinance subindex grew by 3.0%. The average rate for a 30-year fixed-rate mortgage increased by 4 basis points, climbing from 6.84% to 6.88%.
On Tuesday, Kansas City Fed President Schmidt expressed that the current “watch as a wait” approach to monetary policy is suitable. He suggested that the Fed should hold off on adjusting interest rates until the effects of tariffs and other economic policies are clearer.
This week, market focus will be on whether the ceasefire between Israel and Iran holds. Additionally, any updates regarding tariffs or trade transactions will draw attention. Powell’s testimony before the Senate Banking Committee on Monetary Policy is of particular interest today. New home sales in the U.S. are anticipated to range from a decrease of 6.7% month-over-month to an estimate of 693,000. Furthermore, the first-quarter GDP is projected to show a slight decline of 0.2% quarter-over-quarter on an annualized basis. Initial weekly unemployment claims are expected to remain stable at 245,000. Coming up on Friday, personal spending is expected to rise by 0.1% month-over-month, while personal income is estimated to increase by 0.3%. Also, the Core PCE price index for May is anticipated to rise by 0.1% month-over-month and 2.6% year-over-year. Lastly, the University of Michigan Consumer Sentiment Index is expected to dip to 60.3 from a previous drop of 0.2 points.
The market currently anticipates a 21% chance of a 25 basis point rate reduction at the upcoming FOMC meeting at the end of July.
Looking at overseas markets, they are mixed today. The Euro Stoxx 50 has declined by 0.39%, while China’s Shanghai Composite hit a six-and-a-half-month high, closing up 1.04%. Meanwhile, Japan’s Nikkei 225 rose by 0.39%.
Interest Rates Overview
September T-Notes are down by 6 ticks. The yield on the decade bond has seen a slight uptick of 2.4 basis points, now at 4.318%. T-Notes have been declining today, having fallen from a one-and-a-half-month peak, while the ten-year yield has rebounded from lows seen earlier this year. Weak European government bonds and comments from Fed President Schmidt are putting pressure on T-Notes, as he noted the need to wait for clarity on economic impacts before adjusting interest rates. There is additional supply pressure related to today’s Treasury auctions of two-year and five-year notes, with amounts of $28 billion and $70 billion, respectively.
European government bond yields are trending higher today. The yield on ten-year German bonds has reached a weekly high of 2.575%, up 2.574% with a 3.1 basis points increase. Meanwhile, British bonds are rebounding from a month and a half low, currently sitting at 4.490%, having increased by 1.8 basis points.
In the eurozone, there’s potential for new car registrations to rise, hitting 927,000, marking the biggest increase in five months.
Market expectations indicate a 9% chance that the ECB might cut rates by 25 basis points in its upcoming policy meeting.
Stock Movers
The strength of the so-called “magnificent seven” stocks is giving broader market support. Nvidia has risen over 2%, while Alphabet and Apple have both seen increases of more than 1%. Microsoft has climbed 0.58%, Amazon is up by 0.40%, and Meta Platforms has gained 0.09%. However, Tesla is trending down, falling over 2% after reports indicated a decline in European deliveries, dropping 28% year-over-year.
Super Micro Computer is up more than 6% after a strong buy recommendation from GF Securities with a target price of $59. Likewise, Symbotic has increased by over 5% following a favorable recommendation with a $50 target price from Arete. In another positive move, Coinbase has risen more than 4% after Bernstein lifted its price target from $310 to $510. Stellantis is up over 4% after an upgrade from Jefferies, raising its target to $13.20. Yam! Brands has grown by more than 4% following a JPMorgan Chase upgrade.
On the downside, Paychex leads the losers on the S&P 500 and NASDAQ 100, dropping more than 7% after its fourth-quarter EPS came in at $1.19, which matched estimates. FedEx has fallen more than 5% after projecting weaker-than-expected Q1 earnings and refraining from giving a fiscal year profit outlook. QXO Inc. is down over 6% after announcing a public offering at a lower price. General Mills saw a decrease of more than 3% after reporting fourth-quarter sales below expectations. Nuscale Power Corp decreased more than 2% following a downgrade from BTIG. Finally, WEC Energy fell over 1% after being downgraded by Goldman Sachs with a price target of $100.
Revenue Reports
Companies reporting revenue include Daktronics Inc, General Mills Inc, HB Fuller Co, Jefferies Financial Group Inc, Micron Technology Inc, Millerknoll Inc, Novagold Resources, Paychex Inc, and Winnebago Industries.
