What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.23%.
Stocks this morning are posting modest losses after bond yields turned higher when today’s U.S. economic news showed Oct housing starts and building permits unexpectedly rose, a hawkish factor for Fed policy.
Stock losses are limited today on some positive corporate news. The Gap surged more than +30% after reporting Q3 adjusted EPS well above consensus. Also, Ross Stores is up more than +8% after reporting stronger-than-expected Q3 sales. In addition, Warner Music Group is up more than +1% after reporting Q4 revenue above consensus.
U.S. Oct housing starts unexpectedly rose +1.9% m/m to 1.372 million, stronger than expectations for a decline to 1.350 million. Also, Oct building permits, a proxy for future construction, unexpectedly rose +1.1% to 1.487 million, stronger than expectations of a decline to 1.450 million.
Comments today from San Francisco Fed President Daly suggest she favors maintaining the pause in Fed rate hikes when she said, "When uncertainty is high, and risk to our objectives are more balanced, we need to practice gradualism."
According to Bank of America, EPFR Global data showed global stock funds attracted $23.5 billion of inflows in the week through Nov 15, the second-biggest inflows this year.
The markets are discounting a 0% 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 +30% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 78% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields today are mixed. The 10-year T-note yield recovered from a 1-3/4 month low of 4.377% and is up +1.8 bp at 4.453%. The 10-year German bund yield dropped to a 2-1/2 month low of 2.517% and is down -0.7 bp at 2.583%. The 10-year UK gilt yield fell to a 5-3/4 month low of 4.029% and is down -5.1 bp at 4.100%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.82%. China’s Shanghai Composite Index closed up +0.11%. Japan’s Nikkei Stock Index closed up +0.48%.
Today’s stock movers…
Applied Materials (AMAT) is down more than -4% to lead losers in the S&P 500 and Nasdaq 100 after Reuters reported the company faces a U.S. criminal investigation for allegedly violating export restrictions to China.
TransDigm (TDG) is down more than -2% on signs of insider selling after an SEC filing showed Co-COO Reiss sold $2.98 million of shares on Wednesday.
Alphabet (GOOGL) is down more than -1% after the Information reported the company is delaying the release of its Gemini AI language model from this month to Q1 of next year.
Air Products & Chemicals (APD) is down more than -1% after Redburn double-downgraded the stock to sell from buy with a price target of $240.
Managed healthcare stocks are under pressure today. As a result, UnitedHealth Group (UNH) is down more than -1% to lead losers in the Dow Jones Industrials. Also, Molina Healthcare (MOH) and Humana (HUM) are down more than -1%.
Gitlab (GTLB) is down more than -3% after Barclays downgraded the stock to equal weight from overweight.
Ross Stores (ROST) are up more than +8% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 sales of $4.92 billion, stronger than the consensus of $4.84 billion.
Copart Inc (CPRT) is up more than +3% after reporting Q1 revenue of $1.02 billion, stronger than the consensus of $988 million.
Expedia Group (EXPE) is up more than +3% after Evercore ISI upgraded the stock to outperform from inline with a price target of $200.
The Gap (GPS) is up more than +30% after reporting Q3 adjusted EPS of 59 cents, well above the consensus of 19 cents.
Globant SA (GLOB) is up more than +11% after forecasting Q3 non-IFRS adjusted EPS of at least $1.60, better than the consensus of $1.58.
Tenet Healthcare Corp (THC) is up more than +9% after Novant Health bought three Tenet hospitals and affiliated operations in South Carolina.
Warner Music Group (WMG) is up more than+1% after reporting Q4 revenue of $1.59 billion, above the consensus of $1.57 billion.
Analog Devices (ADI) is up more than +1% after Mogan Stanley upgraded the stock to overweight from equal weight with a price target of $225.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are down -4 ticks, and the 10-year T-note yield is up +1.8 bp at 4.453%. Dec T-note prices gave up an early advance and fell back from a 1-3/4 month high today, and the 10-year T-note rose from a 1-3/4 month low of 4.377%. T-notes came under pressure after today’s economic news showed U.S. Oct housing starts and building permits unexpectedly increased. T-note prices today initially moved higher on positive carryover from a rally in UK gilts after UK Oct retail sales unexpectedly declined.
The dollar index (DXY00) today is down by -0.14%. The dollar today is moderately lower and remains under pressure as this week’s better-than-expected U.S. inflation news and weekly jobs data that point to a slowing labor market have bolstered speculation the Fed is down raising interest rates. The dollar recovered from its worst levels after today’s news showed that U.S Oct housing starts and Oct building permits unexpectedly rose.
EUR/USD (^EURUSD) today is up by +0.14% and just below Tuesday’s 2-1/2 month high. A weaker dollar today is supportive of the euro. Also, hawkish ECB comments today gave EUR/USD a boost after ECB Governing Council members Nagel and Holzmann voiced opposition to any easing of ECB monetary policy in the medium term.
ECB Governing Council member and Bundesbank President Nagel said borrowing costs "have to remain at a high level for a sufficient period," and an ECB rate cut anytime soon is "highly improbable."
ECB Governing Council member Holzmann said it would be "too soon" for the ECB to begin cutting interest rates in Q2 of next year, and market expectations for a rate reduction are premature.
USD/JPY (^USDJPY) today is down by -0.71%. The yen today extended Thursday’s gains and climbed to a 2-1/2 week high against the dollar. Short-covering is lifting the yen as it recovers further from Monday’s 1-year low. Gains in the yen accelerated in overnight trade after the 10-year T-note yields dropped to a 1-3/4 month low.
December gold (GCZ3) today is down -3.8 (-0.19%), and Dec silver (SIZ23) is down -0.163 (-0.68%). Precious metals prices today are moderately lower, with gold falling back from a 1-1/2 week high and silver retreating from a 2-1/2 month high. Precious metals gave up overnight gains and turned lower after T-note yields recovered from early losses and turned higher after today’s news showed U.S. Oct housing starts and building permits unexpectedly increased, hawkish factors for Fed policy. Also, hawkish comments from ECB Governing Council members Nagel and Holzmann undercut gold prices when they voiced their opposition to easing ECB monetary policy. Dollar weakness today is supportive of metals. A weaker dollar today is limiting losses in 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.
