What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.51%.
Stocks this morning are moderately higher, with the S&P 500 climbing to a 3-3/4 month high and the Nasdaq 100 posting a 1-3/4 year high. Stocks are finding support on economic optimism after U.S.Q3 GDP was revised higher and the Q3 core deflator was revised lower, reinforcing speculation the U.S. economy is continuing to grow at a moderate pace with easing price pressures that will allow the Fed to end its interest rate hiking campaign. Lower bond yields today are also supportive for stocks, with the 10-year T-note yield falling to a 2-1/2 month low. Stocks fell back from their best levels on hawkish comments from Richmond Fed President Barkin, who said the Fed should keep the option to hike interest rates on the table.
On the positive side for stocks, NetApp is up more than +16% after reporting Q2 adjusted EPS above consensus and raising its 2024 adjusted EPS forecast. Also, Workday is up more than +10% after reporting Q3 revenue above consensus and raising its 2024 subscription revenue forecast. In addition, General Motors is up more than +9% after saying it will boost its dividend by 33% and implement a $10 billion stock buyback program.
On the negative side, Hormel Foods is down more than -4% after reporting weaker-than-expected Q4 net sales. Also, Las Vegas Sands is down more than -4% on news that Miriam Adelson is selling $2 billion of the company’s stock. In addition, PG&E Corp is down more than -2% after announcing an offering of $1.5 billion of convertible senior notes due 2027 in a private placement.
U.S. Q3 GDP was revised upward by +0.3 to +5.2% (q/q annualized), stronger than expectations of +5.0%. The Q3 GDP price index was revised upward by +0.1 to 3.6%, stronger than expectations of no change at 3.5%, but the Q3 core PCE deflator was revised downward by -0.1 to 2.3%, weaker than expectations of no change at 2.4%.
Atlanta Fed President Bostic said, "Our research and input from business leaders tell me the downward trajectory of inflation will likely continue."
Richmond Fed President Barkin said the Fed should keep the option to hike interest rates on the table in case inflation proves stubborn.
The markets are discounting a 1% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 52% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 113% 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 lower. The 10-year T-note yield dropped to a 2-1/2 month low of 4.249% and is down -4.4 bp at 4.276%. The 10-year German bund yield fell to a 4-month low of 2.412% and is down -6.6 bp at 2.430%. The 10-year UK gilt yield fell to a 1-1/2 week low of 4.053% and is down -6.8 bp at 4.105%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.73%. China’s Shanghai Composite Index closed down -0.56%. Japan’s Nikkei Stock Index closed down -0.26%.
Today’s stock movers…
NetApp (NTAP) is up more than +16% to lead gainers in the S&P 500 in pre-market trading after reporting Q2 adjusted EPS of $1.58, stronger than the consensus of $1.39, and raising its 2024 adjusted EPS forecast to $6.05-$6.25 from a previous estimate of $5.65-$5.85, above the consensus of $5.73.
General Motors (GM) rallied more than +9% in pre-market trading after saying it would boost its dividend by 33% and implement a $10 billion stock buyback program.
CrowdStrike Holdings (CRWD) is up more than +9% to lead gainers in the Nasdaq 100 after reporting Q3 revenue of $786 million, stronger than the consensus of $777.4 million and raised its 2024 revenue forecast to $3.05 billion from a previous forecast of $3.03 billion-$3.04 billion, above the consensus o $3.04 billion.
Workday (WDAY) is up more than+10% after reporting Q3 revenue of $1.87 billion, better than the consensus of $1.85 billion, and raised its 2024 subscription revenue forecast to $6.60 billion from a prior estimate of $6.57 billion-$6.59 billion.
HP Enterprise (HPE) is up more than +7% after reporting Q4 adjusted EPS of 52 cents, stronger than the consensus of 50 cents, and unexpectedly raised its dividend to 13 cents per share from 12 cents.
Fluence Energy (FLNC) is up more than +27% after reporting Q4 total revenue of $673 million, well above the consensus of $510.5 million, and forecasting 2024 total revenue of $2.7 billion-$3/3 billion, the midpoint above the consensus of $2.78 billion.
Foot Locker (FL) is up more than +17% after reporting Q3 comparable sales fell -8%, a smaller decline than the consensus of -9.77%, and raised its full-year sales forecast to a decline of -8.0% to -8.5% from a previous estimate of -8% to -9%.
Salesforce (CRM) is up more than+1% to lead gainers in the Dow Jones Industrial after reporting Cyber Week digital sales reached $298 billion globally, up +6% y/y.
Hormel Foods (HRL) is down more than -4% to lead losers in the S&P 500 after reporting Q4 net sales of $3.20 billion, below the consensus of $3.26 billion.
Las Vegas Sands (LVS) is down more than -4% on news that Miriam Adelson is selling $2 billion of stock in the company.
PG&E Corp (PCG) is down more than -2% after announcing an offering of $1.5 billion of convertible senior notes due 2027 in a private placement.
Patterson Cos (PDCO) is down more than -14% after reporting Q2 net sales of $1.65 billion, weaker than the consensus of $1.70 billion.
Jabil Inc (JBL) is down more than -11% after forecasting 2024 revenue of about $31 billion, weaker than the consensus of $33.67 billion.
Okta (OKTA) is down more than -3% after saying that hackers who breached its network two months ago stole information on all users of its customer support system, many more than the 1% of customers the company had previously said were affected.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are up +12 ticks, and the 10-year T-note yield is down -4.4 bp at 4.276%. Dec T-note prices this morning rallied to a 2-1/2 month high, and the 10-year T-note yield fell to a 2-1/2 month low of 4.249%. T-notes have a positive carryover from a rally in 10-year German bunds today to a 4-month high. T-notes extended their gains after the U.S. Q3 core PCE deflator was revised lower, a dovish factor for Fed policy.
The dollar index (DXY00) today recovered from a 3-1/2 month low and is up by +0.02%. The dollar rebounded today after U.S. Q3 GDP was revised higher than expected. Also, an easing of consumer price pressures in Germany and Spain is dovish for ECB policy and weighed on the euro to benefit the dollar. Strength in stocks today is curbing liquidity demand for the dollar and is limiting its gains.
EUR/USD (^EURUSD) today fell back from a 3-1/2 month high and is down by -0.10%. A slowing of price pressures in Germany and Spain knocked European government bond yields lower today and weighed on the euro. EUR/USD today initially climbed to a 3-1/2 month high on hawkish comments from ECB Governing Council member Stournaras after Eurozone Nov economic confidence rose more than expected to a 4-month high.
ECB Governing Council member Stournaras cautioned against premature bets on when the ECB will lower interest rates, saying, "The current numbers betting on a rate cut in April seem a bit optimistic."
Eurozone Nov economic confidence rose +0.3 to a 4-month high of 93.8, stronger than expectations of 93.6.
German Nov CPI (EU harmonized) eased to +2.3% y/y from +3.0% y/y in Oct, better than expectations of +2.5% y/y and the smallest pace of increase in nearly 2-1/2 years.
Spain Nov CPI (EU harmonized) unexpectedly eased to +3.2% y/y from +3.5% y/y in Oct, better than expectations of an increase to +3.7% y/y.
USD/JPY (^USDJPY) today is down by -0.05%. The yen today extended this week’s rally to a 2-1/2 month high against the dollar. A slump in T-note yields today is boosting the yen. However, the yen fell back from its best levels on comments from BOJ member Adachi, who said his preference was to wait until at least April before the BOJ exits its ultra-easy monetary policy.
BOJ member Adachi indicated his preference to wait until at least April before the BOJ exits its ultra-easy monetary policy, saying, “We need to continue with easing patiently, and we’re not at a phase to discuss an exit strategy, given the current economy and inflation.”
December gold (GCZ3) today is up +4.1 (+0.20%), and Dec silver (SIZ23) is up +0.230 (+0.92%). Precious metals prices today are moderately higher, with gold posting a 6-1/2 month high and silver posting a 4-1/2 month high. Precious metals are climbing today on positive carryover from Tuesday when Fed Governor Waller signaled that he favored a pause in Fed rate hikes. Also, today’s decline in global bond yields is bullish for precious metals. Silver prices have support after U.S. Q3 GDP was revised higher than expected, a positive factor for industrial metals demand. Today’s rally in stocks is curbing safe-haven demand and limiting gains in precious metals. Also, today’s recovery in the dollar to higher on the day from a 3-1/2 month low is bearish for metals.
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.
