What you need to know…
The S&P 500 Index ($SPX) (SPY) Monday closed down -0.54%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.99%.
Stocks on Monday settled moderately lower, with the Nasdaq 100 falling to a 3-week low. A jump in bond yields on Monday undercut technology stocks and weighed on the broader market. Bond yields moved higher on concern that the markets might be overly optimistic about the odds for the Fed to cut interest rates by Q2-2024.
The markets are awaiting reports this week on JOLTS job openings, ADP National Employment, and monthly U.S. payrolls to gauge the strength of the U.S. labor market to see if additional monetary tightening is appropriate.
On the negative side for stocks, higher bond yields undercut chip stocks and weighed on the technology sector. Also, Freeport-McMoRan closed down more than -4% as a sharp reversal in metals prices Monday weighed on mining stocks after gold fell from a record high and closed down more than -2%, and copper and silver prices fell more than -2%. In addition, Alaska Air Group closed down more than -14% after it agreed to purchase Hawaiian Holdings for $1.9 billion and after it was replaced in the S&P 500 Index.
On the positive side, Science Applications International closed up more than +13% after reporting Q3 revenue above consensus and raising its 2024 revenue forecast. Also, Hawaiian Holdings surged more than +192% after Alaska Air Group agreed to buy the company for $1.9 billion. In addition, Spotify closed up by more than +7% after saying it would reduce its total headcount by 17% across the company.
U.S. Oct factory orders fell -3.6% m/m, weaker than expectations of -3.0% m/m and the biggest decline in 3-1/2 years.
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 66% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than discounting (135%) that -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields Monday were mixed. The 10-year T-note yield rose +8.6 bp at 4.282%. The 10-year German bund yield fell to a 5-month low of 2.313% and finished down -0.8 bp at 2.354%. The 10-year UK gilt yield rose +5.3 bp to 4.194%.
ECB Governing Council member Centeno warned that labor market fallout from too much monetary tightening could be precipitous when the economy turns.
ECB Vice President Guindos said the ECB can't yet say inflation is in check as "we are seeing very big wage increases" in parts of the Eurozone."
The Eurozone Dec Sentix investor confidence index rose +1.8 to -16.8, weaker than expectations of -15.6.
German trade news was weaker than expected as Oct exports unexpectedly fell -0.2% m/m, weaker than expectations of +1.1% m/m. Also, Oct imports fell -1.2% m/m, weaker than expectations of +0.8% m/m.
Overseas stock markets on Monday settled lower. The Euro Stoxx 50 closed down -0.08%. China’s Shanghai Composite Index closed down -0.29%. Japan’s Nikkei Stock Index closed down -0.60%.
Today’s stock movers…
Alaska Air Group (ALK) closed down more than -14% to lead losers in the S&P 500 after it agreed to purchase Hawaiian Holdings for $1.9 billion and after it was replaced in the S&P 500 Index.
Freeport-McMoRan (FCX) closed down more than -4% as a sharp reversal in metals price weighed on mining stocks after gold fell from a record high and closed down more than -2%, and copper and silver prices fell -2% or more.
Higher T-note yields Monday weighed on chip stocks. Intel (INTC) closed down more than -3%. Also, Advanced Micro Devices (AMD), Applied Materials (AMAT), Globalfoundries (GFS), and Micron Technology (MU) closed down more than -2%. In addition, KLA Corp (KLAC), ON Semiconductor (ON), Marvell Technology (MRVL), Lam Research (LRCX), and Western Digital (WDC) closed down more than -1%.
Ansys Inc (ANSS) closed down more than -3% after announcing that CFO Anasenes will depart in Q2 of 2024 and that it has launched a search for a new CFO.
Nvidia (NVDA) closed down more than -2% on signs of insider selling after data from Washington Service showed that Nvidia executives sold $180 million worth of stock last month.
Lululemon Athletica (LULU) closed down more than -1% after Wells Fargo Securities downgraded the stock to equal weight from overweight and removed it from its Top Picks list.
Recently beaten-down consumer stocks rallied Monday as fund managers rotated into underperforming stocks. As a result, Bath & Body Works (BBWI) closed up more than +8% to lead gainers in the S&P 500. Also, Estee Lauder (EL) closed up more than +5%, and VF Corp (VFC) closed up more than +3%.
Norwegian Cruise Line Holdings Ltd (NCLH) closed up more than +6% after Citigroup raised its price target on the stock to $18 from $16. Other cruise line operators rallied on the news, with Carnival (CCL) and Royal Caribbean Cruises (RCL) closing up more than +3%.
3M Co (MMM) closed up more than +3% to lead gainers in the Dow Jones Industrials after Barclays upgraded the stock to equal weight from underweight.
Hawaiian Holdings (HA) closed up more than +192% after Alaska Air Group agreed to buy the company for $1.9 billion.
Science Applications International (SAIC) closed up more than +13% after reporting Q3 revenue of $1.90 billion, stronger than the consensus of $1.79 billion, and raised its 2024 revenue forecast to $7.33 billion-$7.35 billion from a previous forecast of $7.20 billion-$7.25 billion, better than the consensus of $7.23 billion.
Spotify (SPOT) closed up more than +7% after saying it would reduce its total headcount by 17% across the company.
Uber Technologies (UBER) closed up more than +2% after S&P Dow Jones Indices said the stock will replace Sealed Air Corp in the S&P 500 before trading on December 18.
General Motors (GM) closed up more than +2% after Mizuho Securities upgraded the stock to buy from neutral with a price target of $42.
Across the markets…
March 10-year T-notes (ZNH24) Monday closed down -15.5 ticks, and the 10-year T-note yield rose +8.6 bp to 4.282%. Mar T-note prices on Monday moved lower as they fell back from last Friday’s 3-month high on concern that the markets might be overly optimistic about the odds of the Fed cutting interest rates by Q2 2024. Losses in T-notes were contained after Monday’s U.S. Oct factory orders report fell more than expected. T-notes also had some positive carryover from Monday’s rally in 10-year German bunds to a 5-month high.
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.
