What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.15%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.31%.
Stocks this morning are mildly lower on some disappointing corporate earnings results. Cisco Systems is down more than -11% to lead technology stocks lower after it cut its full-year revenue forecast. Also, Walmart is down more than -7% to drag retailer stocks lower after striking a cautious tone about the outlook for U.S. shoppers. In addition, a more than -3% plunge in WTI crude oil to a nearly 4-month low today is pressuring energy stocks.
Stock index futures recovered from their worst levels as bond yields fell on several Fed-friendly economic reports, including weekly jobless claims, Oct manufacturing production, and the Nov NAHB housing market index.
Stocks also have support after the Senate Wednesday night voted 87-11 to approve a temporary funding measure to avert a government shutdown. President Biden will now sign the bill. The measure will fund some parts of the government through Jan 19 and others through Feb 2.
U.S. weekly initial unemployment claims rose +13,000 to 231,000, showing a weaker labor market than expectations of 220,000. Also, weekly continuing claims rose +32,000 to a 2-year high of 1.865 million, showing a weaker labor market than expectations of 1.843 million.
The U.S. Nov Philadelphia Fed business outlook survey rose +3.1 to -5.9, stronger than expectations of -8.0.
The U.S. Oct import price index ex-petroleum fell -0.2% m/m, just above expectations of -0.3% m/m.
U.S. Oct manufacturing production fell -0.7% m/m, weaker than expectations of -0.4% m/m and the biggest decline in 4 months.
The U.S. Nov NAHB housing market index unexpectedly fell -6 to an 11-month low of 34, weaker than expectations of no change at 40.
Comments from Cleveland Fed President Mester suggest she favors the Fed pausing rate hikes when she said the current funds rate positions the Fed well, and whether further rate hikes are needed depends on the economy.
On the positive side for stocks, Macy’s is up more than +7% after reporting Q3 adjusted EPS well above the consensus and raising its full-year adjusted EPS forecast. Also, Intel is up more than +4% after Mizuho Securities upgraded the stock to a buy.
The markets are discounting a 0% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +41% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 92% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -9.0 bp at 4.441%. The 10-year German bund yield fell to a 2-1/2 month low of 2.560% and is down -7.1 bp at 2.572%. The 10-year UK gilt yield dropped to a 5-1/2 month low of 4.104% and is down -11.3 bp at 4.115%.
China Oct new home prices fell -0.38% m/m, the biggest decline in 8-1/2 years, and the fifth consecutive month home prices have fallen.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.21%. China’s Shanghai Composite Index closed down -0.71%. Japan’s Nikkei Stock Index closed down -0.28%.
Today’s stock movers…
Cisco Systems (CSCO) is down more than -11% to lead losers in the S&P 500, Dow Jones Industrials, and Nasdaq 100 after cutting its full-year revenue forecast to $53.8 billion-$55.0 billion from a prior forecast of $57.0 billion-$58.2 billion, well below the consensus of $57.84 billion.
Walmart (WMT) is down more than -7%, despite raising its full-year profit forecast, after CEO Rainey said there was a “sharper falloff” in sales in the last two weeks of October and that they are “more cautious on the consumer than they were 90 days ago at this time.” Other retailers fell on the news, with Dollar Tree (DLTR) down more than -4%, Kroger (KR) down more than -3%, and Costco Wholesale (COST) and Dollar General (DG) down more than -2%.
Palo Alto Networks (PANW) is down more than -6% after reporting Q1 billings of $2.02 billion, weaker than the consensus of $2.08 billion.
Energy stocks and energy service providers are under pressure today, with WTI crude falling more than -3% to a 4-month low. As a result, APA Corp (APA) is down more than -4%. Also, Baker Hughes (BKR), ConocoPhillips (COP), Devon Energy (DVN), Haliburton (HAL), Diamondback Energy (FANG), Marathon Oil (MRO), Schlumberger (SLB), and Valero Energy (VLO) are down more than -3%. Chevron (CVX), Marathon Petroleum (MPC), Occidental Petroleum (OXY), and Phillips 66 (PSX) are down more than -2%.
Children’s Place (PLCE) is down more than -25% after reporting Q3 adjusted EPS of $3.22, well below the consensus of $3.75.
Bath & Body Works (BBWI) is down more than -5% after forecasting Q4 EPS of $1.70-$1.90, weaker than the consensus of $1.99.
VF Corp (VFC) is down more than -5% after Moody’s Investors Service downgraded the company’s senior unsecured debt rating to Baa3 from Baa2 with a negative outlook.
Intel (INTC) is up more than +4% to lead gainers in the S&P 500, Dow Jones Industrials and Nasdaq 100 after Mizuho Securities upgraded the stock to buy from neutral with a price target of $50.
Macy’s (M) is up more than +7% after reporting Q3 adjusted EPS of 21 cents, well above the consensus of zero cents, and raising its full-year adjusted EPS forecast to $2.88-$3.12 from a previous forecast of $2.70-$3.20.
Allstate (ALL) is up more than +2% after saying rate increases for its auto insurance since the beginning of the year have resulted in a premium impact of 10.4%, which is expected to raise annualized written premiums by $2.7 billion.
Travelers Cos (TRV) is up more than +1% after JPMorgan Chase said it added the stock to its U.S. Equity Income Fund.
Microsoft (MSFT) is up more than +1% after it unveiled its Mala 100 chip, its first homegrown artificial intelligence chip and cloud-computing processor.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are up +18 ticks, and the 10-year T-note yield is down -9.0 bp at 4.441%. Dec T-note prices this morning are moderately higher on Fed-friendly U.S. economic reports, including weekly jobless claims, Oct manufacturing production, and the Nov NAHB housing market index. Also, comments from Cleveland Fed President Mester supported T-notes when she signaled that she favors a pause in Fed rate hikes.
The dollar index (DXY00) today is down by -0.09%. The dollar is under pressure today on dovish U.S. economic reports, including weekly jobless claims, Oct manufacturing production, and the Nov NAHB housing market index. Also, lower T-note yields today are weighing on the dollar. Losses in the dollar are contained as a slide in stocks has boosted some liquidity demand for the dollar.
EUR/USD (^EURUSD) today is up by +0.20% and just below Tuesday’s 2-1/2 month high. The main bullish factor for the euro today is a weaker dollar. Also, a decline in T-note yields following weaker-than-expected U.S. economic news today on jobless claims and manufacturing production weakened the dollar’s interest rate differentials versus the euro.
USD/JPY (^USDJPY) today is down by -0.48%. The yen today is moderately higher against the dollar. Better-than-expected Japanese trade news today boosted the yen, as did a stronger-than-expected Japan Sep core machine orders report. Also, the decline in T-note yields today is supportive of the yen.
Japan Oct exports rose +1.6%y/y, stronger than expectations of +1.0% y/y. Also, Oct imports fell -12.5% y/y, a smaller decline than expectations of -12.8% y/y.
Japan Sep core machine orders rose +1.4% m/m, stronger than expectations of +0.9% m/m.
The Japan Sep tertiary index fell -1.0% m/m, weaker than expectations of -0.1% m/m and the biggest decline in 6 months.
December gold (GCZ3) today is up +18.2 (+0.938%), and Dec silver (SIZ23) is up +0.557 (+2.37%). Precious metals prices today are mixed, with silver climbing to a 2-1/2 month high. Dollar weakness today is supportive of metals. Also, a decline in global bond yields is bullish for precious metals. In addition, today’s weaker-than-expected U.S. reports on weekly jobless claims, Oct manufacturing production, and Nov NAHB housing market index were dovish for Fed policy and bullish for precious metals.
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.
