What you need to know…
The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.17%.
Stocks on Wednesday closed moderately higher, with the S&P 500 posting a nearly 2-year high and the Dow Jones Industrials and Nasdaq 100 posting record highs. A fall in bond yields on Wednesday supported stocks after the 10-year T-note yield dropped to a 5-1/4 month low. Market expectations for Fed rate cuts have increased as the swaps market is now fully discounting a -25 bp rate cut by the Fed at the March FOMC meeting.
Wednesday’s U.S. economic news was weaker than expected after the Dec Richmond Fed manufacturing sentiment index unexpectedly fell -6 to an 8-month low of -11, weaker than expectations of an increase to -3.
The markets are discounting the chances for a -25 bp rate cut at 18% at the next FOMC meeting on Jan 30-31 and fully discounting (104%) that -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields Wednesday moved are lower. The 10-year T-note yield dropped to a 5-1/4 month low of 3.782% and finished down -10.6 bp at 3.791%. The 10-year German bund yield dropped to a 1-year low of 1.893% and finished down -8.4 bp at 1.895%. The 10-year UK gilt yield fell to an 8-1/2 month low of 3.434% and finished down -6.9 bp at 3.436%.
Overseas stock markets on Wednesday settled higher. The Euro Stoxx 50 closed up +0.13%. China’s Shanghai Composite Index closed up +0.54%. Japan’s Nikkei Stock Index closed up +1.13%.
Today’s stock movers…
Regeneron Pharmaceuticals (REGN) closed up more than +2% after a court ruled that the company’s patent rights were infringed by a cheaper copy of an eye drug developed by Viatris.
Tesla (TSLA) closed up more than +1% after Wedbush Securities said the company’s delivery trajectory for Q4 looks strong.
Cytokinetics (CYTK) closed up more than +81% after a trial of its heart drug aficamten showed a statistically significant and clinically meaningful increase in the primary efficacy endpoint.
Coherus Biosciences (CHRS) closed up more than +23% after the FDA approved the company’s Udenyca Onbody, a medication administered after chemotherapy to reduce infection risks.
AstraZeneca (AZN) closed up more than +1% after it acquired Gracell Biotechnologies for $1.2 billion to boost its pipeline of cancer drugs.
Albemarle (ALB) closed down more than -2% to lead losers in the S&P 500 as softer-than-expected demand has knocked China lithium carbonate prices down to a 2-1/3 year low.
Energy stocks and energy service providers moved lower after the price of WTI crude oil fell nearly -2%. As a result, Marathon Petroleum (MPC), Schlumberger (SLB), Marathon Oil (MRO), Haliburton (HAL), and Valero Energy (VLO) closed down more than -1%.
Nike (NKE) closed down -0.82% to lead losers in the Dow Jones Industrials as analysts have cut their price targets on the stock by an average of 4.7% since it reported earnings on Dec 21.
Iovance Biotherapeutics (IOVA) closed down more than -18% after it said the U.S. FDA placed a clinical hold on its IOV-LUN-202 trial after a severe adverse event potentially related to the non-myeloablative lymphodepletion pre-conditioning regimen.
Across the markets…
March 10-year T-notes (ZNH24) on Wednesday closed up +19.5 ticks, and the 10-year T-note yield fell by -10.6 bp to 3.791%. Mar T-notes Wednesday rallied to a 6-month nearest-futures high, and the 10-year T-note yield fell to a 5-1/4 month low of 3.782%. Mar T-note prices found carryover support Wednesday from a rally in European government bonds, as 10-year German bunds rallied to a 1-year high and 10-year UK gilts climbed to an 8-1/2 month high. Also, Wednesday’s news that showed an unexpected decline in the Dec Richmond Fed manufacturing sentiment index to an 8-month low was bullish for T-notes. In addition, a decline in inflation expectations was positive for T-notes as Wednesday's 10-year breakeven inflation rate fell to a 2-week low of 2.160%.
T-notes raced to their highs Wednesday afternoon on strong demand for the Treasury’s $58 billion auction of 5-year T-notes that was awarded at 3.801%, below the 3.815% when issued (WI) yield at the bidding deadline of the auction.
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.
