What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.67%.
Stocks this morning are mixed after hawkish comments from New York Fed President Williams dampened expectations for Fed rate cuts when he said it was “premature” to think about a March interest rate cut. Also, today’s weaker-than-expected U.S. economic reports curbed optimism that the Fed will be able to engineer a soft landing for the U.S. economy. Lower bond yields today are limiting losses in stocks.
The U.S. Dec Empire manufacturing survey general business conditions index fell -23.6 to a 4-month low of -14.5, weaker than expectations of 2.0.
U.S. Nov manufacturing production rose +0.3% m/m, weaker than expectations of +0.5% m/m.
The U.S. Dec S&P manufacturing PMI unexpectedly fell -1.2 to 48.2, weaker than expectations of an increase to 49.5 and the weakest level in 4 months.
New York Fed President Williams said the question now is whether we're sufficiently restrictive. "We aren't really talking about rate cuts" now, and it is "premature" to be thinking about a March rate cut.
U.S. equity funds recently boosted their buying of stocks. Bank of America said EPFR Global data showed U.S. equity funds reported $25.9 billion of inflows in the week to December 13, the ninth week of inflows and the longest streak in two years.
Market volatility today may be higher than normal due to the expiry of monthly and quarterly options and futures contracts, in an event known as triple witching. There is also the rebalancing of many indexes. According to Tier1Alpha, about $3.1 trillion in notional open interest is scheduled to expire or roll into the new year.
The markets are discounting the chances for a -25 bp rate hike at 14% for the next FOMC meeting on Jan 30-31 and 82% for the following meeting on March 19-20.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is down -1.5 bp at 3.905%. The 10-year German bund yield fell to an 8-1/2 month low of 2.011% and is down -10.0 bp at 2.020%. The 10-year UK gilt yield is down -9.2 bp at 3.697%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.35%. China’s Shanghai Composite Index closed down -0.56%. Japan’s Nikkei Stock Index closed up +0.87%.
Today’s stock movers…
Exelon (EXC) is down more than -4% to lead losers in the S&P 500 and Nasdaq 100 after Bank of America Global Research and Guggenheim Securities both downgraded the stock to neutral from buy.
Scholastic (SCHL) is down more than -11% after cutting its full-year adjusted Ebitda estimate to $165 million-$175 million from a previous forecast of $10 million-$200 million.
Tractor Supply (TSCO) is down more than -3% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $171.
Managed healthcare stocks are under pressure today and weighing on the overall market. Molina Healthcare (MOH) and Cardinal Health (CAH) are down more than -3%. Also, Elevance Health (ELV), Centene (CNC), and Cigna Group (CI) are down more than -2%.
Roku (ROKU) is down more than -4% after MoffettNathanson LLC downgraded the stock to sell from neutral.
Lennar (LEN) is down more than -2% despite reporting better than expected Q4 adjusted EPS after forecasting Q1 gross margin on home sales of 21.0%-21.3%, below the consensus of 22.9%.
GlobalFoundries (GFS) is down more than -1% after Bank of America Global Research downgraded the stock to neutral from buy.
Kimberly-Clark (KMB) is down more than -1% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $115.
Steel Dynamics (STLD) is up more than +5% to lead gainers in the S&P 500 after forecasting Q4 EPS of $2.60-$2.64, stronger than the consensus of $2.43.
Intel (INTC) is up more than +3% to lead gainers in the Dow Jones Industrials after it unveiled new chips for personal computers and data centers as it seeks to establish a foothold in the AI hardware space.
Global Payments (GPN) is up more than +4% after it denied rumors that it was in talks to acquire Shift4 Payments.
Costco Wholesale (COST) is up more than +3% after reporting Q1 EPS of $3.58, stronger than the consensus of $3.41.
Chewy (CHWY) is up more than +5% after Needham & Co. raised its price target on the stock to $25 from $20.
Palo Alto Networks (PANW) is up more than +1% after Mizuho Securities raised its price target on the stock to $325 from $280.
STMicroelectronics NV (STM) is up more than +1% after Citigroup named the stock a top pick in Europe’s tech hardware sector.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +2 ticks, and the 10-year T-note yield is down -1.5 bp at 3.905%. Mar T-note prices this morning are slightly higher as they waver on either side of unchanged. T-notes have carryover support from a rally in 10-year German bunds to an 8-1/2 month high. Also, today’s weaker-than-expected U.S. economic reports underpinned T-note prices. Gains in T-notes are limited by hawkish comments from New York Fed President Williams, who said it is "premature" to think about a March rate cut.
The dollar index (DXY00) today is up by +0.38%. The dollar today is moderately higher on hawkish comments from New York Fed President Williams, who pushed back against speculation about Fed rate cuts as soon as March.
EUR/USD (^EURUSD) today is down by -0.69%. The euro is under pressure today from a stronger dollar. Also, weaker-than-expected Eurozone economic news today is weighing on EUR/USD after Eurozone Dec manufacturing and service sector activity contracted more than expected. In addition, today’s slump in the 10-year German bund yield to an 8-1/2 month low has weakened the euro’s interest rate differentials.
The Eurozone Dec S&P manufacturing PMI was unchanged at 44.2, weaker than expectations of an increase to 44.6. Also, the Dec S&P composite PMI unexpectedly fell -0.6 to 47.0, weaker than expectations of an increase to 48.0.
Swaps tied to ECB meeting dates have now priced in a 53% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting.
USD/JPY (^USDJPY) today is down by -0.20%. The yen today is moderately higher and modestly above Thursday’s 4-1/2 month high against the dollar. Lower T-note yields today are supporting gains in the yen. Also, comments today from Japanese Finance Minister Suzuki sparked short covering in the yen when he said the government will continue to monitor currency movements “closely.”
Japanese economic news was mixed for the yen. The Japan Dec Jibun Bank manufacturing PMI fell -0.6 to 47.7, the weakest level in 10 months. However, the Dec Jibun Bank services PMI rose +1.2 to 52.0.
February gold (GCG4) this morning is up +6.1 (+0.30%), and Mar silver (SIH24) is down -0.056 (-0.23%). Gold and silver prices this morning are mixed. A stronger dollar today is bearish for metals prices. However, the weakness in global bond yields today is bullish for precious metals. Silver prices are under pressure today on industrial metals demand concerns after U.S. Nov manufacturing production, the U.S. Dec S&P manufacturing PMI, and the Japan Dec Jibun Bank manufacturing PMI reports were all weaker than expected. Gains in gold were limited by hawkish comments from New York Fed President Williams, who pushed back against speculation about Fed rate cuts as soon as March.
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.
