What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.31%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.86%.
Stocks today are moderately higher, with the S&P 500 posting a 3-week high, Dow Jones Industrials posting a 1-1/2 month high and the Nasdaq 100 index climbing to a 3-1/2 week high. A decline in bond yields today is supportive of stocks. T-note yields fell on carryover support from a rally in UK gilts when the 10-year gilt yield fell to a 6-week low after BOE Chief Economist Pill hinted interest rate cuts might be on the table by the middle of next year.
Some positive corporate earnings results are also boosting the overall market, with Datadog up more than +29% after reporting better-than-expected Q3 and raising its full-year revenue forecast. Also, GlobalFoundries and Gen Digital are up more than +7% after reporting Q3 adjusted EPS above the consensus.
Negative stock factors include hawkish comments from Minneapolis Fed President Kashkari and Chicago Fed President Goolsbee that dampened hopes that the Fed was done raising interest rates. Also, global economic growth concerns are negative for stocks after China Oct exports fell more than expected. Today’s economic news showed the U.S. Sep trade deficit widened more than expected, a negative factor for GDP.
Monday evening, Minneapolis Fed President Kashkari said that while there have been three months of promising data on inflation, it isn’t enough, and "we need to let the data keep coming to us to see if we really have got the inflation genie back in the bottle."
Chicago Fed President Goolsbee said policymakers' top priority is returning inflation to its target, and they don't want to "pre-commit" decisions on interest rates.
The U.S. Sep trade deficit increased to -$61.5 billion from -$58.7 billion in Aug, wider than expectations of -$59.8 billion.
The markets are discounting a 12% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and an 18% 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 moving lower. The 10-year T-note yield is down by -6.0 bp at 4.583%. The 10-year German bund yield is down -7.4 bp at 2.665%. The 10-year UK gilt yield fell to a 6-week low of 4.268% and is down -10.4 bp at 4.273%.
China’s trade news was mixed as Oct exports fell -6.4% y/y, weaker than expectations of -3.5% y/y. However, Oct imports unexpectedly rose +3.0% y/y versus expectations of a -5.0% y/y decline and the biggest increase in 8 months.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.02%. China’s Shanghai Composite Index today closed down -0.04%. Japan’s stock market today closed down -1.34%.
Today’s stock movers…
Gen Digital (GEN) is up more than +7% to lead gainers in the S&P 500 after reporting Q3 revenue of $948 million, above the consensus of $945 million.
Datadog (DDOG) is up more than +29% to lead gainers in the Nasdaq 100 after reporting Q3 revenue of $547.5 million, better than the consensus of $523.5 million, and raising its full-year revenue forecast to $2.10 billion-$2.11 billion from a previous estimate of $2.05 billion-$2.06 billion, above the consensus of $2.06 billion.
GlobalFoundries (GFS) is up more than +7% after reporting Q3 adjusted EPS of 55 cents, stronger than the consensus of 49 cents.
Alteryx (AYX) is up more than +21% after reporting Q3 revenue of $232 million, stronger than the consensus of $210.1 million, and forecast full-year revenue of $953 million-$959 million, well above the consensus of $934.8 million.
DigitalOcean Holdings (DOCN) is up more than +11% after Goldman Sachs double-upgraded the stock to buy from underweight with a price target of $33.
NXP Semiconductors NV (NXPI) is up more than +3% after reporting Q3 adjusted EPS of $3.01, above the consensus of $2.87.
VF Corp (VFC) is up more than +3% on signs of insider buying after an SEC filing showed company director Shattock purchased $306,140 of shares last Friday.
DR Horton (DHI) is up more than +2% after reporting Q4 revenue of $10.50 billion, stronger than the consensus of $10.02 billion and forecasting 2024 revenue of $36 billion-$37 billion, above the consensus of $36.02 billion.
Air Products and Chemicals (APD) is down more than -11% to lead losers in the S&P 500 after reporting Q4 sales of $3.19 billion, below the consensus of $3.34 billion.
Emerson Electric (EMR) is down more than -8% after reporting Q4 net sales of $4.09 billion, weaker than the consensus of $4.20 billion.
Energy stocks and energy service providers are under pressure today, with WTI crude oil down more than -2% to a 2-1/2 month low. As a result, APA Corp (APA) is down more than -4%. Also, Haliburton (HAL), Schlumberger (SLB), Marathon Oil (MRO), Baker Hughes (BKR), and Devon Energy (DVN) are down more than -3%. In addition, ConocoPhillips (COP), Diamondback Energy (FANG), Exxon Mobil (XOM), Occidental Petroleum (OXY), Phillips 66 (PSX), Marathon Petroleum (MPC), and Valero Energy (VLO) are down more than -2%. Finally, Chevron (CVX) is down more than -1% to lead losers in the Dow Jones Industrials.
Fidelity National Information Services (FIS) is down more than -3% after reporting Q3 revenue of $2.49 billion, well below the consensus of $3.66 billion.
Celanese (CE) is down more than -3% after reporting Q3 net sales of $2.70 billion, weaker than the consensus of $2.76 billion.
Shockwave Medical (SWAV) is down more than -13% after forecasting full-year revenue of $725 million-$730 million, the midpoint below the consensus of $728.8 million.
Welltower Inc (WELL) is down more than -2% after announcing the sale of 17.5 million shares of its common stock to Bank of America Securities and Goldman Sachs.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are up +12 ticks, and the 10-year T-note yield is down -6.0 bp at 4.583%. Weak Eurozone economic news today knocked European government bond yields lower and provided carryover support to T-notes. Gains in T-notes are limited due to hawkish comments from Minneapolis Fed President Kashkari and Chicago Fed President Goolsbee that dampened speculation the Fed was done raising interest rates. Also, supply pressures are weighing on T-notes as the Treasury will auction $112 billion of T-notes and T-bonds in this week’s quarterly refunding operation, beginning today’s $48 billion sale of 3-year T-notes.
The dollar index (DXY00) today is up by +0.48%. The dollar this morning is moderately higher on hawkish Fed comments that curbed speculation the Fed was done tightening monetary policy. Also, weaker-than-expected Eurozone economic news today weighed on the euro to the dollar’s benefit.
EUR/USD (^EURUSD) today is down -0.49%. Weaker-than-expected Eurozone economic news today is undercutting the euro. German Sep industrial production fell more than expected, and the German S&P Oct construction PMI contracted by the most on record. Also, an easing of producer price pressures is dovish for ECB policy and bearish for EUR/USD after Eurozone Sep PPI fell by a record -12.4% y/y.
German Sep industrial production fell -1.4% m/m, a bigger decline than expectations of -0.1% m/m.
The German S&P Oct construction PMI fell -1.0 to 38.3, a record pace of contraction.
Eurozone Sep PPI fell by a record -12.4% y/y, the most since data began in 1982.
USD/JPY (^USDJPY) today is up by +0.34%. The yen is moderately lower today on dollar strength after hawkish Fed comments reduced speculation the Fed was done tightening monetary policy. Also, weaker-than-expected Japanese economic news on wages is dovish for BOJ policy and negative for the yen after Japan Sep real cash earnings fell more than expected. Lower T-note yields today are limiting losses in the yen.
Japan Sep household spending fell -2.8% y/y, a smaller decline than expectations of -2.9% y/y.
Japan Sep real cash earnings fell -2.4% y/y, weaker than expectations of -2.3% y/y.
December gold (GCZ3) today is down -18.6 (-0.94%), and Dec silver (SIZ23) is down -0.609 (-2.62%). Precious metals prices today are moderately lower, with gold falling to a 2-1/2 week low and silver dropping to a 3-week low. A stronger dollar today is weighing on metals prices. Metals are also under pressure on hawkish Fed comments today that reduced speculation the Fed was down raising interest rates. Industrial metals demand concerns also weigh on silver prices after German Sep industrial production fell more than expected and China’s Oct exports dropped more than expected. Lower global bond yields today are limiting losses in 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.
