What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.51%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.20%.
Stocks this morning are mixed, with the Dow Jones Industrials falling to a 2-week low. Strength in technology stocks is leading the broader market higher, with Nvidia up more than +4% at a record high to lead gains in chipmakers after Reuters reported the company plans mass production of an AI chip designed for China to comply with U.S. export rules in Q2. Also, an increase in M&A activity supports stocks after Boston Scientific agreed to buy Axionics for $3.7 billion, and Johnson & Johnson agreed to buy Ambix Biopharma for $2 billion.
Stock indexes are also finding support from lower bond yields on comments over the weekend from Dallas Fed President Logan, who said the Fed may slow the pace at which it shrinks its portfolio of assets to keep ample liquidity in financial markets.
On the negative side for stocks, Boeing tumbled more than -7% to push the Dow Jones Industrials down to a 2-week low after a fuselage section on a new 737 Max 9 aircraft ejected during an Air Alaska flight over the weekend, forcing the company to pull the jet from service for inspections.
The markets are discounting the chances for a -25 bp rate cut at 5% at the next FOMC meeting on Jan 30-31 and 69% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -6.6 bp at 3.979%. The 10-year German bund yield is down -1.7 bp at 2.139%. The 10-year UK gilt yield is down -0.7 bp at 3.780%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.44%. China’s Shanghai Composite Index closed down -1.42%. Japan’s Nikkei Stock Index was closed for the Coming-of-Age holiday.
Today’s stock movers…
Nvidia (NVDA) is up more than +4% at a record high after Reuters reported the company plans mass production of an AI chip designed for China to comply with U.S. export rules in Q2.
Arista Networks (ANET) is up more than +4% after Melius Research LLC upgraded the stock to buy from hold with a price target of $300.
American Airlines Group (AAL) is up more than +4% after Morgan Stanley upgraded the stock to overweight from equal weight.
Dexcom (DXCM) is up more than +4% to lead gainers in the Nasdaq 100 after reporting preliminary Q4 revenue of at least $1.03 billion, higher than the consensus of $1.0 billion.
Advanced Micro Devices (AMD) is up more than +3% after Melius Research LLC upgraded the stock to buy from hold with a price target of $188.
Ambrix Biopharma (AMAM) is up more than +98% after Johnson & Johnson agreed to buy the company for $2 billion or about $28 per share.
Crocs (CROX) is up more than +20% after raising its full-year revenue forecast to $3.95 billion from a previous forecast of $3.91-$3.94 billion, stronger than the consensus of $3.93 billion.
Delta Air Lines (DAL) is up more than +2% after Morgan Stanley named the stock a top pick for airline stocks in 2024.
Boeing (BA) is down more than -7% to lead losers in the S&P 500 and Dow Jones Industrials after it pulled its 737 Max 9 jet from service for inspections after a fuselage section on a new Alaska Airlines jet blew out during flight.
Energy stocks and energy service providers are falling today, with the price of WTI crude oil down more than -4%. As a result, Haliburton (HAL) and Schlumberger NV (SLB) are down more than -4%, and Baker Hughes (BKR) is down more than -4% to lead losers in the Nasdaq 100. Also, Marathon Coil (MRO), APA Corp (APA), and ConocoPhillips (COP) are down more than -3%. In addition, Devon Energy (DVN), Exxon Mobil (XOM), Diamondback Energy (FANG), and Occidental Petroleum (OXY) are down more than -2%.
Genesco (GCO) is down more than -4% after reporting comparable sales fell -4% for the quarter-to-date period, and it cut its full-year adjusted EPS continuing operations estimate to 65 cents-85 cents from a previous estimate of $1.50-$2.00, well below the consensus of $1.73.
ZoomInfo Technologies (ZI) is down more than -1% after RBC Capital Markets downgraded the stock to underperform from sector perform with a price target of $14.
Lululemon Athletica (LULU) is down -0.62% after forecasting Q4 net revenue of $3.17 billion-$3.19 billion, the midpoint below the consensus of $3.19 billion.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +12 ticks, and the 10-year T-note yield is down -6.6 bp at 3.979%. Mar T-note prices today are slightly higher on weekend comments from Dallas Fed President Logan, who said the Fed may need to slow the pace of shrinking its balance sheet to keep adequate liquidity in financial markets. T-notes also have support from today’s -3% plunge in crude prices, which lowers inflation expectations. Gains in T-notes are limited due to supply pressures as the Treasury will auction $110 billion of T-notes and T-bonds this week, beginning with Tuesday’s sales of $52 billion of 3-year T-notes.
The dollar index (DXY00) today is down by -0.27%. The dollar today is under pressure from lower T-note yields. Also, strength in stocks today has curbed liquidity demand for the dollar. Losses in the dollar are contained after last Friday’s stronger-than-expected U.S. Dec payrolls report reduced expectations that the Fed may not cut interest rates as much as previously thought.
The markets are discounting the chances for a -25 bp rate cut at 5% at the next FOMC meeting on Jan 30-31 and 57% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is up by +0.29%. The euro today is moderately higher on hawkish comments from ECB Governing Council member Vujcic who said the ECB probably won’t cut interest rates before summer. Also, a larger-than-expected increase in Eurozone Dec economic confidence to an 8-month high is bullish for the euro. Gains in EUR/USD are limited after German Nov factory orders rose less than expected.
ECB Governing Council member Vujcic said he expects inflation to slow gradually and that the ECB "is not talking about cutting interest rates now, and probably won't before the summer."
The Eurozone Dec economic confidence indicator rose +2.4 to an 8-month high of 96.4, stronger than expectations of 94.2.
The Eurozone Jan Sentix investor confidence index rose +1.0 to an 8-month high of -15.8, right on expectations.
German Nov factory orders rose +0.3% m/m, weaker than expectations of +1.1% m/m.
German trade news was better than expected as Nov exports rose +3.7% m/m, stronger than expectations of +0.5% m/m and the biggest increase in 1-3/4 years. Also, Nov imports rose +1.9% m/m, stronger than expectations of +0.4% m/m and the biggest increase in 9 months.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 6% for its next meeting on January 25 and 46% for the following meeting on March 7.
USD/JPY (^USDJPY) is down by -0.65%. The yen is moving higher today on a decline in T-note yields, which is bullish for the yen. Trading activity in the yen is muted, with markets in Japan closed today for the Coming-of-Age holiday.
February gold (GCG4) today is down -19.7 (-0.96%), and Mar silver (SIH24) is down -0.120 (-0.51%). Gold and silver prices this morning are moderately lower, with gold falling to a 3-1/2 week low. Doubts about interest rate cuts from the Fed and BOE are undercutting precious metals after last Friday’s stronger-than-expected U.S. Dec payrolls report and after today’s comments from ECB Governing Council member Vujcic who said the ECB won’t cut interest rates before the summer. Also, long liquidation pressures weighed on gold after long gold holdings in ETFs fell to a nearly 4-year low last Friday. Silver prices are under pressure after German Nov factory orders rose less than expected, a sign of weakness in industrial metals demand.
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.
