What you need to know…
The S&P 500 Index ($SPX) (SPY) Monday closed down -0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.13%.
Stocks on Monday posted modest losses. The broader market was under pressure Monday on concern that economic weakness in China will weigh on global economic prospects after China’s industrial profits rose at the slowest pace in three months in October. However, Monday’s weaker-than-expected U.S. economic news knocked T-note yields lower and limited losses in the stock market.
On the positive side for stocks, Shopify closed up more than +5% after it said merchants set a Black Friday record with a combined $4.1 billion in sales. Also, Crown Castle Inc. closed up more than +3% after activist investor Elliot Investment Management, which has acquired a more than $2 billion stake in the company, said it plans to push for changes in the company that will help boost its shares.
Adobe Analytics raised its estimate for Cyber Monday sales to $12.4 billion from an initial forecast of $12 billion after reporting U.S. shoppers spent a record $9.8 billion online on Black Friday. Also, data from Salesforce Inc. showed U.S. online sales rose +9% year-on-year on Black Friday.
U.S. Oct new home sales fell -5.6% m/m to 679,000, weaker than expectations of 721,000.
The U.S. Nov Dallas Fed manufacturing outlook level of general business activity unexpectedly fell -0.7 to a 4-month low of -19.9, weaker than expectations of an increase to -16.0.
The markets are discounting a 4% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 12% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 16% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 58% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields on Monday moved lower. The 10-year T-note yield fell back from a 1-week high of 4.512% and finished down -7.8 bp at 4.389%. The 10-year German bund yield fell -9.5 bp to 2.548%. The 10-year UK gilt yield fell -7.1 bp to 4.212%.
China Oct industrial profits rose +2.7% y/y, the smallest increase in 3 months.
Japan Oct PPI services prices rose +2.3% y/y, stronger than expectations of +2.1% and the strongest pace of increase in 3-3/4 years.
Overseas stock markets Monday settled lower. The Euro Stoxx 50 closed down -0.40%. China’s Shanghai Composite Index closed down -0.30%. Japan’s Nikkei Stock Index closed down -0.53%.
Today’s stock movers…
GE Healthcare Technologies (GEHC) closed down more than -4% to lead losers in the Nasdaq 100 after UBS downgraded the stock to sell from neutral with a price target of $66.
Walgreens Boots Alliance (WBA) closed down more than -3% to lead losers in the Dow Jones Industrials and Nasdaq 100 after transactions observed by Bloomberg Second Measure showed sales at Walgreens stores in the week ended Nov 19 fell -5.97% y/y.
Southern Copper (SCCO) closed down more than -4% after Morgan Stanley downgraded the stock to underweight from equal weight.
Okta (OKTA) closed down more than -4% after JMP Securities downgraded the stock to market perform from outperform.
Weyerhaeuser (WY) closed down more than -1% after Raymond James downgraded the stock to market perform from strong buy.
Lucid Group (LCID) closed down more than -1% after Needham downgraded the stock to hold from buy.
Foot Locker (FL) closed down nearly -1% after Citigroup downgraded the stock to sell from neutral with a price target of $18.
Domino’s Pizza (DPZ) closed up more than +4% to lead gainers in the S&P 500 after Cowen raised its price target on the stock to $430 from $410.
Shopify (SHOP) closed up more than +5% after it said merchants set a Black Friday record with a combined $4.1 billion in sales. Other online retailers and payment companies also rose on the news, with Etsy (ETSY) closing more than +2%, and Amazon.com (AMZN) and PayPal Holdings (PYPL) closing up +1%.
MercadoLibre (MELI) closed up more than +4% to lead gainers in the Nasdaq 100 after reporting that its gross merchandise volume in Brazil surged 80% between Nov 23-24 from last year.
Crown Castle (CCI) closed up more than +3% after activist investor Elliot Investment Management, which has acquired a more than $2 billion stake in the company, said it plans to push for changes in the company that will help boost its shares.
Roku (ROKU) closed up more than +8% after Cannonball Research upgraded the stock to buy from neutral with a price target of $116.
Packaging Corp of America (PKG) closed up more than +2% after Seaport Research said the company raised prices on signs of firming demand, which may also prompt its peers to raise prices. International Paper (IP) closed up more than +3% on the news.
Pinterest (PINS)closed up more than +1% after New Street Research initiated coverage on the stock with a buy rating and a price target of $48.
Across the markets…
December 10-year T-notes (ZNZ23) Monday closed up +19.5 ticks, and the 10-year T-note yield fell -7.8 bp to 4.389%. Dec T-note prices Monday morning recovered from a 1-week low and moved higher, and the 10-year T-note yield fell back from a 1-week high of 4.512%. Monday’s U.S. economic news was bullish for T-notes after new home sales for October, and the Nov Dallas Fed manufacturing outlook fell more than expected. Also, a decline in inflation expectations supported T-notes after Monday's 10-year breakeven inflation rate tumbled to a 4-1/4 month low of 2.219%.
T-notes maintained their gains Monday despite weak demand for the Treasury’s 2-year and 5-year T-note auctions. The $54 billion auction of 2-year T-notes had a bid-to-cover ratio of 2.54, below the 10-auction average of 2.75, and the $55 billion auction of 5-year T-notes had a bid-to-cover ratio of 2.46, weaker than the 10-auction average of 2.53.
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.
