What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.35%.
Stocks this morning are mostly lower. Higher bond yields today are weighing on the overall market. Stocks are also under pressure this morning after Moody’s Investors Service late Friday cut its outlook on the U.S. credit rating to negative from stable, citing wider budget deficits and political polarization. U.S. lawmakers have until Friday night to pass a stopgap spending bill before funding runs out and the government shuts down. Losses in the overall market are limited by expectations that U.S. consumer prices in October eased.
The markets are awaiting Tuesday’s U.S. consumer price report for October for market direction. The consensus is for Oct CPI to ease to 3.3% y/y from +3.7% y/y in Sep.
On the negative side for stocks, Illumina is down more than -4% after it said it expects to incur losses in connection with exiting a portion of its Foster City, California campus. Also, Verve Therapeutics plunged more than -44% after it said two patients experienced serious heart-related adverse effects during a trial of its gene-editing therapy. In addition, Trade Desk is down more than -2%, adding to last Friday’s -16% plunge after forecasting weaker than expected Q4 revenue.
On the positive side, Monday.com is up more than +11% after reporting Q3 adjusted EPS above consensus. Also, Boeing is up more than +3% after China said it was considering ending a freeze on its purchases of Boeing’s airliners. In addition, Dexcom and Insulet are up more than +4% after Bloomberg Intelligence said pharmacy channel sales data for October show the companies are still seeing solid sales growth for devices that treat and monitor diabetes despite competition from new obesity drugs.
The markets are discounting a 14% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 28% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European government bond yields today are mixed. The 10-year T-note yield rose to a 1-week high of 4.696% and is up +1.2 bp at 4.664%. The 10-year German bund yield is up +1.0 bp at 2.727%. The 10-year UK gilt yield is down -0.5 bp at 4.331%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.56%. China’s Shanghai Composite Index closed up +0.25%. Japan’s Nikkei Stock Index closed up +0.05%.
Today’s stock movers…
Illumina (ILMN) is down more than -3% after it said it expects to incur losses in connection with exiting a portion of its Foster City, California campus.
Warner Bros Discovery (WBD) is down more than -3% to lead losers in the Nasdaq 100 after Macquarie cut its price target on the stock to $16 from $20.
Trade Desk (TTD) is down more than -2%, adding to last Friday’s -16% plunge after forecasting Q4 revenue of $580 million, well below the consensus of $610.2 million.
Verve Therapeutics (VERV) is down more than -44% after it said two patients experienced serious heart-related adverse effects during a trial of its gene-editing therapy.
Healthpeak Properties (PEAK) is down more than -2% after Bank of America downgraded the stock to underperform from neutral.
Tower Semiconductor Ltd (TSEM) is down more than -1% after reporting Q3 revenue of $358.2 million, below the consensus of $358.8 million, and forecasting Q4 revenue of $350 million, weaker than the consensus of $359 million.
Southwest Airlines (LUV) is down more than -1% after Melius Research LLC downgraded the stock to sell from hold.
DaVita (DVA) is up more than +5% after Bloomberg Intelligence said the easing of the pandemic-driven overhang on patient census and the healthcare labor market may remain a tailwind for the company into the first half of 2024.
Boeing (BA) is up more than +3% to lead gainers in the Dow Jones Industrials after China said it was considering ending a freeze on its purchases of Boeing’s airliners.
Dexcom (DXCM) is up more than +4% to lead gainers in the Nasdaq 100, and Insulet (PODD) is also up +4% after Bloomberg Intelligence said pharmacy channel sales data for October show the companies are still seeing solid sales growth for devices that treat and monitor diabetes despite competition from new obesity drugs.
Tesla (TSLA) is up more than +2% after Guotai Junan Securities initiated coverage on the stock with a recommendation of overweight with a price target of $248
Monday.com (MNDY) is up more than +11% after reporting Q3 adjusted EPS of 64 cents, well above the consensus of 19 cents.
StoneCo (STNE) climbed more than +4% in pre-market trading after reporting 3.33 million active clients in Q3 revenue, above the consensus of 3.17 million.
CrowdStrike Holdings (CRWD) is up more than +1% after Stifel upgraded the stock to buy from hold with a price target of $225.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are down -9 ticks, and the 10-year T-note yield is up +1.2 bp at 4.664%. Dec T-notes this morning dropped to a 1-week low and the 10-year T-note yield rose to a 1-week high of 4.696%. T-notes are under pressure after Moody Investors Service late last Friday downgraded its U.S. credit-rating outlook to negative from stable. Also, position squaring and long liquidation pressures are weighing on T-notes ahead of Tuesday’s U.S. consumer price report for October.
The dollar index (DXY00) today is down by -0.12%. The dollar this morning is posting modest losses after Moody Investors Service late last Friday downgraded its U.S. credit-rating outlook. Also, expectations that Tuesday’s U.S. Oct CPI report will show an easing of inflation expectations are weighing on the dollar. Losses in the dollar are limited by higher T-note yields and weakness in stocks, which boosts liquidity demand for the dollar. Weakness in the yen is also supportive of the dollar, with the yen falling to a 1-year low against the dollar today.
EUR/USD (^EURUSD) today is up by +0.06%. The euro today is slightly higher on dollar weakness and on hawkish comments from ECB Vice President Guindos who said it is "premature" to discuss interest rate cuts. On the negative side, dovish comments from ECB Governing Council member Kazaks limited gains in EUR/USD when he said that he could favor no additional tightening from the ECB.
ECB Governing Council member Kazaks said he "could share the view that further tightening from the ECB seems to have become less necessary."
ECB Vice President Guindos said it is "premature" to discuss interest rate cuts as "we expect a temporary rebound in inflation in the coming months as the base effects from the sharp increase in energy and food prices in autumn 2022 drop out."
USD/JPY (^USDJPY) today is up by +0.21%. The yen today declined to a new 1-week low against the dollar. Dollar strength today and central bank divergence are undercutting the yen as the BOJ maintains negative interest rates and QE while other G-7 central banks are tightening monetary policy. Higher T-note yields today are also weighing on the yen.
December gold (GCZ3) today is down -1.3 (-0.07%), and Dec silver (SIZ23) is down -0.261 (-1.17%). Precious metals prices today are moderately lower, with gold dropping to a 3-1/2 week low and silver falling to a 1-month low. Higher T-note yields are negative for precious metals. Silver is also under pressure on industrial metals demand concerns after Japan Oct machine tool orders fell -20.6% y/y, the biggest decline in 4 months and the tenth consecutive month orders have declined. Losses are limited as weakness in stocks today has spurred some safe-haven demand for precious metals. Also, a weaker dollar today is supportive for metals prices.
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.
