What you need to know…
The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.80%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.76%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.06%.
Stocks on Wednesday extended Tuesday’s losses and closed moderately lower, with the S&P 500 falling to a 2-week low, the Dow Jones Industrials sliding to a 1-week low, and the Nasdaq 100 dropping to a 3-week low. Wednesday’s U.S. economic news was mixed as U.S. manufacturing activity was stronger than expected last month, but U.S. job openings in November unexpectedly fell.
Stocks maintained their losses following the release of the minutes of the Dec 12-13 FOMC meeting as the minutes gave no sign of an imminent Fed rate cut. The minutes showed policymakers agreed that "it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably." Also, "participants viewed the policy rate as likely at or near its peak for his tightening cycle."
A supportive factor for stocks was Wednesday’s comments from Richmond Fed President Barkin, who said, "A soft landing is increasingly conceivable but in no way inevitable. Demand, employment, and inflation all surged but now seem to be on a path back to normal."
The U.S. Dec ISM manufacturing index rose +0.7 to 47.4, stronger than expectations of 47.1.
U.S. Nov JOLTS job openings unexpectedly fell -62,000 to a 2-1/2 year low of 8.790 million, showing a weaker labor market than expectations of an increase to 8.821 million.
Weekly MBA mortgage applications fell -10.7% in the week ended December 29. The purchase mortgage application sub-index fell by -7.6%, and the refinancing sub-index fell by -18.1%. The average 30-year fixed rate mortgage rose 5 bp to 6.76% from 6.71% the prior week.
The markets are discounting the chances for a -25 bp rate cut at 9% at the next FOMC meeting on Jan 30-31 and 76% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields Wednesday were mixed. The 10-year T-note yield rose to a 2-1/2 week high of 4.008% but fell back and finished down -2.6 bp at 3.903%. The 10-year German bund yield fell -4.4 bp to 2.024%. The 10-year UK gilt yield rose +0.1 bp to 3.639%.
Overseas stock markets Wednesday settled mixed. The Euro Stoxx 50 closed down -1.43%. China’s Shanghai Composite Index closed up +0.17%. Japan’s Nikkei Stock Index was closed for the New Year’s holiday.
Today’s stock movers…
Aptiv Plc (APTV) closed down more than -6% after Baird downgraded the stock to neutral from outperform.
BorgWarner (BWA) closed down more than -5% after Baird downgraded the stock to neutral from outperform.
Walgreens Boots Alliance (WBA) closed down more than -4% to lead losers in the Dow Jones Industrial after Barclays initiated coverage of the stock with a recommendation of underweight and a price target of $21.
Tesla (TSLA) closed down more than -4% after Q4 sales data showed China’s BYD Co overtook Tesla as the world’s largest seller of electric vehicles.
CBRE Group (CBRE) closed down more than -4% after Evercore ISI downgraded the stock to in-line from outperform.
Ambarella (AMBA) closed down more than -5% after Wells Fargo Securities downgraded the stock to equal weight from overweight.
CME Group (CME) closed down more than -3% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $195.
Airline stocks were under pressure Wednesday and weighed on the overall market. Delta Air Lines (DAL) and Southwest Airlines (LUV) closed down more than -4%. Also, American Airlines Group (AAL) and United Airlines Holdings (UAL) closed down more than -3%.
Eli Lilly (LLY) closed up more than +4% to lead gainers in the S&P 500 after Bank of America named the stock its top 2024 pick among large-cap biopharmaceutical companies.
Energy stocks and energy service providers rallied Wednesday as crude prices climbed more than +3%. As a result, Marathon Petroleum (MPC) closed up more than +3%, and Valero Energy (VLO), Hess Corp (HES), Devon Energy (DVN), Diamondback Energy (FANG), and Marathon Oil (MRO) closed up more than +2%. Also, Chevron (CVX) closed up more than +1% to lead gainers in the Dow Jones Industrials.
PDD Holdings (PDD) closed up more than +2% to lead gainers in the Nasdaq 100 after Benchmark Company LLC raised its price target on PDD Holdings ADRs to $215 from $190.
Dyne Therapeutics (DYN) closed up more than +13% after it announced an increase in muscle delivery in its Achieve trial in DM1 patients and Deliver trial in Duchenne muscular dystrophy patients.
McKesson (MCK) closed up more than +1% after Barclays initiated coverage of the stock with a recommendation of overweight and a price target of $537.
Unum Group (UNM) closed up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral.
Across the markets…
March 10-year T-notes (ZNH24) on Wednesday closed up +7 ticks, and the 10-year T-note yield fell by -2.6 bp to 3.903%. Mar T-notes Wednesday recovered from a 3-week low, and the 10-year T-note yield fell back from a 2-1/2 week high of 4.008%. Bond dealer short covering boosted T-note prices as dealers covered short positions in T-notes that were put on to hedge against the heavy slate of corporate debt securities sold Tuesday and Wednesday. T-notes also found support after Wednesday’s news showed the Nov JOLTS job openings unexpectedly fell to a 2-1/2 year low. In addition, Wednesday’s slump in stocks sparked some safe-haven demand for T-notes.
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.
