What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.69%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.81%.
Stocks this morning recovered from early losses and are moderately higher. Optimism that the Federal Reserve can pull off a soft landing for the U.S. economy is lifting stocks today. A reversal in T-note yields to lower on the day also sparked gains in recently beaten-down tech stocks. T-note yields turned lower after today’s news showed activity in the U.S. service sector slowed more than expected last month.
Stocks this morning initially moved lower after the stronger-than-expected U.S. Dec payrolls report pushed bond yields higher and dampened expectations that the Fed will cut interest rates anytime soon.
U.S. Dec nonfarm payrolls rose +216,000, stronger than expectations of +175,000. Also, the Dec unemployment rate was unchanged at 3.7%, stronger than expectations of an increase to 3.8%.
U.S. Dec average hourly earnings rose +0.4% m/m and +4.1% y/y, stronger than expectations of +0.3% m/m and +3.9% y/y.
The U.S. Dec ISM services index fell -2.1 to a 7-month low of 50.6, weaker than expectations of 52.5.
U.S. Nov factory orders rose +2.6% m/m, stronger than expectations of +2.4% m/m and the biggest increase in 2-3/4 years.
U.S. stocks are also being weighed down by negative carryover from a fall in European stocks as the Euro Stoxx 50 dropped to a 1-month low today as European government bond yields climbed to 3-week highs after Eurozone Dec CPI accelerated from Nov, reducing the chances of the ECB easing monetary policy.
The markets are discounting the chances for a -25 bp rate cut at 7% at the next FOMC meeting on Jan 30-31 and 80% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are mixed. The 10-year T-note yield fell back from a 3-week high of 4.097% and is down -3.1 bp at 3.968%. The 10-year German bund yield climbed to a 3-week high of 2.217% and is up +0.7 bp at 2.131%. The 10-year UK gilt yield rose to a 3-week high of 3.852% and is up +1.8 bp at 3.745%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.02%. China’s Shanghai Composite Index closed down -0.85%. Japan’s Nikkei Stock Index closed up +0.27%.
Today’s stock movers…
Constellation Brands (STZ) is up more than +4% after reporting Q3 comparable EPS of $3.19, above the consensus of $3.03, and raised its full-year operating cash flow estimate to $2.6 billion-$2.8 billion from a previous estimate of $2.4 billion-$2.6 billion.
Carnival (CCL) rose more than +3% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $22.
Regional bank stocks are moving higher after T-yields gave up an early advance and turned lower. As a result, Citizens Financial Group (CFG), Comerica (CMA), KeyCorp (KEY), Huntington Bancshares (HBAN), Fifth Third Bank (FITB), and Synchrony Financial (SYF) are up more than +3%. Also, Zions Bancorp (ZION), US Bancorp (USB), Regions Financial (RF), and Northern Trust (NTRS) are up more than +2%.
Airline stocks are climbing on optimism that record-high holiday travel demand will continue this year. United Airlines Holdings (UAL), Southwest Airlines (LUV), Delta Air Lines (DAL), and American Airlines Group (AAL) are up more than +2%.
Recently beaten-down chip stocks are rebounding today as a drop in T-note yields sparked short-covering in the stocks. Marvell Technology (MRVL) is up more than +4%. Also, Nvidia (NVDA) and Advanced Micro Devices (AMD) are up more than +2%. In addition, Intel (INTC) is up more than +1% to lead gains in the Dow Jones Industrials.
Elanco Animal Health (ELAN) is up more than +6% after Stifel upgraded the stock to buy from hold with a price target of $20.
Dun & Bradstreet (DNB) is up more than +4% after Raymond James upgraded the stock to strong buy from outperform.
Monday.com Ltd (MNDY) is up more than +3% after Jeffries upgraded the stock to buy from hold with a price target of $230.
Beyond Inc (BYON) is up more than +1% after Needham & Co upgraded the stock to buy from hold with a price target of $40.
Managed healthcare stocks are under pressure today. Humana (HUM) is down more than -2% to lead losers in the S&P 500. Also, UnitedHealth Group (UNH) is down more than -1% to lead losers in the Dow Jones Industrials. In addition, Elevance Health (ELV) is down more than -1%.
MSCI Inc (MSCI) fell more than -1% in pre-market trading after Raymond James downgraded the stock to market perform from outperform.
Huntington Ingalls Industries (HII) is down more than -1% after Barclays downgraded the stock to equal weight from overweight.
McDonald’s (MCD) is down nearly -1% after Oppenheimer downgraded the stock to perform from outperform.
Agilon Health (AGL) is down more than -35% after cutting its full-year adjusted Ebitda estimate to a loss of -$55 million to -$69 million from a previous estimate of a profit of $6 million-$18 million.
Palantir Technologies (PLTR) is down more than -1% after Jeffries downgraded the stock to underperform from hold with a price target of $13.
Axon Enterprises (AXON) is down -0.51% on signs of insider selling after an SEC filing showed company president Isner sold $8.91 million of shares on Tuesday.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +6 ticks, and the 10-year T-note yield is down -3.1 bp at 3.968%. Mar T-note prices today recovered from a 3-week low and moved higher, and the 10-year T-note yield fell back from a 3-week high of 4.097%. T-note prices reversed early losses and moved higher after the U.S. Dec ISM services index fell more than expected to a 7-month low.
T-notes this morning initially moved lower on negative carryover from higher European government bond yields after the 10-year German bund yield and the 10-year UK gilt yield rose to 3-week highs. T-notes dropped to their lows on today’s stronger-than-expected U.S. Dec payrolls report, which dampened expectations of Fed rate cuts.
The dollar index (DXY00) today is down -0.29%. The dollar today retreated from a 3-week high and turned lower after the weaker-than-expected U.S. Dec ISM services report knocked bond yields lower. Also, a recovery in stock today curbed liquidity demand for the dollar. The dollar initially moved higher on today’s better-than-expected U.S. Dec payrolls report.
The markets are discounting the chances for a -25 bp rate cut at 7% at the next FOMC meeting on Jan 30-31 and 79% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is up by +0.37%. The euro today recovered from a 3-week low and moved higher after the dollar relinquished early gains and turned lower. EUR/USD also garnered support after today’s Eurozone Dec CPI report showed prices accelerated from November, reducing expectations for the ECB to cut interest rates.
Eurozone Dec CPI rose +2.9% y/y from +2.4% y/y in Nov, right on expectations. Dec core CPI eased to +3.4% y/y from +3.6% y/y in Nov, right on expectations and the smallest pace of increase in 21 months.
German Nov retail sales fell -2.5% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 19 months.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 4% for its next meeting on January 25 and 50% for the following meeting on March 7.
USD/JPY (^USDJPY) is down by -0.44%. The yen today recovered from a 3-week low against the dollar and moved higher. A reversal in T-note yields today boosted the yen after T-note yields gave up early gains and turned lower. The yen also found support on today’s news that showed the Japan Dec consumer confidence index more than expected to a 2-year high.
The Japan Dec consumer confidence index rose +1.1 to a 2-year high of 37.2, stronger than expectations of 36.5.
The Japan Dec Jibun Bank services PMI was revised downward by -0.5 to 51.5 from the initially reported 52.0.
February gold (GCG4) today is up +17.0 (+0.83%), and Mar silver (SIH24) is up +0.398 (+1.72%). Gold and silver prices this morning recovered from early losses and turned higher, with gold rebounding from a 2-1/2 week low. A reversal in the dollar today sparked short covering in metals after the dollar index fell back from a 3-week high and moved lower. Also, a reversal in T-note yields was bullish for precious metals after T-note yields gave up an early advance and moved lower. A supportive factor for silver was the jump in U.S. Nov factory orders by the most in 2-3/4 years, a sign of strong industrial metals demand.
Precious metals today initially moved lower after a stronger-than-expected U.S. Dec payrolls report that dampened expectations for the Fed to cut interest rates. Strength in stocks today has also curbed safe-haven demand for precious 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.
