What you need to know…
The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.11%.
Stocks on Wednesday mainly closed higher, with the S&P 500 posting a 3-week high and the Nasdaq 100 posting a 1-3/4 month high. The broader market wavered Wednesday on mixed corporate news. Lower T-note yields Wednesday were supportive for stocks. The markets are awaiting comments on Thursday from Fed Chair Powell during a conference on monetary policy challenges. On Wednesday, Powell did not comment on the economy or interest rates when he delivered opening comments at the Fed’s Division of Research and Statistics Centennial Conference.
On the positive side for stocks, Extra Space Storage closed up more than +10% after reporting better-than-expected Q3 revenue. Also, Take-Two Interactive Software closed up more than +5% after Bloomberg News reported that the company's Rockstar Games division will soon announce a new version of the Grand Theft Auto game. In addition, DaVita closed up more than +5% after boosting its full-year free cash flow estimate, and Axon Enterprises closed up more than +5% after reporting stronger-than-expected Q3 net sales and raising its full-year revenue estimate.
On the negative side, Warner Bros Discovery slumped more than -18% after reporting a wider-than-expected Q3 loss per share. Also, Biogen closed down more than -5% after cutting its full-year adjusted EPS forecast. In addition, Lucid Group closed down more than -8% after cutting its full-year vehicle production forecast.
Weekly U.S. MBA mortgage applications rose +2.5% in the week ended Nov 3. The purchase mortgage sub-index rose +3.0%, and the refinancing mortgage sub-index rose +1.6%. The average 30-year fixed rate mortgage fell -25 bp to 7.61% from 7.86% the prior week.
U.S. Sep wholesale sales rose +2.2% m/m, stronger than expectations of +0.9% and the biggest increase in 20 months.
The markets are discounting a 10% 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 Wednesday moved lower. The 10-year T-note yield fell by -5.0 bp to 4.517%. The 10-year German bund yield dropped to a 1-3/4 month low of 2.606% and finished down -4.1 bp at 2.617%. The 10-year UK gilt yield fell to a 1-1/2 month low of 4.225% and finished down -3.0 bp at 4.240%.
Eurozone Sep retail sales fell -0.3% m/m, weaker than expectations of -0.2% m/m.
ECB Governing Council member Makhlouf said, "It's far too early to start talking about when the ECB will start cutting interest rates."
ECB Governing Council member Kazaks said the ECB "cannot exclude the possibility that further rate increases might be necessary."
The ECB's monthly consumer inflation expectations survey showed 1-year inflation expectations in Sep rose to a 5-month high of 4.0% from 3.5% in Aug, but Sep 3-year inflation expectations were unchanged at 2.5%.
Overseas stock markets Wednesday settled mixed. The Euro Stoxx 50 closed up +0.60%. China’s Shanghai Composite Index closed down -0.16%. Japan’s Nikkei Stock Index closed down -0.33%.
Today’s stock movers…
Extra Space Storage (EXR) closed up more than +10% to lead gainers in the S&P 500 after reporting Q3 revenue of $748 million, well above the consensus of $675.9 million.
Axon Enterprises (AXON) closed up more than +6% after reporting Q3 net sales of $413.6 million, stronger than the consensus of $389.9 million, and raising its full-year revenue estimate to $1.55 billion from a prior view of $151 billion-$1.53 billion, above the consensus of $1.52 billion.
Take-Two Interactive Software (TTWO) closed up more than +5% after Bloomberg News reported that Rockstar Games, a division of the company, plans to announce a new version of the Grand Theft Auto game as soon as this week.
DaVita (DVA) closed up more than +5% after boosting its full-year free cash flow estimate to $950 million-$1.15 billion from a previous forecast of $850 million-$1.10 billion.
Jack Henry & Associates (JKHY) closed up more than +4% after reporting Q1 EPS of $1.39, higher than the consensus of $1.33.
Ralph Lauren (RL) closed up more than +2% after reporting Q2 total comparable sales ex-forex rose +6%, stronger than the consensus of +3.36%.
Airline stocks rallied Wednesday, with the price of crude falling more than -2% to a 3-1/2 month low, which should cut fuel costs and improve profit margins. As a result, United Airlines Holdings (UAL), American Airlines Group (AAL), Delta Air Lines (DAL), and Alaska Air Group (ALK) closed up more than +2%. Also, Southwest Airlines (LUV) closed up more than +1%.
Mosaic (MOS) closed up more than +2% after reporting Q3 net sales of $3.55 billion, stronger than the consensus of $3.21 billion.
Quanta Services (PWR) closed up more than +1% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $211.
Warner Bros Discovery (WBD) closed down more than -19% to lead losers in the S&P 500 and Nadaq 100 after reporting a Q3 loss per share of -17 cents, weaker than expectations of -9 cents.
Lucid Group (LCID) closed down more than -8% after reporting 1,457 Q3 vehicle deliveries, below the consensus of 1,774, and cutting its full-year vehicle production forecast to 8,000-8,500 from a previous estimate of 10,000.
Biogen (BIIB) closed down more than -5% after cutting its full-year adjusted EPS forecast to $14.50-$15.00 from a previous forecast of $15.00-$16.00.
Gilead Sciences (GILD) closed down more than -3% after Wells Fargo Securities called the company’s better-than-expected quarterly earnings results a “low-quality beat.”
Sleep Number (SNBR) closed down more than -29% after reporting Q3 net sales of $472.6 million, well below the consensus of $512 million, and cutting its full-year EPS forecast to a loss of -70 cents per share from a prior estimate of a gain of $1.25-$1.75.
Coupang Inc (CPNG) closed down more than -9% after reporting Q3 EPS of 5 cents, below the consensus of 7 cents.
Datadog (DDOG) closed down more than -2% after Mizuho Securities downgraded the stock to neutral from buy.
NXP Semiconductors NV (NXPI) closed down more than -1% after Citigroup downgraded the stock to sell from neutral with a price target of $150.
Across the markets…
December 10-year T-notes (ZNZ23) Wednesday closed up +6.5 ticks, and the 10-year T-note yield fell by -5.0 bp to 4.517%. T-notes Wednesday posted moderate gains on carryover support from a rally in European government bonds, with 10-year German bunds climbing to a 1-3/4 month high and 10-year UK Gilts climbing to a 1-1/2 month high. Also, a decline in inflation expectations was bullish for T-notes as the 10-year breakeven inflation rate fell to a 1-week low of 2.350%.
On the negative side, a rally in the S&P 500 to a 3-week high reduced safe-haven demand for T-notes. Also, supply pressures limited gains in T-notes as the Treasury auctioned $40 billion of 10-year T-notes Wednesday as part of this week’s quarterly refunding package of $112 billion of T-notes and T-bonds.
Demand was average for the Treasury’s $40 billion auction of 10-year T-notes, as the auction had a bid-to-cover ratio of 2.48, right on the 10-auction average.
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.
