What you need to know…
The S&P 500 Index ($SPX) (SPY) Thursday closed up +1.03%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.87%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.23%.
Stocks on Thursday settled moderately higher after U.S. economic reports signaled the economy is slowing, bolstering expectations for Fed rate cuts next year. Thursday’s reports showed a downward revision to U.S. Q3 GDP, an unexpected decline in the Dec Philadelphia Fed business outlook survey, and an easing of price pressures, all dovish factors for Fed policy.
Positive corporate news also supported equities on Thursday, with Micron Technology rallying more than +8% after reporting better-than-expected Q1 revenue and forecasting Q2 revenue above consensus. Also, Cintas closed up more than +6% after raising its full-year revenue forecast.
U.S. weekly initial unemployment claims rose +2,000 to 205,000, showing a stronger labor market than expectations of an increase to 215,000. Weekly continuing claims unexpectedly fell -1,000 to 1.865 million, showing a stronger labor market than expectations of an increase to 1.880 million.
The U.S. Dec Philadelphia Fed business outlook survey unexpectedly fell -4.6 to -10.5, weaker than expectations of an increase to -3.0.
U.S. Q3 GDP was revised downward by -0.3 points to 4.9% (q/q annualized), weaker than expectations of no change at 5.2%, as Q3 personal consumption was revised downward to 3.1% from the previously reported 3.6%.
U.S. Q3 inflation data was revised lower as the Q3 GDP price index was revised lower to 3.3% from 3.6%, and the Q3 core PCE price index was revised lower to 2.0% from 2.3%.
U.S. Nov leading indicators fell -0.5% m/m, right on expectations, and the twentieth consecutive month the indicators have declined.
The markets are discounting the chances for a -25 bp rate cut at 14% at the next FOMC meeting on Jan 30-31 and 94% at the following meeting on March 19-20.
U.S. and European government bond yields Thursday were mixed. The 10-year T-note yield dropped to a 4-3/4 month low of 3.827% but rebounded and finished up +4.1 bp at 3.888%. The 10-year German bund yield dropped to a 9-month low of 1.941% and finished down -0.7 bp at 1.964%. The 10-year UK gilt yield fell to an 8-1/4 month low of 3.481% but recovered and finished up +0.1 bp at 3.529%.
ECB Vice President Guindos said, "Once we see inflation is clearly converging in a stable manner to our target of 2%, monetary policy might then start to ease. But it's still too early for that to happen."
Overseas stock markets on Thursday settled mixed. The Euro Stoxx 50 closed down -0.20%. China’s Shanghai Composite Index closed up +0.57%. Japan’s Nikkei Stock Index closed down -1.59%.
Today’s stock movers…
Micron Technology (MU) closed up more than +8% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q1 revenue of $4.73 billion, better than the consensus of $4.54 billion, and forecasting Q2 revenue of $5.1 billion-$5.5 billion, above the consensus of $4.99 billion.
VF Corp (VFC) closed up more than +6% after Baird said they were encouraged to see the company’s websites have returned to normal shipping capabilities following last week’s cyberattack.
Cintas (CTAS) closed up more than +6% after raising its full-year revenue forecast to$9.48 billion-$9.56 billion from a previous view of $9.40 billion-$9.52 billion.
Cruise line operators moved higher Thursday after Carnival reported a Q4 adjusted loss per share of -7 cents, a smaller loss than expectations of -13 cents. As a result, Carnival (CCL) closed up more than +6%. Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises (RCL) closed up more than +5%.
CarMax (KMX) closed up more than +5% after reporting Q3 EPS of 52 cents, stronger than the consensus of 42 cents.
Chip stocks rallied Thursday and supported gains in the overall market. Marvell Technology (MRVL) closed up more than +4%. Also, Advanced Micro Devices (AMD), Globalfoundries (GFS), ASML Holding NV (ASML), ON Semiconductors (ON), and KLA Corp (KLAC) closed up more than +3%. In addition, Intel (INTC) closed up more than +2% to lead gainers in the Dow Jones Industrials. Finally, NXP Semiconductors NV (NXPI), Applied Materials (AMAT), and Lam Research (LRCX) closed up more than +2%.
Spotify Technology (SPOT) closed up more than +2% after Pivotal Research Group upgraded the stock to buy from hold with a price target of $265.
Salesforce (CRM) closed up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $350.
Paychex (PAYX) closed down more than -7% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q2 revenue of $1.26 billion, below the consensus of $1.27 billion.
Westrock (WRK) closed down more than -2% after activist investor Primestone Capital said it had reservations about Smurfit Kappa’s plans to acquire Westrock and said alternative deals could create more value for Smurfit Kappa shareholders.
Paramount Global (PARA) closed down more than -2% after Axios reported the company is in talks with Warner Bros Discovery on a possible merger.
Aon Plc (AON) closed down more than -2% after Fitch Ratings cut its outlook on Aon’s long-term issuer default rating to negative from stable.
Simon Property Group (SPG) closed down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight.
Across the markets…
March 10-year T-notes (ZNH24) on Thursday closed down -3.5 ticks, and the 10-year T-note yield rose +4.1 bp to 3.888%. Mar T-note prices on Thursday gave up an early advance and fell back from a 5-month nearest-futures high, and the 10-year T-note yield rose from a 4-3/4 month low of 3.827%. T-notes gave up early gains as Thursday’s stock rally sparked profit-taking and long liquidation in T-notes.
T-notes Thursday initially opened higher on carryover support from a rally in European government bonds as the 10-year German bund yield fell to a 9-month low and the 10-year UK gilt yield fell to an 8-1/4 month low. T-notes also found early support on Thursday’s U.S. economic reports that showed downward revisions to Q3 GDP and Q3 core PCE prices and an unexpected decline in the Dec Philadelphia Fed business outlook survey.
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.
