What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.36%.
Stocks this morning are moderately lower as technology stocks give back some of Monday’s rally. Also, reduced expectations for a Fed interest rate cut in March are weighing on stocks as swap markets now show expectations for a -25 bp rate cut by the Fed at the March 19-20 FOMC meeting have fallen to a 67% chance from a 100% chance last month.
Some negative corporate news is weighing on stock index futures. MSC Industrial Direct is down more than -2% after reporting Q1 net sales below consensus. Also, Boeing is down more than -1%, adding to Monday’s -7% plunge after the National Transportation Safety Board said it is considering widening the probe into other Boeing 737 Max jets. In addition, HP Inc. is down more than -2% after it was hit with an antitrust suit accusing the company of requiring consumers who purchased its printers to use only its branded replacement ink cartridges.
On the positive side for stocks, Juniper Networks is up more than +22% after the Wall Street Journal reported that HP Enterprise is in advanced talks to acquire the company for about $13 billion. Also, Illumina is up more than +7% after reporting preliminary Q4 revenue above consensus. In addition, Match Group is up more than +5% after the Wall Street Journal reported that Elliot Investment Management had built a stake of about $1 billion in the company.
Today’s U.S. trade news supports stocks after the Nov trade deficit unexpectedly narrowed to -$63.2 billion from $64.5 billion in Oct, better than expectations of a widening to -$64.9 billion and a positive factor for Q4 GDP.
The markets are discounting the chances for a -25 bp rate cut at 5% at the next FOMC meeting on Jan 30-31 and 67% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is unchanged at 4.008%. The 10-year German bund yield is up +4.3 bp at 2.179%. The 10-year UK gilt yield is down -1.0 bp at 3.762%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.42%. China’s Shanghai Composite Index closed up +0.20%. Japan’s Nikkei Stock Index closed up +1.16%.
Today’s stock movers…
HP Enterprise (HPE) is down more than -8% to lead losers in the S&P 500 after the Wall Street Journal reported the company is in advanced talks to acquire Juniper Networks for about $13 billion.
Verizon Communications (VZ) is down more than -2% to lead losers in the Dow Jones Industrials after Headwater Partners II LLC sued the company for infringement on two of its patents on 4G and 5G base stations technology.
MSC Industrial Direct (MSM) is down more than -2% after reporting Q1 net sales of $964 million, weaker than the consensus of $972.3 million.
Boeing (BA) is down more than -1%, adding to Monday’s -7% plunge after the National Transportation Safety Board said it is considering widening the probe into other Boeing 737 Max jets after Alaska Air Group and United Airlines Holdings found loose parts in inspections of their Max 9 jets.
Newmont (NEM) is down more than -2% after TD Securities downgraded the stock to hold from buy.
HP Inc (HPQ) is down more than -2% after it was hit with an antitrust suit accusing the company of requiring consumers who purchased its printers to use only its branded replacement ink cartridges.
Netflix (NFLX) is down more than -1% after Citigroup downgraded the stock to neutral from buy.
Morgan Stanley (MS) is down more than -1% after HSBC downgraded the stock to hold from buy.
Juniper Networks (JNPR) is up more than +22% to lead gainers in the S&P 500 after the Wall Street Journal reported that HP Enterprise is in advanced talks to acquire the company for about $13 billion.
Illumina (ILMN) is up more than +7% to lead gainers in the Nasdaq 100 after reporting preliminary Q4 revenue of $1.12 billion, above the consensus of $1.07 billion.
Acuity Brands (AYI) is up more than +10% after reporting Q1 adjusted EPS of $3.72, well above the consensus of $3.14.
Match Group (MTCH) is up more than +5% after the Wall Street Journal reported that Elliot Investment Management had built a stake of about $1 billion in the company.
ResMed (RMD) is up more than +5% after JPMorgan Chase raised their price target on the stock to $195 from $160.
Revvity (RVTY) is up more than +5% after reporting Q4 preliminary revenue of at least $690 million, stronger than the consensus of $670.5 million.
Crowdstrike Holdings (CRWD) is up more than +4% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $304.
United Airlines Holdings (UAL) is up more than +1% after Bank of America Global Research upgraded the stock to buy from underperform.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -2 ticks, and the 10-year T-note yield is unchanged at 4.008%. Mar T-note prices today are slightly lower on negative carryover from weakness in 10-year German bunds. Also, supply pressures are weighing on T-notes as the Treasury will auction $52 billion of 3-year T-notes later today as part of this week’s $110 billion auction package of T-notes and T-bonds.
The dollar index (DXY00) today is up by +0.15%. The dollar today is moderately higher. Today’s economic news that showed an unexpected narrowing of the U.S. Nov trade deficit supported the dollar. Also, the weakness in stocks today has boosted liquidity demand for the dollar.
The markets are discounting the chances for a -25 bp rate cut at 5% at the next FOMC meeting on Jan 30-31 and 67% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is down by -0.05%. The euro today is slightly lower due to a stronger dollar. Also, economic concerns are undercutting EUR/USD after German Nov industrial production unexpectedly declined for the sixth consecutive month. Losses in the euro are limited after the Eurozone Nov unemployment rate unexpectedly fell to match a record low, a sign of strength in the labor market that is hawkish for ECB policy.
ECB Governing Council member Centeno said the December inflation report for the Eurozone was "good news" and officials will decide when to cut interest rates "sooner than we thought until recently."
The Eurozone Nov unemployment rate unexpectedly fell -0.1 to match a record low of 6.4%, showing a stronger labor market than expectations of no change at 6.5%.
German Nov industrial production unexpectedly fell -0.7% m/m, weaker than expectations of +0.3% m/m, and the sixth consecutive month industrial production has declined.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 6% for its next meeting on January 25 and 46% for the following meeting on March 7.
USD/JPY (^USDJPY) is down by -0.29%. The yen is moderately higher today after the BOJ indicated it would reduce monthly buying on long-term 10 to 25-year Japanese government bonds. Gains in the yen are limited after Japanese economic news showed Nov household spending fell more than expected and Tokyo Dec CPI eased more than expected, dovish factors for BOJ policy.
Japan Nov household spending fell -2.9% y/y, weaker than expectations of -2.3% y/y, and the ninth consecutive month spending has declined.
Tokyo Dec CPI eased to +2.4% y/y from +2.7% y/y in Nov, better than expectations of +2.5% y/y and the slowest pace of increase in 1-1/2 years. Dec CPI ex-fresh food and energy eased to +3.5% y/y from +3.6% y/y in Nov, right on expectations.
February gold (GCG4) today is up +8.2 (+0.40%), and Mar silver (SIH24) is down -0.020 (-0.09%). Gold and silver prices this morning are mixed. Gold found support today on dovish comments from ECB Governing Council member Centeno, who said good news on Eurozone inflation will allow the ECB to cut interest rates earlier than expected. Gains in gold were limited on strength in the dollar today, and long liquidation pressures in gold after long gold holdings in ETFs fell to a nearly 4-year low Monday. Silver prices are slightly lower on signs of weakness in industrial metals demand after German Nov industrial production unexpectedly fell for the sixth consecutive month.
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.
