What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +1.53%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.49%.
Stock indexes this morning are moderately higher, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all posting 2-week highs. Optimism that the Fed is done with its interest rate hikes is weighing on bond yields and supporting stocks. Wednesday’s comments from Fed Chair Powell suggested the Fed might be done raising rates when he said, "Given how far we have come, along with the uncertainties and risks we face, the FOMC is proceeding carefully." Stocks also rose on this morning’s news that showed Q3 nonfarm productivity and weekly jobless claims rose more than expected, dovish factors for Fed policy.
Better-than-expected corporate earnings results also support stocks, with Teleflex and Tyler Technologies up more than +8% after reporting Q3 adjusted EPS above consensus. Also, Starbucks is up more than +10% after reporting Q4 comparable sales above the consensus. Qualcomm is up more than +4% after reporting Q4 adjusted revenue above consensus.
On the negative side, Aptiv Plc is down more than -13% after forecasting full-year net sales well below the consensus. Also, Dentsply Sirona and BorgWarner are down more than -10% after reporting weaker-than-expected Q3 net sales. Moderna is down more than -7% after reporting an unexpected Q3 loss after including a $3.1 billion charge for resizing and tax allowances.
U.S. weekly initial unemployment claims rose +5,000 to 217,000, showing a slightly weaker labor market than expectations of no change at 210,000. Also, weekly continuing claims rose +35,000 to 1.818 million, showing a weaker labor market than expectations of 1.800 million.
U.S. Q3 nonfarm productivity rose +4.7%, stronger than expectations of +4.3% and the most in 3 years. Also, Q3 unit labor costs unexpectedly fell -0.8%, weaker than expectations of +0.3%, which was a positive inflation development.
U.S. Sep factory orders rose +2.8% m/m, stronger than expectations of +2.3% m/m and the biggest increase in 2-3/4 years.
The markets are discounting a 19% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 27% 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 bond yields are lower. The 10-year T-note yield dropped to a 2-1/2 week low of 4.624% and is down -9.4 bp at 4.640%. The 10-year German bund yield fell to a 1-1/2 month low of 2.667% and is down -6.9 bp at 2.695%. The 10-year UK gilt fell to a 3-week low of 4.319% and is down -15.2 bp at 4.347%.
The Bank of England (BOE) today voted 6-3 to keep its key interest rate unchanged at 5.25% and said a "restrictive" policy is likely needed for an extended period to curb inflation. BOE Governor Baily said policymakers are watching to see if more rate increases are needed, and it's "much too early" to be thinking about rate cuts.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +2.23%. China’s Shanghai Composite Index today closed down -0.45%. Japan’s Nikkei 225 today closed up +1.10%.
Today’s stock movers…
Teleflex (TFX) is up more than +11% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS continuing operations of $3.64, well above the consensus of $3.28, and forecasting full-year adjusted EPS continuing operations of $13.30-$13.50, stronger than the consensus of $13.26.
Tyler Technologies (TYL) is up more than +8% after reporting Q3 adjusted EPS of $2.14, better than the consensus of $1.98.
Starbucks (SBUX) is up more than +10% to lead gainers in the Nasdaq 100 after reporting Q4 comparable sales rose +8.00%, stronger than the consensus of +6.31%.
Epam Systems (EPAM) is up more than +9% after raising its full-year adjusted EPS forecast to $10.31-$10.39 from a prior forecast of $9.90-$10.10.
Howmet Aerospace (HWM) is up more than +8% after reporting Q3 revenue of $1.66 billion, above the consensus of $1.60 billion, and raising its full-year revenue forecast to $6.53 billion-$6.56 billion from a prior forecast of $6.40 billion-$6.47 billion.
Clorox (CLX) is up more than +7% after reporting Q1 net sales of $1.39 billion, above the consensus of $1.30 billion.
Trade Desk (TTD) is up more than +6% after New Street Research upgraded the stock to neutral from sell.
Qualcomm (QCOM) is up more than +4% after reporting Q4 adjusted revenue of $8.67 billion, stronger than the consensus of $8.51 billion.
Walgreens Boots Alliance (WBA) is up more than +3% to lead gainers in the Dow Jones Industrials after announcing that Neal Sample, former CEO of Express Scripts, will be the company’s new Executive Vice President and CIO effective immediately.
Aptiv Plc (APTV) is down more than -13% to lead losers in the S&P 500 after forecasting full-year net sales of $19.95 billion-$20.25 billion, the midpoint below the consensus of $20.16 billion.
Dentsply Sirona (XRAY) is down more than -12% after reporting Q3 net sales of $947 million, weaker than the consensus of $975.3 million, and cutting its full-year net sales forecast to $3.90 billion-$3.94 billion from a previous estimate of $3.98 billion-$4.02 billion.
BorgWarner (BWA) is down more than -10% after reporting Q3 net sales of $3.62 billion, weaker than the consensus of $3.74 billion, and forecasting full-year adjusted operating margin continuing operations of 9.4% to 9.6%, below the consensus of 9.79%.
Moderna (MRNA) is down more than -7% to lead losers in the Nasdaq 100 after reporting a Q3 loss per share of -$9.53 after including a $3.1 billion charge for resizing and tax allowances.
Qorvo Inc (QRVO) is down more than -6% after forecasting Q3 revenue of $975 million-$1.03 billion, the midpoint below the consensus of $992.4 million.
Ansys Inc (ANSS) is down more than -5% after reporting Q3 adjusted revenue of $458.8 million, below the consensus of $466.3 million, and cutting its full-year adjusted revenue estimate to $2.23 billion-$2.28 billion from a previous estimate of $2.26 billion-$2.33 billion.
Mariott International (MAR) is down more than -3% after forecasting Q4 adjusted Ebitda of $1.12 billion-$1.15 billion, weaker than the consensus of $1.17 billion.
Airbnb (ABNB) is down more than -2% after forecasting Q4 revenue of $2.13 billion-$2.17 billion, weaker than the consensus of $2.18 billion.
Across the markets…
December 10-year T-notes (ZNZ23) are up +26 ticks, and the 10-year T-note yield is down -9.4 bp at 4.640%. Dec T-notes climbed to a 2-1/2 week high today, and the 10-year T-note yield dropped to a 2-1/2 week low of 4.624%. T-notes have carryover support from Wednesday after Fed Chair Powell said the FOMC would “proceed carefully” on future policy moves, bolstering speculation the Fed might be done tightening for this cycle. Today’s U.S. economic news was also bullish for T-notes after weekly jobless claims and Q3 nonfarm productivity rose more than expected.
The dollar index (DXY00) today is down -0.92% and fell to a 1-week low. The dollar is under pressure today after Wednesday’s post-FOMC meeting comments from Fed Chair Powell bolstered speculation the Fed is done with its rate hiking cycle. Losses in the dollar accelerated on this morning’s U.S. economic reports that showed weekly initial unemployment claims and Q3 nonfarm productivity rose more than expected, dovish factors for Fed policy.
EUR/USD (^EURUSD) today is up +0.70%. Weakness in the dollar today is supportive of the euro. EUR/USD also found support after the Eurozone Oct S&P manufacturing PMI was revised upward. Dovish comments from ECB Governing Council member Knot limited gains in the euro when he favors pausing ECB rate hikes.
The Eurozone Oct S&P manufacturing PMI was revised upward by +0.1 to 43.1 from the previously reported 43.0.
German Oct unemployment rose +30,000, above expectations of +14,000 and a sign of a weaker labor market. The Oct unemployment rate rose +0.1 to 5.8%, right on expectations and the highest in 2-1/4 years.
Comments from ECB Governing Council member Knot suggest he favors pausing ECB rate hikes when he said, "I see the current level of our policy rate as a good cruising altitude where they can remain for some time."
USD/JPY (^USDJPY) today is down -0.42%. The yen today is moving higher for a second day as a sharp decline in T-note yields boosts the yen. The yen also rose today after Prime Minister Kishida announced a larger-than-expected 17 trillion yen stimulus package that aims to boost economic growth.
A Reuters report today supported the yen as it said BOJ Governor Ueda plans to gradually exit the BOJ’s ultra-easy monetary policy by sometime next year.
December gold (GCZ3) today is up +4.5 (+0.23%), and Dec silver (SIZ23) is up +0.170 (+0.75%). Precious metals prices today are moderately higher. Today’s decline in the dollar index to a 1-week low supports metals prices. Also, today’s drop in global bond yields is bullish for precious metals. Metals also found support on Wednesday’s comments from Fed Chair Powell that bolstered speculation the Fed may be finished with its rate hiking cycle. Silver prices found support on today’s stronger-than-expected U.S. Sep factory orders report, a positive sign for industrial metals demand. Gains in metals were limited as today’s rally in stocks curbed the safe-haven demand for precious 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.
