What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.17%.
Stocks recovered early losses this morning and are modestly higher, with the S&P 500 climbing to a 23-month high and the Nasdaq 100 posting a new all-time high.
Stocks found support today on the better-than-expected U.S. existing home sales and consumer confidence reports, bolstering the outlook for a soft landing in the U.S. economy.
Another positive for equities is a decline in global government bond yields on signs inflation is easing after the UK CPI eased to a 2-year low. Slowing inflation figures have bolstered speculation that global central banks could begin cutting interest rates early next year.
Stocks initially opened lower this morning on economic concerns due to weak profit results from FedEx, seen as a bellwether for the economic outlook. FedEx is down more than -10% after reporting Q2 EPS below consensus.
U.S. weekly MBA mortgage applications fell -1.5% for the week ended Dec 15. The home purchase sub-index fell -0.6%, and the refinancing sub-index fell -1.8%. The average 30-year fixed rate mortgage fell -24 bp to 6.83%, a 6-month low.
U.S. Nov existing home sales unexpectedly rose +0.8% m/m to 3.82 million, stronger than expectations of a decline to 3.78 million.
The Conference Board U.S. Dec consumer confidence index rose +9.7 to a 5-month high of 110.7, stronger than expectations of 104.5.
The markets are discounting the chances for a -25 bp rate cut at 12% at the next FOMC meeting on Jan 30-31 and 87% at the following meeting on March 19-20.
U.S. and European government bond yields today are lower. The 10-year T-note yield fell to a 4-3/4 month low of 3.870% and is down -2.1 bp at 3.911%. The 10-year German bund yield dropped to a 9-month low of 1.954% and is down -3.7 bp at 1.979%. The 10-year UK gilt yield fell to an 8-1/4 month low of 3.520% and is down -10.6 bp at 3.547%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.04%. China’s Shanghai Composite Index closed down -1.03%. Japan’s Nikkei Stock Index closed up +1.37%.
Today’s stock movers…
Alphabet (GOOGL) is up more than +3% to lead gainers in the S&P 500 and Nasdaq 100 after the Information news service reported that Google plans to restructure part of its 30,000-person ad-sales unit as automation booms.
Trucking stocks are climbing today after Bloomberg Intelligence said its recent channel checks point to a peak freight demand season that may surpass current low expectations. As a result, SAIA Inc (SAIA) is up more than +4%, and Old Dominion Freight Line (ODFL) is up more than +3%. Also, JB Hunt Transport Services (JBHT) is up more than +2%, and Marten Transport (MRTN) and Landstar System (LSTR) are up more than +1%.
Energy stocks and energy service providers are moving higher, with WTI crude oil posting a 2-week high. Baker Hughes (BKR), Devon Energy (DVN), Diamondback Energy (FANG), Phillips 66 (PSX), Haliburton (HAL), ConocoPhillips (COP), Marathon Petroleum (MPC), and Valero Energy (VLO) are up more than +1%.
Toro Co (TTC) is up more than +8% after reporting Q4 adjusted EPS of 71 cents, better than the consensus of 56 cents.
WW International (WW) is up more than +6% after Guggenheim Securities initiated coverage on the stock with a buy rating and a price target of $14.
Discover Financial Services (DFS) is up more than +1% after Citigroup upgraded the stock to buy from neutral with a price target of $133.
Expedia Group (EXPE) is up more than +1% after Citigroup raised its price target on the stock to $155 from $115.
FedEx (FDX) is down more than -10% to lead losers in the S&P 500 after reporting Q2 adjusted EPS of $3.99, weaker than the consensus of $4.19.
AON Plc (AON) is down more than -5% after agreeing to acquire NFP Corp for about $13.4 billion in cash and stock.
General Mills (GIS) is down more than -3% after cutting its full-year organic net sales forecast to -1% to 0% from a previous estimate of +3% to +4%. Other food makers are also falling on the news, with Campbell Soup (CPB) and Conagra Brands (CAG) down more than 2%, and JM Smucker (SJM) and Kraft Heinz (KHC) down more than -1%.
Zoom Video Communications (ZM) is down more than -2% after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $70.
DocuSign (DOCU) is down more than -2% after Wells Fargo Securities downgraded the stock to underweight from equal weight.
Lowe’s (LOW) is down more than -1% after Stifel downgraded the stock to hold from buy.
Costco Wholesale (COST) is down more than -1% in pre-market trading after Northcoast Research downgraded the stock to neutral from buy.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +4 ticks, and the 10-year T-note yield is down -2.1 bp at 3.911%. Mar T-note prices this morning rallied to a 5-month nearest-futures high, and the 10-year T-note yield fell to a 4-3/4 month low of 3.870%. T-notes have carryover support from a rally in European government bonds after better-than-expected German Nov PPI and UK Nov CPI reports knocked the 10-year German bund yield down to a 9-month low and the 10-year UK gilt yield to an 8-1/4 month low. T-notes fell back from their best levels after Nov existing home sales unexpectedly rose, and after the Conference Board U.S. Dec consumer confidence index rose more than expected to a 5-month high.
The dollar index (DXY00) today is up by +0.06%. The dollar is seeing support from today’s weaker-than-expected German and UK inflation reports, which knocked European government bond yields lower and weakened the euro relative to the dollar. Gains in the dollar accelerated on the stronger-than-expected U.S. existing home sales and consumer confidence reports.
EUR/USD (^EURUSD) today is down by -0.17%. The euro is under pressure today on signs of easing price pressures in Europe that are dovish for ECB policy after the German Nov PPI fell more than expected and UK Nov CPI rose less than expected. Losses in the euro were limited after the Eurozone Dec consumer confidence index rose more than expected to a 5-month high.
Swaps tied to ECB meeting dates have now priced in a 48% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting.
USD/JPY (^USDJPY) today is down by -0.22%. The yen today is moving higher against the dollar on a slump in T-note yields. The yen is also moving higher after Barclay said a passive month-end rebalancing shows “strong” signs of dollar selling against all the dollar’s major peers, including the yen. Strength in the yen is limited after the 10-yer JGB bond yield fell to a 4-1/2 month low today at 0.555%, weakening the yen’s interest rate differentials.
February gold (GCG4) this morning is down -5.1 (-0.25%), and Mar silver (SIH24) is up +0.3048 (+1.25%). Gold and silver prices this morning are mixed, with silver climbing to a 2-week high. A stronger dollar today is bearish for metals prices. However, lower global bond yields today are limiting losses in gold. Also, weaker-than-expected German and UK inflation reports are dovish for central bank policies and bullish for gold as a store of value. Silver prices are finding support today from an unexpected increase in U.S. Nov existing home sales and an increase in Eurozone Nov new car registrations for the sixteenth consecutive month, signs of strength 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.
