Global Stocks Rally on Dovish Bank of Japan Comments

US stocks today are trading higher on positive carryover from a jump in Japanese stocks in the wake of dovish comments from Bank of Japan Deputy Governor Uchida, who pledged to refrain from raising interest rates when the markets are unstable.

Global economic trends have significant implications for stock markets and interest rates.

The S&P 500 Index is up +1.42%, the Dow Jones Industrials Index is up +0.77%, and the Nasdaq 100 Index is up +1.78%. Financial markets have been in turmoil since last week when the BOJ unexpectedly raised interest rates, which sparked a surge in the yen to a 7-month high against the dollar and fueled a rapid unwinding of the yen carry trade that dragged down risk assets globally.

Stock market trends can have a ripple effect on global economies.

Some positive corporate news today is also boosting stocks. Fortinet is up more than +23% after reporting better-than-expected Q2 billings and raising its full-year revenue forecast. Axon Enterprise is up more than +16% after raising its revenue guidance for the year. Global Payments is up more than +7% after reporting Q2 adjusted EPS above consensus.

US Mortgage Applications Rise

US MBA mortgage applications rose +6.9% in the week ended August 2, with the purchase mortgage sub-index up +0.8% and the refinancing mortgage sub-index up +15.9%. The average 30-year fixed rate mortgage fell -27 bp to 6.55% from 6.82% the prior week.

Changes in mortgage rates can significantly impact housing markets and consumer spending.

Global Trade News

Chinese trade news today was mixed as China July exports rose +7.0% y/y, weaker than expectations of +9.5% y/y and a bearish factor for global growth prospects. July imports rose +7.2% y/y, stronger than expectations of +3.2% y/y.

International trade has significant implications for global economic growth and stock markets.

The market consensus is that Q2 earnings for the S&P 500 companies will rise +9% y/y. About half of the companies in the S&P 500 have reported thus far. According to Bloomberg, most reporting companies have beaten their earnings consensus, but only 43% have beaten revenue expectations, the lowest percentage in five years.

Earnings reports can significantly impact stock prices and market trends.

Interest Rates

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 71% for a -50 bp rate cut at that meeting.

Interest rates can significantly impact economic growth, inflation, and stock markets.

September 10-year T-notes today are down -9 ticks. The 10-year T-note yield is up +4.2 bp at 3.934%. Strength in stocks today is curbing safe-haven demand for government debt. Also, supply pressures are undercutting T-notes as the Treasury will auction $42 billion of 10-year T-notes later today as part of this week’s $125 billion August quarterly refunding operation.

Overseas Stock Markets

Overseas stock markets today are higher. The Euro Stoxx 50 is up +1.48%. China’s Shanghai Composite closed up +0.09%. Japan’s Nikkei Stock 225 closed up +1.19%.

Global stock market trends can have significant implications for investors and economies.

The strength in chip stocks today is supportive of the overall market. Marvell Technology and ARM Holdings Plc are up more than +4%. Also, Nvidia, Broadcom, ASML Holding NV, GlobalFoundries, Lam Research, ON Semiconductor, and KLA Corp are up more than +3%. In addition, Advanced Micro Devices, Microchip Technology, and NXP Semiconductors are up more than +2%.

Fortinet is up more than +23% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 billings of $1.54 billion and raising its full-year revenue forecast to $5.80 billion-$5.90 billion from a previous estimate of $5.75 billion-$5.85 billion, above the consensus of $5.80 billion.

Axon Enterprise is up more than +16% after raising its revenue guidance for the year to $2.00 billion-$2.05 billion from a previous estimate of $1.94 billion-$1.99 billion, stronger than the consensus of $1.98 billion.

Global Payments is up more than +6% after reporting Q2 adjusted EPS of $2.93, better than the consensus of $2.91.

*Changes in stock prices can significantly impact investor portfolios and market trends.

Conclusion

Global stocks are rallying today on dovish Bank of Japan comments and positive corporate news. The S&P 500 Index is up +1.42%, the Dow Jones Industrials Index is up +0.77%, and the Nasdaq 100 Index is up +1.78%. Financial markets have been in turmoil since last week when the BOJ unexpectedly raised interest rates, but today’s comments have helped to calm market nerves. With the markets discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 71% for a -50 bp rate cut at that meeting, investors are hoping for a more dovish tone from the Federal Reserve.

Stock market trends can have significant implications for investors and economies.