What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.11%.
Stocks this morning are modestly high, with the S&P 500 posting a nearly 2-year high and the Dow Jones Industrials and Nasdaq 100 posting all-time highs. Expectations for the Federal Reserve to begin cutting interest rates early next year are underpinning stocks. Also, technology stocks are finding support amid the artificial intelligence exuberance, which has spurred gains in chip stocks.
U.S. economic news today showed weekly U.S. initial unemployment claims rose more than expected and weaker-than-expected Nov pending home sales, dovish factors for Fed policy. On the negative side, weakness in crude prices today is weighing on energy stocks.
U.S. weekly initial unemployment claims rose +12,000 to 218,000, showing a weaker labor market than expectations of an increase to 210,000.
U.S. Nov pending home sales were unchanged m/m, weaker than expectations of +0.9% m/m.
The markets are discounting the chances for a -25 bp rate cut at 16% at the next FOMC meeting on Jan 30-31 and have fully discounted (100%) that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +2.0 bp at 3.815%. The 10-year German bund yield is up +4.7 bp at 1.942%. The 10-year UK gilt yield is up +4.2 bp at 3.478%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.24%. China’s Shanghai Composite Index closed up +1.38%. Japan’s Nikkei Stock Index closed down -0.42%.
Today’s stock movers…
Casino stocks are climbing today after the Nevada Gaming Board reported that Las Vegas Strip Nov gambling revenue rose +22.6% y/y to $821 million. As a result, Caesars Entertainment (CZR) is up more than +2% to lead gainers in the S&P 500. Also, Las Vegas Sands (LVS), Wynn Resorts Ltd (WYNN), and MGM Resorts International (MGM) are up more than +1%.
Paramount Global (PARA) is up more than +1% on potential M&A activity after Bloomberg Intelligence said Warner Bros Discovery could acquire the company.
American International Group (AIG) is up more than +1% after HSBC initiated coverage of the stock with a buy recommendation and a price target of $86.
Chubb Ltd (CB) is up nearly +1% after HSBC initiated coverage on the stock with a buy recommendation and a price target of $263.
Regeneron Pharmaceuticals (REGN) is up more than +1%, adding to Wednesday’s +2% gain after a court ruled that the company’s patent rights were infringed by a cheaper copy of an eye drug developed by Viatris.
LanzaTech Global (LNZA) is up more than +7% after Janney Montgomery Scott LLC initiated coverage on the stock with a buy recommendation and a price target of $10.
Boeing (BA) is down more than -1% to lead losers in the Dow Jones Industrials after the FAA said it is monitoring targeted inspections of 737 MAX airplanes to look for a possible loose bolt in the plane’s rudder control system.
Energy stocks and energy service providers are under pressure, with the price of WTI crude oil down nearly -1%. APA Corp (APA), Baker Hughes (BKR), ConocoPhillips (COP), Marathon Oil (MRO), Haliburton (HAL), Devon Energy (DVN), Diamondback Energy (FANG), and Schlumberger (SLB) are down more than -0.5%.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -7 ticks, and the 10-year T-note yield is up +2.0 bp at 3.815%. Mar T-note prices today are moderately lower. Negative carryover from a slide in European government bonds is weighing on T-notes after hawkish ECB comments pushed 10-year German bund yields higher. Supply pressures may limit T-notes' upside as the Treasury will auction $40 billion of 7-year T-notes later today to conclude this week’s auction package of $181 billion in T-notes and floating-rate notes. Losses in T-note are limited after today’s U.S. economic news showed weekly jobless claims rose more than expected and Nov pending home sales were weaker than expected.
The dollar index (DXY00) today is down by -0.20% and posted a 5-month low. Strength in the yen is weighing on the dollar as the yen climbed to a 5-month high against the dollar today. Year-end position squaring and liquidation are also pressuring the dollar. In addition, expectations for the Fed to begin cutting interest rates in 2024 are undercutting the dollar. Higher T-note yields today are limiting the downside in the dollar.
The markets are discounting the chances for a -25 bp rate cut at 16% at the next FOMC meeting on Jan 30-31 and 100% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is up by +0.04% and posted a 5-month high. EUR/USD today climbed to a 5-month high on hawkish comments from ECB Governing Council member Holzmann, who said it's "too early" for the ECB to think about interest rate cuts now. Gains in the euro are limited due to long liquidation and year-end position squaring.
ECB Governing Council member Holzmann said it's "too early" for the ECB to think about interest rate cuts now, and "there's no guarantee for rate cuts in 2024."
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 7% for its next meeting on Jan 25 and at 71% for the following meeting on March 7.
USD/JPY (^USDJPY) is down by -1.04%. The yen today rallied to a 5-month high against the dollar. The yen Is finding support on hawkish comments from BOJ Governor Ueda that suggest he is preparing the markets for a rate hike in the spring. Ueda said it was possible the BOJ could move to exit its negative rate policy at its April policy meeting after assessing annual pay deal figures due in March. Also, positive Japanese economic news today on industrial production and retail sales are bullish for the yen.
Japan Nov industrial production fell -0.9% m/m, a smaller decline than expectations of -1.6% m/m.
Japan Nov retail sales rose +1.0% m/m, stronger than expectations of +0.5% m/m.
February gold (GCG4) today is down -4.2 (-0.20%), and Mar silver (SIH24) is down -0.136 (-0.55%). Gold and silver prices this morning are moderately lower. Precious metals gave up an early advance today as higher global bond yields sparked long liquidation in metals. Gold prices also came under pressure on hawkish comments from ECB Governing Council member Holzmann, who said it's "too early" for the ECB to think about interest rate cuts now. Losses in metals are limited today after the dollar index today fell to a 5-month low.
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.
