What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.46%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.13%.
Stocks this morning are mixed, with the Nasdaq 100 falling to a 3-week low. Stock indexes recovered from early losses and are mixed on some positive corporate news. Lamb Weston Holdings is up more than +2% after reporting Q2 adjusted EPS above consensus and raising its full-year adjusted EPS estimate. Also, Callon Petroleum is up more than +4% after APA Corp acquired the company for $4.5 billion. In addition, Allstate, Home Depot, Dollar General, and Merck & Co are up more than +1% after being upgraded.
Interest rate-sensitive technology stocks are under pressure today after better-than-expected U.S. reports on the labor market pushed bond yields higher and reduced expectations for Fed interest rate cuts.
U.S. weekly initial unemployment claims fell -18,000 to a 2-1/2 month low of 202,000, showing a stronger labor market than expectations of 216,000.
The U.S. Dec ADP employment change rose +164,000, showing a stronger labor market than expectations of +125,000 and the biggest increase in 4 months.
The markets are discounting the chances for a -25 bp rate cut at 7% at the next FOMC meeting on Jan 30-31 and 70% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +6.6 bp at 3.982%. The 10-year German bund yield rose to a 2-1/2 week high of 2.142% and is up +9.3 bp at 2.117%. The 10-year UK gilt yield climbed to a 2-1/2 week high of 3.738% and is up +7.4 bp at 3.713%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.40%. China’s Shanghai Composite Index closed down -0.43%. Japan’s Nikkei Stock Index closed down -0.53%.
Today’s stock movers…
Allstate (ALL) is up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $171.
Lamb Weston Holdings (LW) is up more than +2% after reporting Q2 adjusted EPS of $1.45, above the consensus of $1.41, and raising its full-year adjusted EPS estimate to $5.70-$6.15 from a previous forecast of $5.50-$56.95.
Cruise line operators are gaining today after losing more than -10% over the past two sessions. Norwegian Cruise Line Holdings (NCLH) is up more than +4%, Carnival (CCL) is up more than +3%, and Royal Caribbean Cruises Ltd (RCL) is up more than +2%.
Merck & Co (MRK) is up more than +1% to lead gainers in the Dow Joines Industrials after Cowen upgraded the stock to outperform from market perform with a price target of $135.
Dollar General (DG) is up more than +2% after Barclays upgraded the stock to overweight equal weight with a price target of $154.
Callon Petroleum (CPE) is up more than +4% after APA Corp acquired the company for $4.5 billion.
Home Depot (HD) is up more than +1% after Barclays upgraded the stock to overweight equal weight with a price target of $372.
Comerica (CMA) is up more than +1% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $70.50.
Walgreens Boots Alliance (WBA) is down more than -9% to lead losers in the S&P 500, Dow Jones Industrials, and Nasdaq 100 after cutting its quarterly dividend to 25 cents per share from 48 cents per share.
APA Corp (APA) is down more than -6% after acquiring Callon Petroleum for $4.5 billion, including debt.
Conagra Brands (CAG) is down more than -3% after reporting Q2 organic net sales fell -3.40%, weaker than the consensus of -2.26%, and cut its full-year organic net sales forecast to down -1% to -2% from a previous forecast of up +0.09%.
Mobileye Global (MBLY) is down more than -24% after forecasting 2024 revenue of $1.83 billion-$1.96 billion, well below the consensus of $2.58 billion.
Apple (AAPL) is down more than -1% after Piper Sandler downgraded the stock to neutral from overweight.
Ilumina (ILMN) is down more than -1% after Cowen downgraded the stock to market perform from outperform.
Mattel (MAT) is down more than -1% after Roth MKM downgraded the stock to neutral from buy.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -16 ticks, and the 10-year T-note yield is up +6.9 bp at 3.986%. Mar T-note prices today are moderately lower and just above Wednesday’s 3-week low. T-notes are under pressure on negative carryover from higher European government bond yields after the 10-year German bund yield and the 10-year UK gilt yield rose to 2-week highs. Also, today’s stronger-than-expected U.S. reports on Dec ADP employment and weekly jobless claims show strength in the labor market that is hawkish for Fed policy. In addition, an increase in inflation expectations is bearish for T-notes as the 10-year inflation breakeven rate today rose to a 3-week high of 2.241%.
The dollar index (DXY00) today is little changed as it consolidates just below Wednesday’s 3-week high. Higher T-note yields today are bullish for the dollar. Also, today’s better-than-expected U.S. reports on Dec ADP employment and weekly jobless claims show strength in the labor market that is hawkish for Fed policy and supportive of the dollar.
The markets are discounting the chances for a -25 bp rate cut at 7% at the next FOMC meeting on Jan 30-31 and 70% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is up by +0.16%. Today, the euro is moving higher as an upward revision to the Eurozone S&P Dec composite PMI boosted European government bond yields and dampened speculation for ECB interest rate cuts.
The Eurozone S&P Dec composite PMI was revised upward by +0.6 to 47.6 from the previously reported 47.0.
The German Dec CPI (EU harmonized) rose +0.2% m/m and +3.8% y/y, weaker than expectations of +0.3% m/m and +3.9% y/y.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 5% for its next meeting on January 25 and 52% for the following meeting on March 7.
USD/JPY (^USDJPY) is up by +1.03%. The yen today extended this week’s losses to a 2-week low against the dollar. Higher T-note yields today are bearish for the yen. Also, speculation that the economic impact of the Noto Peninsula earthquake will delay the ending of negative interest rates by the BOJ is weighing on the yen.
February gold (GCG4) today is up +2.6 (+0.13%), and Mar silver (SIH24) is down -0.227 (-0.98%). Gold and silver prices this morning are mixed, with silver falling to a 3-week low. Weakness in stocks today has boosted some safe-haven demand for precious metals. Also, an increase in inflation expectations has boosted demand for gold as an inflation hedge after the 10-year inflation breakeven rate today rose to a 3-week high. In addition, heightened geopolitical tensions in the Middle East have boosted safe-haven demand for precious metals. Higher global bond yields today are limiting gains in gold. Also, silver prices are weighed down today on negative carryover from a slide in copper prices to a 3-week low.
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.
