What you need to know…
The S&P 500 Index ($SPX) (SPY) on Friday closed down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.43%.
On Friday, stocks posted modest losses on year-end position squaring and fund liquidation. Higher bond yields Friday undercut chip stocks and weighed on the overall market. Friday’s economic news showed the Dec MNI Chicago PMI unexpectedly contracted. On the positive side, defensive consumer staples companies moved higher.
Hawkish comments from former Treasury Secretary Summers weighed on stocks and bonds Friday when he said, "I think there's still a risk that the market is probably underestimating that we're not going to make as much progress on inflation as people hope and that there's not going to be quite as much room for Fed easing as people hope."
The U.S. Dec MNI Chicago PMI fell -8.9 to 46.9, weaker than expectations of 50.0.
The markets are discounting the chances for a -25 bp rate cut at 16% at the next FOMC meeting on Jan 30-31 and 99% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields on Friday moved higher. The 10-year T-note yield rose +3.5 bp at 3.879%. The 10-year German bund yield climbed to a 1-1/2 week high of 2.038% and finished up +8.0 bp at 2.024%. The 10-year UK gilt yield rose to a 1-1/2 week high of 3.582% and finished up +4.5 bp at 3.537%.
Overseas stock markets on Friday settled mixed. The Euro Stoxx 50 closed up +0.16%. China’s Shanghai Composite Index closed up +0.68%. Japan’s Nikkei Stock Index closed down -0.22%.
Today’s stock movers…
Albemarle (ALB) closed down more than -3% to lead losers in the S&P 500, with China lithium carbonate prices at a 2-1/3 year low.
Higher bond yields on Friday undercut chip stocks and weighed on the overall market. ON Semiconductor (ON), Marvel Technology (MRVL), and Globalfoundries (GFS) closed down more than -1%. Also, Advanced Micro Devices (AMD), Qualcomm (QCOM), KLA Corp (KLAC), Texas Instruments (TXN), Applied Materials (AMAT), Analog Devices (ADI), and Lam Research (LRCX) closed down more than -0.6%.
Lyft (LYFT) closed down more than -3% after Nomura downgraded the stock to reduce from neutral.
Uber Technologies (UBER) closed down more than -2% after Nomura downgraded the stock to neutral from buy.
Higher bond yields weighed on real estate investment trusts. Boston Properties (BXP), Equity Residential (EQR), and Federal Realty Investment Trust (FRT) closed down more than -2%. Also, Kimco Realty (KIM), Essex Property Trust (ESS), Realty Income (O), Healthpeak Properties (PEAK), Alexandria Real Estate Equities (ARE), and Mid-America Apartment Communities (MAA) closed down more than -1%.
Airline stocks were under pressure Friday and weighed on the overall market. American Airlines Group (AAL), United Airlines Holdings (UAL), Southwest Airlines (LUV), and Delta Air Lines (DAL) closed down more than -1%.
Boston Scientific (BSX) closed up more than +2% to lead gainers in the S&P 500 after it said it anticipates FDA approval of its Farapulse PFA System for treating atrial fibrillation in Q1 of 2024.
T-Mobile U.S. (TMUS) closed up +0.87% after winning U.S. regulatory approval for its proposed $3.5 billion purchase of airwaves used for 5G signals.
Vulcan Materials (VMC) closed up +0.7% after Mexican President Obrador said his government is working on a proposal to buy land near Playa del Carmen owned by Vulcan.
Defensive consumer staples companies moved higher Friday. Hershey Co (HSY) closed up more than +1%. Also, Kroger (KR), Kraft Heinz (KHC), Colgate Palmolive (CL), Campbell Soup (CPB), Hormel Foods (HRL), Kellanova (K), and Procter & Gamble (PG) closed up more than +0.5%
Across the markets…
March 10-year T-notes (ZNH24) on Friday settled unchanged, and the 10-year T-note yield rose by +3.5 bp to 3.879%. Mar T-notes Friday were little changed. T-note prices initially moved lower Friday on negative carryover from a slide in European government bonds to 1-1/2 week lows. Also, quarter and year-end position squaring by bond managers weighed on T-notes. In addition, hawkish comments from former Treasury Secretary Summers weighed on T-notes when he said, "I think not going to be quite as much room for Fed easing as people hope." However, T-notes recovered all of their losses after the Dec MNI Chicago PMI fell more than expected, a dovish factor for Fed policy.
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.
