The S&P 500 Index ($SPX) (SPY) Friday closed down -1.32%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.40%.
Stocks retreated Friday, with the S&P 500 and Nasdaq 100 falling to 1-1/2 week lows and the Dow Jones Industrials falling to a 1-week low. Signs of a hawkish Fed pushed the 10-year T-note yield to a 5-1/2 month high Friday and pressured stocks. On Thursday, Fed Chair Powell signaled the Fed was in no hurry to cut interest rates. Also, Boston Fed President Collins shared that view when she said Friday that a December interest rate cut by the Fed isn't a "done deal." The hawkish Fed comments reduced the chances of a Fed rate cut next month to 58% from 82% a day ago. Stocks added to their losses as bond yields rose further after today’s US economic news showed that retail sales and the Nov Empire manufacturing survey rose more than expected, a hawkish factor for Fed policy.
Vaccine makers and pharmaceutical stocks sold off Friday after President-elect Trump tapped vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health and Human Services. Also, chip stocks were under pressure, with Applied Materials closing down more than -9% after forecasting weaker-than-expected Q1 net sales.
US Oct retail sales rose +0.4% m/m, stronger than expectations of +0.3% m/m, and Sep was revised higher to +0.8% m/m from the previously reported +0.4% m/m.
The US Nov Empire manufacturing survey of general business conditions rose +43.1 to a 2-3/4 year high of 31.2, stronger than expectations of 0.0.
The US Oct import price index ex-petroleum rose +0.2% m/m, stronger than expectations of +0.1% m/m.
US Oct manufacturing production fell -0.5% m/m, which was right on expectations.
Of the 85% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average. According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.4% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.
The markets are discounting the chances at 58% for a -25 bp rate cut at the December 17-18 FOMC meeting.
Overseas stock markets Friday settled mixed. The Euro Stoxx 50 closed down -0.80%. China's Shanghai Composite Index fell to a 1-1/2 week low and closed down -1.45%. Japan's Nikkei Stock 225 closed up +0.28%.
Interest Rates
December 10-year T-notes (ZNZ24) Friday close down -0.5 of a tick. The 10-year T-note yield fell -0.5 bp to 4.430%. Dec T-notes Friday slid to a 5-month low, and the 10-year T-note yield rose to a 5-1/2 month high of 4.501%. Carryover pressure from Thursday weighed on T-notes when Fed Chair Powell said the FOMC is in no hurry to lower interest rates. T-notes were also undercut by Friday’s comments from Boston Fed President Collins, who said a December interest rate cut by the Fed isn't a "done deal." T-notes fell to their lows on Friday’s stronger-than-expected US economic news, including Oct retail sales, Nov Empire manufacturing survey of general business conditions, and the Oct import price index ex-petroleum, hawkish factors for Fed policy.
However, Friday’s slump in equities sparked short covering in T-notes as the finished little changed. Also, a decline in inflation expectations supported T-notes after Friday's 10-year breakeven inflation rate fell to a 1-week low of 2.329%.
European government bond yields Friday were mixed. The 10-year German bund yield rose +1.4 bp to 2.356%. The 10-year UK gilt yield fell -1.1 bp to 4.471%.
The European Commission forecasts 2024 Eurozone GDP of +0.8% and inflation of +2.4% and projects inflation in the Eurozone slowing to the ECB's 2% target in Q4 of 2025.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 23% for a -50 bp rate cut at the same meeting.
US Stock Movers
Vaccine makers and pharmaceutical stocks sold off Friday after President-elect Trump tapped vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health and Human Services. Moderna (MRNA) and West Pharmaceutical Services closed down more than -6%. Also, Eli Lilly (LLY) closed down more than -5%, and Amgen (AMGN) closed down more than -4% to lead losers in the Dow Jones Industrials. In addition, Bristol-Myers Squibb (BMY), Regeneron Pharmaceuticals (REGN), Vertex Pharmaceuticals Moderna (VRTX), and BioNTech (BNTX) closed down more than -3%.
Applied Materials (AMAT) closed down more than -9% to lead losers in the S&P 500 and Nasdaq 100 and weigh on chip makers after forecasting Q1 net sales of $6.75 billion-$7.55 billion, the midpoint below the consensus of $7.25 billion. Also, Lam Research (LRCX) closed down more than -6%, and ARM Holdings Plc (ARM) closed down more than -5%. In addition, ASML Holding NV (ASML), Microchip Technology (MCHP), and KLA Corp (KLAC) closed down more than -4%. Finally, Nvidia (NVDA), GlobalFoundries (GFS), Marvell Technology (MRVL), ON Semiconductor (ON), and Broadcom (AVGO) closed down more than -3%.
Ad agency stocks tumbled Friday amid concerns that RF Kennedy Jr, who has been proposed to run the Department of Health and Human Services in the Trump administration, may curb drugmakers from advertising on TV. As a result, Omnicom Group (OMC) and Interpublic Group of Cos (IPG) closed down more than -7%. Also, Trade Desk (TTD) closed down more than -5%, and Magnite (MGNI) closed down more than -4%.
Pfizer (PFE) closed down more than -4% after Wolfe Research initiated coverage on the stock with a recommendation of underperform with a price target of $25.
Halozyme Therapeutics (HALO) closed down more than -15% after Bloomberg News reported the company submitted a $2.1 billion bid to acquire Evotec SE.
Advanced Auto Parts (AAP) closed down more than -8% after CFRA downgraded the stock to sell from hold after the company reported weaker-than-expected Q3 results.
Ulta Beauty (ULTA) closed down more than -4% after Berkshire Hathaway said it sold most of its share in the company it originally acquired in the previous quarter.
Palantir (PLTR) closed up more than +11% to lead gainers in the S&P 500 after it said its NYSE listing will end at the close of trading on November 25, with Nasdaq trading starting the next day.
Walt Disney (DIS) closed up more than +5% to lead gainers in the Dow Jones Industrials, adding to Thursday’s +6% surge after Bank of America Global Research raised its price target on the stock to $140 from $120.
Super Micro Computer (SMCI) closed up more than +3% to lead gainers in the Nasdaq 100 on short covering after the stock had fallen more than -30% over the past five sessions.
Friday’s weakness in the overall equity market sparked the buying of defensive utility companies. As a result, CenterPoint Energy (CNP), American Electric Power Co (AEP), Vistra Corp (VST), Exelon (EXC), Dominion Energy (D), and Alliant Energy (LNT) closed up more than +2%.
Alcoa (AA) closed up more than +7% after aluminum prices jumped when China canceled a tax rebate on aluminum exports.
Pool Corp (POOL) closed up nearly +1% after Berkshire Hathaway said in a regulatory filing that it acquired a 1.1% stake in the company.
Earnings Reports (11/18/2024)
AECOM (ACM), BellRing Brands Inc (BRBR), Bit Digital Inc (BTBT), Critical Metals Corp (CRML), I3 Verticals Inc (IIIV), Mondee Holdings Inc (MOND), Twist Bioscience Corp (TWST).
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