What you need to know…
The S&P 500 Index ($SPX) (SPY) Thursday rose by +1.89%, the Dow Jones Industrials Index ($DOWI) (DIA) rose by +1.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose by +1.74%.
Stocks on Thursday extended this week’s gains, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all posting 2-week highs. Hopes that the Fed is done with its interest rate hikes forced bond yields lower and provided support for stocks. Wednesday’s comments from Fed Chair Powell suggested the Fed might be done raising rates when he said, "Given how far we have come, along with the uncertainties and risks we face, the FOMC is proceeding carefully." Stocks also rose on Thursday’s news that showed Q3 nonfarm productivity and weekly jobless claims rose more than expected, dovish factors for Fed policy.
Better-than-expected corporate earnings results also support stocks, with Teleflex and Tyler Technologies closing up more than +9% after reporting Q3 adjusted EPS above consensus. Also, Starbucks closed up more than +9% after reporting Q4 comparable sales above the consensus. Qualcomm closed up more than +5% after reporting Q4 adjusted revenue above consensus.
On the negative side, BorgWarner closed down more than -13% after reporting weaker-than-expected Q3 net sales. Also, Aptiv Plc and Dentsply Sirona closed down more than -7% after forecasting full-year net sales well below the consensus. In addition, Moderna closed down more than -6% after reporting an unexpected Q3 loss after including a $3.1 billion charge for resizing and tax allowances.
U.S. weekly initial unemployment claims rose +5,000 to 217,000, showing a slightly weaker labor market than expectations of no change at 210,000. Also, weekly continuing claims rose +35,000 to 1.818 million, showing a weaker labor market than expectations of 1.800 million.
U.S. Q3 nonfarm productivity rose +4.7%, stronger than expectations of +4.3% and the most in 3 years. Also, Q3 unit labor costs unexpectedly fell -0.8%, weaker than expectations of +0.3%, which was a positive inflation development.
U.S. Sep factory orders rose +2.8% m/m, stronger than expectations of +2.3% m/m and the biggest increase in 2-3/4 years.
The markets are discounting a 19% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 29% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields Thursday moved lower. The 10-year T-note yield dropped to a 2-1/2 week low of 4.624% and finished down -6.7 bp at 4.667%. The 10-year German bund yield fell to a 1-1/2 month low of 2.667% and finished down -4.7 bp at 2.717%. The 10-year UK gilt fell to a 3-week low of 4.319% and finished down -11.7 bp at 4.382%.
The Bank of England (BOE) Thursday voted 6-3 to keep its key interest rate unchanged at 5.25% and said a "restrictive" policy is likely needed for an extended period to curb inflation. BOE Governor Baily said policymakers are watching to see if more rate increases are needed, and it's "much too early" to be thinking about rate cuts.
Overseas stock markets Thursday settled mixed. The Euro Stoxx 50 closed up +1.90%. China’s Shanghai Composite Index today closed down -0.45%. Japan’s Nikkei 225 today closed up +1.10%.
Today’s stock movers…
Teleflex (TFX) closed up more than +11% after reporting Q3 adjusted EPS continuing operations of $3.64, well above the consensus of $3.28, and forecasting full-year adjusted EPS continuing operations of $13.30-$13.50, stronger than the consensus of $13.26.
Tyler Technologies (TYL) closed up more than +9% after reporting Q3 adjusted EPS of $2.14, better than the consensus of $1.98.
Starbucks (SBUX) closed up more than +9% after reporting Q4 comparable sales rose +8.00%, stronger than the consensus of +6.31%.
Parker-Hannifin (PH) closed up more than +9% after reporting Q1 adjusted EPS of $5.96, stronger than the consensus of $5.32, and raising its full-year adjusted EPS forecast to $22.60-$23.40 from a prior forecast of $21,90-$22.90.
Sealed Air Corp (SEE) closed up more than +8% after reporting Q3 adjusted Ebitda of $284.7 million, stronger than the consensus of $266.3 million.
Howmet Aerospace (HWM) closed up more than +7% after reporting Q3 revenue of $1.66 billion, above the consensus of $1.60 billion, and raising its full-year revenue forecast to $6.53 billion-$6.56 billion from a prior forecast of $6.40 billion-$6.47 billion.
Epam Systems (EPAM) closed up more than +7% after raising its full-year adjusted EPS forecast to $10.31-$10.39 from a prior forecast of $9.90-$10.10.
Clorox (CLX) closed up more than +6% after reporting Q1 net sales of $1.39 billion, above the consensus of $1.30 billion.
Qualcomm (QCOM) closed up more than +5% after reporting Q4 adjusted revenue of $8.67 billion, stronger than the consensus of $8.51 billion.
BorgWarner (BWA) closed down more than -13% to lead losers in the S&P 500 after reporting Q3 net sales of $3.62 billion, weaker than the consensus of $3.74 billion, and forecasting full-year adjusted operating margin continuing operations of 9.4% to 9.6%, below the consensus of 9.79%.
Aptiv Plc (APTV) closed down more than -10% after forecasting full-year net sales of $19.95 billion-$20.25 billion, the midpoint below the consensus of $20.16 billion.
Dentsply Sirona (XRAY) closed down more than -7% after reporting Q3 net sales of $947 million, weaker than the consensus of $975.3 million, and cutting its full-year net sales forecast to $3.90 billion-$3.94 billion from a previous estimate of $3.98 billion-$4.02 billion.
Moderna (MRNA) closed down more than -6% to lead losers in the Nasdaq 100 after reporting a Q3 loss per share of -$9.53 after including a $3.1 billion charge for resizing and tax allowances.
Airbnb (ABNB) closed down more than -3% after forecasting Q4 revenue of $2.13 billion-$2.17 billion, weaker than the consensus of $2.18 billion.
Qorvo Inc (QRVO) closed down more than -2% after forecasting Q3 revenue of $975 million-$1.03 billion, the midpoint below the consensus of $992.4 million.
Ansys Inc (ANSS) closed down more than -2% after reporting Q3 adjusted revenue of $458.8 million, below the consensus of $466.3 million, and cut its full-year adjusted revenue estimate to $2.23 billion-$2.28 billion from a previous estimate of $2.26 billion-$2.33 billion.
Mariott International (MAR) closed down more than -1% after forecasting Q4 adjusted Ebitda of $1.12 billion-$1.15 billion, weaker than the consensus of $1.17 billion.
Across the markets…
December 10-year T-notes (ZNZ23) on Thursday closed up +22 ticks, and the 10-year T-note yield fell by -6.7 bp to 4.667%. Dec T-notes Thursday climbed to a 2-1/2 week high, and the 10-year T-note yield fell to a 2-1/2 week low of 4.624%. T-notes rallied on carryover support from Wednesday after Fed Chair Powell said the FOMC would “proceed carefully” on future policy moves, bolstering speculation the Fed might be done tightening for this cycle. Thursday’s U.S. economic news was also bullish for T-notes after weekly jobless claims and Q3 nonfarm productivity rose more than expected, while Q3 unit labor costs unexpectedly declined.
On the negative side was Thursday’s rally in the S&P 500 to a 2-week high, reducing safe-haven demand for T-notes. Also, Sep factory orders rose more than expected by the most in 2-3/4 years, a hawkish factor for Fed policy.
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.
