What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.04%.
Stocks this morning are mixed, with the Nasdaq 100 falling to a 1-week low. Bond yields jumped on this morning’s stronger-than-expected U.S. Sep retail sales and Sep manufacturing reports, hawkish factors for Fed policy. Also, weakness in chip stocks is weighing on the overall market after Bloomberg News reported the U.S. is restricting the sale of chips to China that are used for AI. A rally in medical device makers lifted the S&P 500 off its lows.
The U.S. and its allies are ramping up diplomatic efforts to contain the conflict between Israel and Hamas. German Chancellor Scholz is expected to arrive in Israel today, and U.S. President Biden will travel to Israel on Wednesday. President Biden will also travel to Jordan to meet with Arab leaders, including Jordan King Abdullah II, Egyptian President Abdel Fatah El-Sisi, and Palestinian Authority President Mahmoud Abbas.
U.S. Sep retail sales rose +0.7% m/m and +0.6% m/m ex-autos, stronger than expectations of +0.3% m/m and +0.2% m/m ex-autos. Also, Aug retail sales were revised higher to +0.8% m/m and +0.9% m/m ex-autos from the initially reported +0.6% m/m and +0.6% m/m ex-autos.
U.S. Sep manufacturing production rose +0.4% m/m, stronger than expectations of unchanged m/m.
The U.S. Oct NAHB housing market index fell -4 to a 9-month low of 40, weaker than expectations of 44.
The markets are discounting a 10% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 46% chance for that +25 bp rate hike at the following meeting that ends on December 13. The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields are higher. The 10-year T-note yield rose to a 1-week high of 4.855% and is up +11.1 bp at 4.817%. The 10-year German bund yield rose to a 1-week high of 2.895% and is up +9.8 bp at 2.883%. The 10-year UK gilt yield rose to a 1-week high of 4.561% and is up +5.3 bp at 4.533%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.12%. China’s Shanghai Composite Index closed up +0.32%. Japan’s Nikkei 225 today closed up +1.20%.
Today’s stock movers…
Chip stocks are under pressure today after the U.S. said it is restricting top-of-the-line chips used for powering artificial intelligence (AI) models, including chips Nvidia designed especially for the Chinese market. As a result, Nvidia (NVDA) is down more than -5% to lead losers in the S&P 500 and Nasdaq 100. Also, Intel (INTC) is down more than -2% to lead losers in the Dow Jones Industrials. In addition, Advanced Micro Devices (AMD), Marvell Technology (MRVL), KLA Corp (KLAC), Broadcom (AVGO), Lam Research (LRCX), and NXP Semiconductors (NXPI) are down more than -2%.
Lucid Group (LCID) is down more than -3% after reporting it delivered 1,457 vehicles in Q3, below expectations of 2,100.
Bank of New York Mellon (BK) is down more than -3% after reporting Q3 total average deposits of $262.11 billion, below the consensus of $269.61 billion.
NetScout (NTCT) is down more than -19% after cutting its 2023 adjusted EPS forecast to $2.00-$2.20 from a prior forecast of $2.20-$2.32, weaker than the consensus of $2.27.
U.S.-listed Chinese stocks are falling today after Bloomberg News reported the U.S. is restricting the sale of chips to China that are used for AI. As a result, JD.com (JD) is down more than -3%. Also, Baidu (BIDU) and NetEase (NTES) are down more than -2%. In addition, Trip.com (TCOM) is down more than -1%.
Choice Hotels International (CHH) is down more than -3% after offering to buy Wyndham Hotels for $90/share in a deal valued at $9.8 billion.
Goldman Sachs (GS) is down more than -1% after reporting Q3 net interest income of $1.55 billion, weaker than the consensus of $1.86 billion.
VF Corp (VFC) is up more than +6% to lead gainers in the S&P 500 after activist investor Engaged Capital took a stake in the company.
Medical device companies are rallying today after Leerink Partners named Intuitive Surgical, Dexcom, and Shockwave Medical among its top buys. As a result, Dexcom (DXCM) is up more than +4% to lead gainers in the Nasdaq 100. Also, Insulet (PODD) is up more than +4%, Shockwave Medical (SWAV) is up more than +3%, and Intuitive Surgical (ISRG) is up more than +1%.
Dollar Tree (DLTR) is up more than +3% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $137.
Wyndham Hotels & Resorts (WH) is up more than +10% after Choice Hotels International proposed to buy the company for $90 a share in a deal valued at $9.8 billion.
Viasat (VSAT) is up more than +5% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30.
Fidelity National Information Services (FIS) is up more than +1% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $65.
Air Products & Chemicals (APD) is up more than +1% after Wells Fargo Securities upgraded the stock to overweight from neutral with a price target of $345.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are down -25 ticks, and the 10-year T-note yield is up +11.1 bp at 4.817%. Dec T-notes today fell to a 1-week low, and the 10-year T-note yield climbed to a 1-week high of 4.885%. Today’s stronger-than-expected U.S. retail sales and manufacturing production reports were hawkish for Fed policy and weighed on T-note prices. Also, an increase in inflation expectations is bearish for T-notes after the 10-year breakeven inflation rate today climbed to a 2-1/4 month high of 2.410%.
The dollar index (DXY00) today is up by +0.16%. The dollar today recovered from overnight losses and is moderately higher. Signs of strength in the U.S. economy are boosting T-note yields and the dollar on today’s stronger-than-expected U.S. retail sales and manufacturing production reports. Also, the weakness in stocks today has boosted the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is down by -0.09%. Strength in the dollar today is weighing on the euro. Losses in EUR/USD are limited after today’s news showed the German Oct ZEW survey expectations of economic growth rose more than expected to a 6-month high. Also, hawkish comments from ECB Chief Economist Lane were supportive of the euro when he said ECB policy is far from being loosened.
The German Oct ZEW survey expectations of economic growth rose +10.3 to a 6-month high of -1.1, stronger than expectations of -9.0.
ECB Chief Economist Lane said monetary policy can only be loosened when ECB officials are "sufficiently confident" of reaching their 2% inflation target, "but this is quite some distance away from where we are now."
USD/JPY (^USDJPY) today is up by +0.17%. The yen today gave up an overnight advance and is moderately lower. A jump in T-note yields today is undercutting the yen along with weak Japanese economic news after the Aug tertiary industry index unexpectedly fell. The yen initially moved higher in overnight trade on a Bloomberg report that said the BOJ will likely discuss raising its inflation projection for fiscal 2023 and 2024 at its policy meeting later this month.
The Japan Aug tertiary industry index unexpectedly fell -0.1% m/m, weaker than expectations of a +0.3% m/m increase.
December gold (GCZ3) today is up +2.8 (+0.14%), and Dec silver (SIZ23) is up +0.135 (+0.592%). Precious metals prices this morning are moderately higher on increased safe-haven demand regarding the Israeli-Hamas war after Israeli defense minister Gallant said to expect a “long war” against Hamas. Also, an increase in inflation expectations boosted demand for gold as an inflation hedge after the 10-year U.S. breakeven inflation rate today rose to a 2-1/4 month high. Silver also found support today on the stronger-than-expected U.S. retail sales and manufacturing production reports, which were bullish for industrial metals demand.
Gains in precious metals are limited today by the stronger dollar and higher global bond yields. Also, hawkish comments from ECB Chief Economist Lane weighed on precious metals when he said ECB policy is far from being loosened.
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