What you need to know…
The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.81%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.82%.
Stocks on Thursday posted moderate losses. Stocks were under pressure Thursday from higher bond yields after weak demand for the Treasury’s $24 billion 30-year T-bond auction pushed bond yields higher. Stocks extended their losses Thursday afternoon as bond yields moved even higher after hawkish comments from Fed Chair Powell dampened speculation the Fed was finished raising interest rates.
On the bearish side for stocks, Becton Dickinson & Co fell more than -9% after reporting Q4 adjusted EPS below consensus and forecasting 2024 adjusted EPS below estimates. Also, Corteva Inc fell more than -8% after reporting Q3 adjusted organic sales below consensus and forecasting weaker-than-expected full-year net sales. Tesla fell more than -5% after HSBC initiated coverage on the stock with a sell-equivalent rating.
On the bullish side, TransDigm Group closed up more than +8% after reporting Q4 adjusted EPS of $8.03, well above consensus and forecasting stronger-than-expected 2024 adjusted EPS. Also, Walt Disney rose more than +6% after reporting a larger-than-expected amount of Q4 Disney+ subscribers. In addition, Affirm Holdings closed up more than +13% after reporting Q1 revenue above consensus and forecasting Q2 revenue above estimates.
U.S. weekly initial unemployment claims unexpectedly fell -3,000 to 217,000, close to expectations of 218,000. However, weekly continuing claims rose +22,000 to a 6-1/2 month high of 1.834 million, showing a weaker labor market than expectations of 1.820 million.
Fed Chair Powell said policymakers are "not confident" they have achieved the stance to return inflation to the Fed's 2% target, and they "won't hesitate" to tighten more if appropriate.
Comments from some Fed members suggest they favor maintaining interest rates at current levels when Atlanta Fed President Bostic agreed with Richmond Fed President Barkin's assessment that "In aggregate, we are still not seeing the full effects of monetary policy." Atlanta Fed President Bostic added that the Fed will stay restrictive until it is sure inflation falls to 2%.
Bitcoin (^BTCUSD) rose more than +1% to a 1-1/2 year high on optimism that the Securities and Exchange Commission (SEC) will soon approve a spot Bitcoin ETF. Bloomberg Intelligence predicts there is a 90% chance the SEC will approve a spot Bitcoin ETF by January 10. Bitcoin fell back from its best levels on hawkish comments from Fed Chair Powell.
The markets are discounting a 14% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 26% 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 Thursday moved higher. The 10-year T-note yield rose +12.9 bp to 4.622%. The 10-year German bund yield rose +3.0 bp to 2.647%. The 10-year UK gilt yield rose +3.3 bp at 4.273%.
China’s Oct CPI fell -0.2% y/y, weaker than expectations of -0.1% y/y. China Oct PPI fell -2.6% y/y, a smaller decline than expectations of -2.9% y/y.
ECB Governing Council member Villeroy de Galhau said the inflation rate in the Eurozone has fallen threefold in a year and, despite some volatility, the trend is "clearly downward," so the ECB is done with interest rate increases unless it has to deal with additional shocks.
ECB Vice President Guindos said talks of interest rate cuts by the ECB in the coming months are "clearly premature," citing risks to the inflation outlook.
BOJ Governor Ueda said the BOJ won't rush to normalize monetary policy, saying that lower-than-desired inflation would be harder to deal with given the current situation in Japan.
Overseas stock markets Thursday settled higher. The Euro Stoxx 50 closed up +1.21%. China’s Shanghai Composite Index closed up +0.03%. Japan’s Nikkei Stock Index closed up +1.49%.
Today’s stock movers…
Becton Dickinson & Co (BDX) closed down more than -9% to lead losers in the S&P 500 after reporting Q4 adjusted EPS of $3.42, below the consensus of $3.43, and forecasting 2024 adjusted EPS of $12.70-$13.00, weaker than the consensus of $13.53.
Corteva Inc (CTVA) closed down more than -7% after reporting Q3 adjusted organic sales of $2.41 billion, weaker than the consensus of $2.67 billion, and forecasting full-year net sales of $17.00 billion-$17.30 billion, below the consensus of $17.57 billion.
Tesla (TSLA) closed down more than -5% to lead losers in the Nasdaq 100 after HSBC initiated coverage on the stock with a recommendation of reduce, with a price target of $146.
Veeva Systems (VEEV) closed down more than -14% after cutting its full-year revenue forecast to $2.35 billion-$2.36 billion from a prior forecast of $2.37 billion.
Bill Holdings (BILL) closed down more than -9% after Bloomberg News reported the company is in advanced talks to acquire Melio Payments for $1.95 billion.
Arm Holdings (ARM) closed down more than -4% after forecasting Q3 total revenue of $720 million-$800 million, the midpoint below the consensus of $773 million.
FleetCor Technologies (FLT) closed down more than -2% after reporting Q3 revenue of $970.9 million, below the consensus of $979.1 million, and cutting its full-year revenue forecast to $3.77 billion-$3.80 billion from a previous forecast of $3.84 billion-$3.86 billion, weaker than the consensus of $3.81 billion.
Biogen (BIIB) closed down more than -2% after Wedbush Securities cut its price target on the stock to $239 from $266.
TransDigm Group (TDG) closed up more than +8% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $8.03, well above the consensus of $7.55, and forecasting 2024 adjusted EPS of $31.00-$32.94, the midpoint stronger than the consensus of $31.09.
Walt Disney (DIS) closed up more than +6% to lead gainers in the Dow Jones Industrials after reporting 150.2 million Q4 Disney+ subscribers, above the consensus of 147.07 million.
Warner Bros Discovery (WBD) closed up more than +2% to lead gainers in the Nasdaq 100 after Hollywood studios and the actors union reached an agreement to end the four-month-long strike. Paramount Global (PARA) also closed up more than +2% on the news.
Affirm Holdings (AFRM) closed up more than +13% after reporting Q1 revenue of $497 million, well above the consensus of $445.6 million, and forecasting Q2 revenue of $495 million-$520 million, the midpoint higher than the consensus of $505.9 million.
Tapestry (TPR) closed up more than +2% after forecasting full-year adjusted EPS of $4.10 to $4.15, the midpoint above the consensus of $4.12.
Twilio (TWLO) closed up more than +1% after reporting Q3 revenue of $1.03 billion, above the consensus of $988.4 million.
Take-Two Interactive Software (TTWO) closed up more than +1% after reporting Q2 net bookings of $1.44 billion, stronger than the consensus of $1.33 billion.
Across the markets…
December 10-year T-notes (ZNZ23) Thursday closed down -25.5 ticks, and the 10-year T-note yield rose by +12.9 bp to 4.622%. T-notes prices were pressured by negative carryover from a decline in European government bond markets. Also, hawkish comments from Fed Chair Powell were bearish for T-notes when he dampened speculation the Fed was done raising interest rates by saying policymakers are "not confident" they have achieved the stance to return inflation to the Fed's 2% target.
T-notes sank to their lows Thursday afternoon on tepid demand for the Treasury’s $24 billion auction of 30-year T-bonds, as the auction had a bid-to-cover ratio of 2.24, well below the 10-auction average of 2.40 and the lowest in nearly two years.
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.
