What you need to know…
The S&P 500 Index ($SPX) (SPY) Monday closed up +0.39%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.85%.
Stocks on Monday posted moderate gains, with the S&P 500 climbing to a 20-month high and the Dow Jones Industrials and Nasdaq 100 climbing to 1-3/4 year highs. Stocks found support Monday on expectations that U.S. consumer prices will continue to ease. Tuesday’s U.S. Nov CPI report is expected to ease to +3.1% y/y from +3.2% y/y in Oct, while Nov CPI ex-food and energy is expected to remain unchanged at +4.0% y/y. Stocks extended their gains Monday afternoon after bond yields fell back from early highs on strong demand for the Treasury’s $37 billion auction of 10-year T-notes.
The markets will look to the results of this week’s central bank meetings from the Fed, ECB, and BOE to see if policymakers support pausing their interest rate hike campaigns and when they may begin to pivot to easier policies.
Strength in chip stocks Monday boosted the technology sector and the overall market after Bloomberg Intelligence said that with a bottom confirmed across most end markets and secular tailwinds from generative AI, 2024 is poised to be a year of robust fundamental growth for chip stocks.
M&A activity supported stocks after Occidental Petroleum agreed to acquire CrownRock LP in a cash-and-stock deal valued at about $12 billion. Also, Macy’s reportedly received a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
Also, on the bullish side, Cigna closed up more than +16% after it ended talks on acquiring Humana, and it said it would boost its stock buyback program by an additional $10 billion. Also, Macy’s closed up more than +19% after receiving a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management. In addition, Broadcom, Snap, and Universal Health Services closed up more than +4% after being upgraded.
On the bearish side for stocks, Paramount Global closed down more than -3% after Loop Capital Markets downgraded the stock to sell from hold. Also, Eli Lilly closed down more than -2% after a new study showed that patients who stopped taking the firm’s obesity drug Zepbound regained, within a year, half of the weight they had originally lost. In addition, JD.com closed down more than -3% after the Nasdaq 100 announced the stock would be removed from the index before the market opens on Monday, December 18.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting 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 44% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are fully discounting (107%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields on Monday are mixed. The 10-year T-note yield rose +0.4 bp t0 4.239%. The 10-year German bund yield fell -0.6 bp t0 2.270%. The 10-year UK gilt yield rose +3.6 bp to 4.078%.
China Nov CPI fell -0.5% y/y, weaker than expectations of -0.2% y/y and the biggest decline in 3 years. Also, China Nov PPI fell -3.0% y/y, weaker than expectations of -2.8% y/y.
According to reports, BOJ officials see little need to rush into scrapping its negative interest rate policy as they have yet to see enough evidence of wage growth that would support sustainable inflation.
Overseas stock markets on Monday settled higher. The Euro Stoxx 50 closed up +0.37%. China’s Shanghai Composite Index closed up +0.74%. Japan’s Nikkei Stock Index closed up +1.50%.
Today’s stock movers…
Cigna (CI) closed up more than +16% to lead gainers in the S&P 500 after it ended talks on acquiring Humana and said it would boost its stock buyback program by an additional $10 billion.
Broadcom (AVGO) closed up +9% to lead gainers in the Nasdaq 100 after Citigroup restarted coverage of the stock with a buy rating and a price target of $1,100.
Semiconductor stocks rallied Monday after Bloomberg Intelligence said that with a bottom confirmed across most end markets and secular tailwinds from generative AI, 2024 is poised to be a year of robust fundamental growth for chip stocks. As a result, Globalfoundries (GFS) and Applied Materials (AMAT) closed up more than +5%. Also, KLA Corp (KLAC),Lam Research (LRCX), ON Semiconductor Corp (ON), and Advanced Micro Devices (AMD) closed up more than +4%. In addition, Intel (INTC) closed up more than +4% to lead gainers in the Dow Jones Industrials. Finally, Micron Technology (MU), Marvell Technology (MRVL), and Microchip Technology (MCHP) closed up more than +3%.
Macy’s (M) closed up more than +19% after receiving a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
Incyte (INCY) closed up more than +4% after it said a trial of its treatment for patients with refractory chronic graft-versus-host disease who had received at least two prior lines of systemic therapy met its primary endpoint.
Universal Health Services (UHS) closed up more than +4% after Goldman Sachs double-upgraded the stock to buy from sell.
Snap (SNAP) closed up more than +4% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $22.
HP Inc (HPQ) closed up more than +3% after Evercore ISI upgraded the stock to outperform from in-line with a price target of $40.
Nike (NKE) closed up more than +2% after Citigroup upgraded the stock to buy from neutral with a price target of $135.
Paramount Global (PARA) closed down more than -3% to lead losers in the S&P 500 after Loop Capital Markets downgraded the stock to sell from hold with a price target of $12.
Eli Lilly (LLY) closed down more than -2% after a new study showed that patients who stopped taking the firm’s obesity drug Zepbound regained half of the weight they’d lost a year later.
Take-Two Interactive Software (TTWO) closed down more than -2 % on signs of insider selling after an SEC filing showed CFO Goldstein sold $3.27 million of shares last Wednesday.
JD.com (JD) closed down more than -3% to lead losers in the Nasdaq 100 after the Nasdaq 100 announced the stock would be removed from the index before the market opens on Monday, December 18.
Meta Platforms (META) closed down more than -2%, and Amazon.com (AMZN), Alphabet (GOOGL), and Apple (AAPL) closed down more than -1% after Bloomberg Intelligence said companies offering digital wallets and payment apps might come under Consumer Financial Protection Bureau (CFPB) supervision, increasing compliance costs and regulatory demands.
Biomea Fusion (BMEA) closed down more than -30% after reporting underwhelming topline updates from a dosing cohort of a mid-stage trial for its drug in treating patients with type 2 diabetes.
Super Micro Computer (SMCI) closed down more than -3% after Susquehanna Financial Group downgraded the stock to negative from neutral.
Albemarle (ALB) closed down more than -1% after Morgan Stanley cut its view for the North American chemicals sector to in-line from attractive.
Across the markets…
March 10-year T-notes (ZNH24) Monday closed up +2 ticks, and the 10-year T-note yield rose +0.4 bp to 4.239%. Mar T-note prices Monday recovered from early losses and closed slightly higher after strong demand for the Treasury’s $37 billion auction of 10-yer T-notes sparked short-covering in T-note futures. The auction had a 2.53 bid-to-cover ratio, above the 10-auction average of 2.47 and a sign of solid demand.
T-notes Monday initially opened lower on supply pressures, as the Treasury auctioned $50 billion of 3-year T-notes and $37 billion of 10-year T-notes. Also, position squaring weighed on T-notes ahead of Tuesday’s U.S. consumer price report for November and the results of the Tue/Wed FOMC meeting.
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.
