The S&P 500 Index ($SPX) (SPY) this morning is down -0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.14%. 

Stock indexes this morning are mixed. Higher bond yields are negative for stocks after today’s stronger-than-expected Mar ADP employment report reinforced the view that interest rates will remain higher for longer.  The markets are also awaiting comments from Fed Chair Powell later this morning.

US weekly MBA mortgage applications fell -0.6% in the week ended March 29.  The purchase mortgage sub-index fell -0.1%, and the refinancing mortgage sub-index fell -1.6%.  The average 30-year fixed rate mortgage fell -2 bp to 6.91% from 6.93% in the prior week. 

The US Mar ADP employment change rose +184,000, stronger than expectations of +150,000.  Also, Feb ADP was revised upward to +155,000 from the previously reported +140,000.

Atlanta Fed President Bostic said due to the bumpy nature of inflation progress, "it will likely be appropriate for us to lower interest rates at the end of this year, in the fourth quarter."

The markets are discounting the chances for a -25 bp rate cut at 7% for the next FOMC meeting on April 30-May 1 and 60% for the following meeting on June 11-12.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.36%.  China's Shanghai Composite closed down -0.18%.  Japan's Nikkei Stock Index fell to a 2-week low and closed down -0.97%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are down -12 ticks.  The 10-year T-note yield is up +3.4 bp at 4.383%. June T-note prices today dropped to a 2-week nearest-futures low, and the 10-year T-note yield climbed to a 4-month high of 4.427%.

T-notes are under pressure today on today’s stronger-than-expected ADP employment report, which was hawkish for Fed policy.  Also, an increase in inflation expectations is weighing on T-note prices as today's 10-year breakeven inflation rate climbed to a 4-3/4 month high of 2.378%.  Losses in T-notes are contained as weakness in stocks has boosted some safe-haven demand for T-notes. 

European government bond yields today are higher.  The 10-year German bund yield is up +1.4 bp at 2.414%.  The 10-year UK gilt yield is up +0.1 bp at 4.086%.

Eurozone Mar CPI eased to 2.4% y/y from 2.6% y/y in Feb, better than expectations of 2.5% y/y.  Mar core CPI eased to 2.9% y/y from 3.1% y/y in Feb, better than expectations of 3.0% y/y and the slowest pace of increase in 2 years.

The Eurozone Feb unemployment rate was unchanged at a record low of 6.5%, higher than expectations of a decline to 6.4%.

ECB Governing Council member Holzmann said, "An ECB rate cut in April is not on my radar.  In June, if the data allows it, a decision will be made."

US Stock Movers

Ulta Beauty (ULTA) is down more than -11% to lead losers in the S&P 500 after the company said at JPMorgan’s retail round up investor conference that external data points reflect a slowdown to start the year.

Intel (INTC) is down more than -6% to lead losers in the Dow Jones Industrials and Nasdaq 100 after it said losses have deepened at its factory business and the unit may not reach a break-even point for several years. 

Wolfspeed (WOLF) is down more than -4% after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Tesla (TSLA) is down more than -1%, adding to Tuesday’s -4% decline, as demand for the company’s cars in China is waning after Bloomberg calculations from China’s Passenger Car Association data showed Tesla’s market share in China in Q4 fell to 6.7% from 10.5% in Q1 of 2023. 

PepsiCo (PEP) is down more than -1% after Argus Research downgraded the stock to hold from buy, citing the potential impact of weight-loss drugs. 

Bio-Rad Laboratories (BIO) is down more than -1% after Citigroup downgraded the stock to neutral from buy.

Five Below (FIVE) is down more than -1% after Gordon Haskett downgraded the stock to accumulate from buy. 

Eli Lilly (LLY) is up more than +2% after Erste Group upgraded the stock to buy from hold.

Booking Holdings (BKNG) is up more than +1% after B Riley initiated coverage of the stock with a buy recommendation and a price target of $4,400.

Dave & Buster’s Entertainment (PLAY) is up more than +9% after reporting Q4 Ebitda of $151.8 million, above the consensus of $145 million, and announced an additional $100 million share buyback program. 

Cal-Maine Foods (CALM) is up more than +6% after reporting Q3 net sales of $703.1 million, stronger than the consensus of $692.5 million. 

United Parcel Service (UPS) is up nearly +1% after Redburn upgraded the stock to buy from neutral with a price target of $180. 

Carlisle (CSL) is up more than +1% after Goldman Sachs initiated coverage of the stock with a buy recommendation and a price target of $455.

Earnings Reports (4/3/2024)

Acuity Brands Inc (AYI), Novagold Resources Inc (NG), Resources Connection Inc (RGP), Simulations Plus Inc (SLP), Sportsman's Warehouse Holdings (SPWH), SWK Holdings Corp (SWKH).

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