The S&P 500 Index ($SPX) (SPY) closed up +0.39% on Tuesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.76% and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.16%.
Stock indexes ended mixed on Tuesday. Gains in big tech stocks on Tuesday boosted the broader market. Carnival also rose more than 8% after reporting revenue and forecast EBITDA that beat consensus. U.S. consumer confidence for June came in better than expected, helping the broader market hold on to gains.
On the bear side, construction stocks fell after Poole Corporation cut its full-year EPS forecast, and Home Depot fell more than 3%, weighing on the Dow Jones Industrial Average.
Fed Governor Bowman said on Tuesday he sees some upside risks to the inflation outlook and that “we are not yet at a stage where it is appropriate to cut rates,” a hawkish comment that was bearish for stocks. Bowman added that “we do not expect the Fed to cut rates this year and have extended our outlook for rate cuts until 2025.”
Cook said it would be appropriate for the Fed to cut interest rates “at some point,” but “the timing of any such adjustment will depend on how economic data change and how that affects the economic outlook and the balance of risks.”
The Conference Board's U.S. consumer confidence index for June fell 0.9 points to 100.4, beating the forecast of 100.0.
The Richmond Fed's manufacturing index fell 10 points in June, below expectations of a -3 point drop.
The U.S. S&P CoreLogic Composite 20 Home Price Index fell to +7.20% y/y in April, beating expectations of +7.00% y/y from +7.46% y/y in March.
The US Chicago Fed National Activity Index for June unexpectedly increased by +0.44 to 0.18, beating a previously expected decline to -0.25.
Markets are awaiting the release of the Fed's preferred inflation gauge, the U.S. core PCE deflator for May, on Friday to gauge whether upward price pressures are easing, which could pave the way for the Fed to start cutting interest rates. The consensus is that the core PCE deflator for May fell to +2.6% y/y from +2.8% y/y in April.
Markets are pricing in a 10% chance of a 25bp cut at the next FOMC meeting on July 30-31, and a 65% chance at the following meeting on September 17-18.
Stocks are being supported by generally strong first-quarter earnings results. First-quarter revenue is expected to grow 7.1% year over year, well above expectations of a 3.8% increase ahead of earnings season. About 81% of S&P 500 companies beat first-quarter earnings expectations, according to data compiled by Bloomberg Intelligence.
Overseas stock markets closed mixed on Tuesday. The Euro Stoxx 50 Index closed down -0.30%. China's Shanghai Composite Index fell to its lowest in four months, closing down -0.44%. Japan's Nikkei Stock Average rose to its highest level in a week and a half, closing up +0.95%.
Interest level
The September 10-year Treasury note (ZNU24) closed up 2 ticks on Tuesday. The 10-year Treasury yield was down -0.2 basis points to 4.230%. Treasuries recovered from early losses to post modest gains on Tuesday. Fed Chairman Bowman's hawkish comments weighed on Treasuries, saying “we do not expect the Fed to cut rates this year and have extended our outlook for rate cuts to 2025.” Supply pressures also weighed on Treasuries as the Treasury auctioned $69 billion in 2-year notes on Tuesday as part of this week's $211 billion package of Treasury and floating rate notes.
Treasuries recovered losses and edged higher Tuesday afternoon on strong demand for the Treasury's $69 billion auction of two-year notes, which traded at 2.75, above the 10-auction average of 2.63. Lower inflation expectations also supported Treasuries, after the 10-year breakeven inflation rate fell to a one-week low of 2.211% on Tuesday.
European government bond yields fell on Tuesday. The 10-year German Bund yield fell 0.7 basis points to 2.411%. The 10-year UK Government Bond yield fell 0.2 basis points to 4.079%.
Swaps markets are pricing in a 6% chance of the ECB cutting rates by 25 basis points at its July 18 meeting and a 71% chance at its September 12 meeting.
US stock trends
Mega-cap tech stocks rose on Tuesday, lifting the broader market. Nvidia (NVDA) was the top gainer on the Nasdaq 100, up more than +6%, while Meta Platforms (META), Alphabet (GOOGL) and Tesla (TSLA) all closed up more than +2%. Additionally, Amazon.com (AMZN) closed up +0.72%.
Cruise line shares rose on Tuesday after Carnival reported second-quarter revenue of $5.78 billion, beating the consensus estimate of $5.69 billion, and third-quarter adjusted EBITDA of $2.66 billion, beating the consensus estimate of $2.62 billion. As a result, Carnival (CCL) rose more than 7%, making it the top gainer in the S&P 500 index. Norwegian Cruise Line Holdings (NCLH) also rose more than 4%, and Royal Caribbean Cruises Limited (RCL) closed up more than 3%.
Apple (AAPL) rose nearly 1%, leading gainers on the Dow Jones Industrial Average after Maxim Group LLC raised its price target on the stock to $195 from $178.
Semiconductor stocks rebounded on Tuesday after Monday's decline, with KLA Corp (KLAC) and Lam Research (LRCX) closing up more than 2%, while Applied Materials (AMAT), ASML Holding NV (ASML), Globalfoundries (GFS), Micron Technology (MU) and Western Digital (WDC) all closing up more than 1%.
Capri Holdings (CPRI) closed up more than 1% after Wells Fargo raised the stock to overweight from equal weight and set a $43 price target.
Insmed Inc. (INSM) shares closed up more than 1% after Barclays raised its price target on the stock to $90 from $63.
Trump Media & Technology (DJT) closed up more than 7%, adding to Monday's 20% gain, after the company announced late Friday that it would receive more than $69.4 million in proceeds from the cash exercise of stock warrants.
Pool Corporation (POOL) fell more than 8% to be the top loser in the S&P 500 after the company cut its full-year EPS forecast to $11.04-$11.44 from a previous estimate of $13.19-$14.19, well below the consensus estimate of $13.11. Other construction stocks also fell on the news, with Home Depot (HD) falling more than 3% to be the top loser in the Dow Jones Industrial Average, while Tractor Supply (TSCO) and Lowe's (LOW) both closed down more than 4%.
Shares of Builders First Source (BLDR) closed down more than 4% after Wedbush cut its price target on the stock to $175 from $215.
TD Synex (SNX) closed down more than 9% after it reported second-quarter revenue of $13.95 billion, below the consensus estimate of $14.1 billion, and forecast third-quarter revenue of $13.3 billion to $14.9 billion, below the midpoint consensus estimate of $14.5 billion.
Spirit Aero (SPR) shares closed down more than 3% after Bloomberg reported that Boeing had changed its proposed financing for the company from an all-cash to a mostly stock deal.
Birkenstock (BIRK) closed down more than 3% after holder L. Catterton Management offered 14 million shares through Morgan Stanley and JPMorgan Chase.
Norfolk Southern (NSC) closed down more than 2% after Susquehanna Financial cut its price target on the stock to $245 from $265.
Paramount Global (PARA) closed down more than 1% after Goldman Sachs reinstated the stock with a sell recommendation and a $9.50 price target.
Earnings Report (June 26, 2024)
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On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart's disclosure policy here.
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