What you need to know…
The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.13%.
Stocks on Tuesday posted moderate gains, with the Dow Jones Industrials climbing to a 3-1/2 month high. Stocks rose Tuesday on dovish comments from Fed Governor Waller that knocked the 10-year T-note yield down to a 2-1/4 month and bolstered expectations that the Fed was done raising interest rates. Stocks also found support on the outlook for a soft landing after Tuesday’s U.S. Nov consumer confidence report came in stronger than expected.
On the negative side, chip stocks retreated Tuesday after Micron Technology forecasted Q1 adjusted operating expenses well above the consensus. Also, GE Healthcare Technologies closed down more than -4% and added to Monday’s -4% slide after UBS downgraded the stock.
Comments from Fed Governor Waller suggest he favors pausing Fed rate hikes when he said, "I am increasingly confident that Fed policy is currently positioned to slow the economy and get inflation back to 2%."
The U.S. Sep CoreLogic composite-20 home price index rose +3.92% y/y, stronger than expectations of +3.90% and the largest increase in 9 months.
The Conference Board U.S. Nov consumer confidence index rose +2.9 to 102.0, stronger than expectations of 101.0.
The U.S. Nov Richmond Fed manufacturing survey fell -8 to -5, weaker than expectations of 1.
The markets are discounting a 4% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 4% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 31% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and an 84% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields moved lower on Tuesday. The 10-year T-note yield fell to a 2-1/4 month low of 4.327% and finished down -4.5 bp at 4.342%. The 10-year German bund yield fell to a 2-3/4 month low of 2.490% and finished down -5.2 bp at 2.497%. The 10-year UK gilt yield fell -3.8 bp to 4.174%.
ECB Governing Council member and Bundesbank President Nagel said, "It would be premature for the ECB to lower interest rates soon or to speculate about such steps."
Overseas stock markets on Tuesday settled mixed. The Euro Stoxx 50 closed down -0.15%. China’s Shanghai Composite Index closed up +0.23%. Japan’s Nikkei Stock Index closed down -0.12%.
Today’s stock movers…
Newmont (NEM) closed up more than +6% to lead gainers in the S&P 500 after the price of gold rose to a 6-1/2 month high.
PDD Holdings ADRs (PDD) closed up more than +18% to lead gainers in the Nasdaq 100 after reporting Q3 revenue of 68.54 billion yuan, stronger than the consensus of 54.87 billion yuan.
Synchrony Financial (SYF) closed up more than +5% after agreeing to sell its Pets Best Insurance Services to Poodle Holdings and expects a gain of about $750 million net of tax on the sale.
Crown Castle (CCI) closed up more than +3% and added to Monday’s +3% advance after activist investor Elliot Investment Management, which has acquired a more than $2 billion stake in the company, said it plans to push for changes in the company that will help boost its shares.
3M Co (MMM) closed up more than +1% to lead gainers in the Dow Jones Industrials after the Sixth Circuit Court ruled that a lawsuit over exposure to “forever chemicals” lacks standing to proceed with the case.
SpringWorks Therapeutics (SWTX) closed up more than +18% after the FDA approved the company’s nirogacestat, an oral treatment for desmoid tumors.
Carlyle Group (CG) closed up more than +4% after S&P Dow Jones Indices said the company will replace ICU Medical in the S&P MidCap 400 before the opening of trading on Thursday, Nov 30.
Boeing (BA) closed up more than +1% after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $275.
GE Healthcare Technologies (GEHC) closed down more than -4% to lead losers in the Nasdaq 100 and added to Monday’s -4% slide after UBS downgraded the stock to sell from neutral with a price target of $66.
Walt Disney (DIS) closed down more than -2% to lead losers in the Dow Jones Industrials after TV chief Walden said television channels are critical components of Disney’s business, conflicting with recent comments from Disney CEO Iger, who said the company may sell traditional TV networks.
Chip stocks retreated Tuesday after Micron Technology forecasted Q1 adjusted operating expenses of $990 million, well above the consensus of $902.8 million. As a result, Micron Technology (MU), Applied Materials (AMAT), and ASML Holding NV (ASML) closed down more than -2%. Also, Nvidia (NVDA), Qualcomm (QCOM), Lam Research (LRCX), and KLA Corp (KLAC) closed down more than -1%.
Old Dominion Freight Line (ODFL) closed down more than -2% on signs of insider selling after an SEC filing showed chair emeritus Congdon sold $1.1 million of shares on Monday.
Morgan Stanley (MS) closed down more than -1% after Societe Generale downgraded the stock to hold from buy.
Airbnb (ABNB) closed down more than -1% on signs of insider selling after an SEC filing showed CSO Blecharczyk sold $4.15 million worth of shares last Wednesday.
Lululemon Athletica (LULU) closed down more than -1% after Raymond James removed the stock from its Current Favorites List.
Across the markets…
December 10-year T-notes (ZNZ23) Tuesday closed up +17 ticks, and the 10-year T-note yield fell -4.5 bp to 4.342%. Dec T-note prices Tuesday rallied to a 2-1/4 month high, and the 10-year T-note yield fell to a 2-1/4 month low of 4.327%. Dovish comments on Tuesday from Fed Governor Waller pushed T-notes higher and bolstered speculation the Fed was done raising interest rates when he signaled that he favored a continued pause in Fed rate hikes. Also, a decline in inflation expectations is bullish for T-notes as the 10-year breakeven inflation rate fell to a 4-1/4 month low Tuesday at 2.212%.
T-notes maintained most of their gains Tuesday despite weak demand for the Treasury’s 7-year T-note auction. The $49 billion auction of 7-year T-notes had a bid-to-cover ratio of 2.44, below the 10-auction average of 2.56.
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.
