What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.56%.
Stocks this morning are moderately higher, with the S&P 500 posting a 3-1/2 month high, the Dow Jones Industrials climbing to a 3-1/4 month high, and the Nasdaq 100 rallying to a 1-3/4 year high. Stocks are finding support today on some positive corporate news. HP Inc is up more than +4% after reporting Q4 adjusted operating margin above consensus. Also, chip stocks are climbing after UBS said AI “will remain a driver of growth in demand for semiconductors into 2025.” In addition, airline stocks are moving higher as today’s -4% plunge in crude oil prices lowers jet fuel costs and boosts their profit margins.
A slight easing of geopolitical risks in the Middle East is a positive factor for stocks after Hamas agreed to free 50 hostages from Gaza in return for a four-day ceasefire with Israel and the release of 150 Palestinian prisoners.
Crude oil prices are down more than -4% today after this weekend’s OPEC+ meeting was delayed until Nov 30 as talks ran into trouble amid Saudi dissatisfaction with other members’ oil production levels.
On the negative side for stocks, T-note yields increased after weekly jobless claims fell more than expected and after the University of Michigan U.S. Nov inflation expectations unexpectedly rose. Also, Deere & Co is down more than -6% after forecasting 2024 net income well below consensus, and Guess is down more than -10% after reporting weaker-than-expected Q3 EPS and cutting its full-year adjusted EPS forecast.
U.S. weekly initial unemployment claims fell -24,000 to a 5-week low of 209,000, showing a stronger labor market than expectations of 227,000. Weekly continuing claims unexpectedly fell -22,000 to 1.840 million, better than expectations of an increase to 1.875 million.
U.S. Oct capital goods new orders nondefense ex-aircraft, a proxy for capital spending, unexpectedly fell -0.1% m/m, weaker than expectations of +0.1% m/m.
The University of Michigan U.S. Nov consumer sentiment index was revised upward by +0.9 to 61.3, stronger than expectations of 61.0.
The University of Michigan U.S. Nov 1-year inflation expectations unexpected rose +0.1 to a 7-month high of 4.5%, above expectations of no change at 4.4%. Also, the Nov 5-10-year inflation expectations remained unchanged from Oct at 3.2%, stronger than expectations of a -0.1 point decline to 3.1%.
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 6% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +22% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 63% 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 mixed. The 10-year T-note yield rebounded from a 2-month low of 4.362% and is up +3.5 bp at 4.428%. The 10-year German bund yield is down -0.5 bp at 2.561%. The 10-year UK gilt yield is up +5.3 bp at 4.158%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.51%. China’s Shanghai Composite Index closed down -0.79%. Japan’s Nikkei Stock Index closed up +0.29%.
Today’s stock movers…
HP Inc (HPQ) is up more than +4% to lead gainers in the S&P 500 despite reporting weaker-than-expected Q4 revenue after reporting a Q4 adjusted operating margin of 9.00%, better than the consensus of 8.89%.
Chip stocks are climbing today after UBS said AI “will remain a driver of growth in demand for semiconductors into 2025.” As a result, Advanced Micro Devices (AMD) is up more than +3% to lead gainers in the Nasdaq 100. Also, Lam Research (LRCX), Marvell Technology (MRVL), Applied Materials (AMAT), On Semiconductor (ON), and Micron Technology (MU) are up more than +2%. In addition, Intel (INTC) is up more than +2% to lead gainers in the Dow Joines Industrials.
Airline stocks are rallying as today’s -4% plunge in crude oil prices lowers jet fuel costs and boosts company profits. United Airlines Holdings (UAL) is up more than +3%. Also, American Airlines Group (AAL) and Delta Air Lines (DAL) are up more than +2%. In addition, Southwest Airlines (LUV) and Alaska Air Group (ALK) are up more than +1%.
Amazon.com (AMZN) is up more than +2% after Adobe Analytics said U.S. consumers had spent $63.2 billion online in the first 20 days of the holiday shopping season, up +5% from last year and above the consensus of +4.8%.
Microsoft (MSFT) is up nearly +1% after Open AI said it would bring back Sam Altman and overhaul its board with new directors, a victory for Microsoft, which backed the company with a $10 billion stake.
GoDaddy (GDDY) is up more than +2% after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $124.
Clorox (CLX) is up more than +1% after JPMorgan Chase upgraded the stock to neutral from underweight.
Deere & Co (DE) is down more than -6% to lead losers in the S&P 500 after forecasting 2024 net income of $7.75 billion-$8.25 billion, well below the consensus of $9.32 billion.
Autodesk (ADSK) is down more than -5% to lead losers in the Nasdaq 100 after forecasting 2024 adjusted EPS of $7.43-$7.49, the midpoint below the consensus of $7.47.
Nvidia (NVDA) is down more than -4% despite reporting stronger than expected Q3 revenue when it forecast Q4 revenue of $20 billion, plus or minus 2%, above the consensus of $17.9 billion, but below an even loftier whisper number of $21 billion.
Energy stocks and energy service providers are falling today, with the price of WTI crude down more than -4%. As a result, Baker Hughes (BKR), ConocoPhillips (COP), Diamondback Energy (FANG), Haliburton (HAL), Marathon Oil (MRO), Schlumberger (SLB), and Occidental Petroleum (OXY) are down more than -2%.
Guess (GES) is down more than -10% after reporting Q3 EPS of 49 cents, weaker than the consensus of 61 cents, and cutting its full-year adjusted EPS forecast to $2.67-$2.74 from a previous estimate of $2.88-$3.08.
Urban Outfitters (URBN) is down more than -9% after reporting Q3 net sales of $324.4 million, below the consensus of $325.5 million.
Nordstrom Inc (JWN) is down more than -6% after reporting Q3 total revenue of $3.32 billion, below the consensus of $3.42 billion.
APA Corp (APA) is down more than -3% after Citigroup downgraded the stock to neutral from buy.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are down -7 ticks, and the 10-year T-note yield is up +3.5 bp at 4.428%. Dec T-note prices this morning gave up an early advance and are mildly lower. Stronger than expected U.S. economic news today is weighing on T-notes after weekly jobless claims fell more than expected and after the University of Michigan U.S. Nov inflation expectations unexpectedly rose. T-notes today initially moved higher after a plunge in crude prices pushed the 10-year breakeven inflation expectations rate down to a 2-1/4 month low of 2.236%.
The dollar index (DXY00) today is up by +0.56%. Stronger-than-expected U.S. economic news today is hawkish for Fed policy and supported moderate gains in the dollar. Also, higher T-note yields today are strengthening the dollar’s interest rate differentials.
EUR/USD (^EURUSD) today is down by -0.41%. Strength in the dollar today has sparked selling in the euro. Also, comments today from ECB Vice President Guindos weighed on EUR/USD when he said investors may not be fully pricing the risk of a stronger hit to the Eurozone economy from higher interest rates.
The Eurozone Nov consumer confidence indicator rose +0.9 to -16.9, stronger than expectations of -17.8.
ECB Vice President Guindos said, "The outlook that markets are taking with respect to the evolution of the Eurozone economy, I would say, is a little bit sanguine and optimistic."
USD/JPY (^USDJPY) today is up by +0.90%. The yen today is under pressure from a stronger dollar. Also, rising T-note yields today are weighing on the yen. In addition, strength in stocks today has curbed the safe-haven demand for the yen.
December gold (GCZ3) today is down -5.8 (-0.29%), and Dec silver (SIZ23) is down -0.199 (-0.83%). Precious metals prices today are posting moderate losses due to a stronger dollar. Also, higher T-note yields today are bearish for precious metals. A decline in inflation expectations reduces demand for gold as an inflation hedge after the 10-year breakeven inflation rate today dropped to a 2-1/2 month low. In addition, today’s rally in stocks has reduced the safe-haven appeal of precious metals. Losses in precious metals were limited after today’s news that the University of Michigan’s U.S. Nov inflation expectations unexpectedly rose.
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.
