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 up +0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.10%.
Stocks this morning are mixed amid thin holiday-season trading. According to Bloomberg data, trading volume across U.S. exchange-traded funds was 35% lower than the 30-day average on Tuesday. Today’s economic news was weaker than expected after the Dec Richmond Fed manufacturing sentiment index unexpectedly fell to an 8-month low.
Lower global bond yields support stocks on optimism that the world’s central banks will begin cutting interest rates next year. The 10-year T-note yield today is just above last Thursday’s 5-month low, while the 10-year German bund yield tumbled to a 1-year low, and the 10-year UK gilt yield dropped to an 8-1/2 month low.
The U.S. Dec Richmond Fed manufacturing sentiment index unexpectedly fell -6 to an 8-month low of -11, weaker than expectations of an increase to -3.
The markets are discounting the chances for a -25 bp rate cut at 164% at the next FOMC meeting on Jan 30-31 and 100% for the following meeting on March 19-20.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -6.7 bp at 3.830%. The 10-year German bund yield dropped to a 1-year low of 1.899% and is down -7.6 bp at 1.903%. The 10-year UK gilt yield fell to an 8-1/2 month low of 3.444% and is down -4.6 bp at 3.458%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.07%. China’s Shanghai Composite Index closed up +0.54%. Japan’s Nikkei Stock Index closed up +1.13%.
Today’s stock movers…
Apple (AAPL) is down -0.78%, adding to Tuesday’s -0.28% loss to lead losers in the Dow Jones Industrials after the U.S. Trade Representative decided not to reverse the International Trade Commission’s decision that Apple infringed on two patents owned by Masimo and Cercacor Laboratories.
Albemarle (ALB) is down more than -1% as softer-than-expected demand has knocked China lithium carbonate prices down to a 2-1/3 year low.
Hasbro (HAS) is down more than 1% after Bloomberg Intelligence said the company’s declining toy sales and entertainment revenue are challenging its plans for operating margin improvement.
Iovance Biotherapeutics (IOVA) is down more than -20% after it said the U.S. FDA placed a clinical hold on its IOV-LUN-202 trial after a severe adverse event potentially related to the non-myeloablative lymphodepletion pre-conditioning regimen.
Tesla (TSLA) is up more than +2% after Wedbush Securities said the company’s delivery trajectory for Q4 looks strong.
Cytokinetics (CYTK) is up more than +70% after a trial of its heart drug aficamten showed a statistically significant and clinically meaningful increase in the primary efficacy endpoint.
Coherus Biosciences (CHRS) is up more than +21% after the FDA approved the company’s Udenyca Onbody, a medication administered after chemotherapy to reduce infection risks.
AstraZeneca (AZN) is up more than +1% after it acquired Gracell Biotechnologies for $1.2 billion to boost its pipeline of cancer drugs.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +8 ticks, and the 10-year T-note yield is down -6.7 bp at 3.830%. Mar T-note prices today are moving higher on carryover support from a rally in European government bonds, as 10-year German bunds rallied to a 1-year high and 10-year UK gilts climbed to an 8-1/2 month high. Also, a decline in inflation expectations is bullish for T-notes as today's 10-year breakeven inflation rate fell to a 2-week low of 2.172%. Supply pressures may limit T-notes' upside as the Treasury will auction $58 billion of 5-year T-notes and $26 billion of 2-year floating-rate notes later today as part of this week’s auction package of $181 billion in T-notes and floating-rate notes.
The dollar index (DXY00) today is down by -0.20% and fell to a 5-month low. The dollar today is under pressure from lower T-note yields. Also, expectations for the Fed to begin cutting interest rates in 2024 are weighing on the dollar.
The markets are discounting the chances for a -25 bp rate cut at 14% at the next FOMC meeting on Jan 30-31 and 98% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is up +0.37% and posted a 5-month high. The weakness in the dollar today is bullish for the euro. Speculation that the Fed cuts interest rates before the ECB does is weighing on the dollar to benefit the euro. Gains in the euro are limited after the 10-year German bund yield fell to a 1-year low, weakening the euro’s interest rate differentials.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 4% for its next meeting on Jan 25 and at 64% for the following meeting on March 7.
USD/JPY (^USDJPY) is up +0.12%. Today, the yen is under pressure from the dovish summary of the December 18-19 BOJ meeting that showed several BOJ members indicated that they see no rush in ending the BOJ’s negative rate policy. Also, today’s news that showed a decline in Japan housing starts to a 7-month low is negative for the yen. Lower T-note yields today are limiting the downside in the yen.
Japan Nov housing starts fell -8.6% y/y to a 7-month low of 775,000.
February gold (GCG4) today is up +11.7 (+0.57%), and Mar silver (SIH24) is up +0.094 (+0.39%). Gold and silver prices this morning are moderately high, with gold climbing to a 3-week high. Today’s decline in the dollar index to a 5-month low is bullish for metals. Also, a slump in global bond yields today supports precious metals. Strength in equity markets today is reducing the safe-haven demand for precious metals. Also, gains in silver are limited due to today’s economic news that showed a fall in the U.S. Dec Richmond Fed manufacturing sentiment index to an 8-month low and a decline in Japan Nov housing starts to a 7-month low, signaling weakness 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.
