What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.36%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.24%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.84%.
Stocks this morning are moderately lower on some disappointing corporate earnings results. Also, long liquidation pressure is weighing on the overall market after Monday’s rally. The markets are awaiting the minutes of the Oct 31-Nov 1 FOMC meeting later today to see the Fed’s assessment of the economy and the future direction of Fed policy. Also, earnings results from Nvidia will be released after today’s close, and the markets will scour the results to see if demand remains strong for the company’s artificial intelligence computing chips.
Losses in the broader market were contained as bond yields fell on weaker-than-expected U.S. Chicago Fed and existing home sales reports. The weak reports further bolstered expectations that the Fed is done raising interest rates.
Stocks came under pressure today after Goldman Sachs told clients that the recent rally in stocks increases the risk of "disappointment in the near term" amid lingering concerns about economic growth and inflation.
On the negative side for stocks, Jacobs Solutions is down more than -8% after forecasting 2024 adjusted Ebitda below consensus. Also, Best Buy is down more than -3% after reporting Q3 revenue below consensus and cutting its full-year revenue forecast. In addition, Kohl’s is down more than -12% after reporting a bigger-than-expected fall in Q3 same-store sales.
On the positive side, Agilent is up more than +7% after reporting stronger-than-expected Q4 net revenue. Also, Tesla is up more than +2% after Bloomberg reported that it is nearing an agreement with India to allow exports of its cars to India from next year and set up a factory there within two years.
The U.S. Oct Chicago Fed national activity index fell -0.47 to a seven-month low of -0.49, weaker than expectations of zero.
U.S. Oct existing home sales fell -4.1% m/m to a 13-year low of 3.79 million, weaker than expectations of 3.90 million.
The markets are discounting a 0% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 2% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +31% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 76% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -1.8 bp at 4.402%. The 10-year German bund yield is down -5.3 bp at 2.558%. The 10-year UK gilt yield is down -3.6 bp at 4.089%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.27%. China’s Shanghai Composite Index closed down -0.01%. Japan’s Nikkei Stock Index closed down -0.10%.
Today’s stock movers…
Jacobs Solutions (J) is down more than -7% to lead losers in the S&P 500 after forecasting 2024 adjusted Ebitda of $1.53 billion-$1.60 billion, weaker than the consensus of $1.61 billion.
Best Buy (BBY) is down more than -3% after reporting Q3 revenue of $9.76 billion, below the consensus of $9.90 billion, and cut its full-year revenue forecast to $43.1 billion-$43.7 billion from a previous forecast of $43.8 billion-$44.5 billion.
Zoom Video Communications (ZM) is down more than -4% despite reporting better-than-expected Q3 EPS after Bernstein said the earnings report shows tepid growth trends and the “forward guidance was no more bullish.”
Zions Bancorp (ZION) is down more than -4% after Citigroup downgraded the stock to neutral from buy.
Cruise line stocks are under pressure today after Trust Financial said it saw “pockets of weakness” in booking trends over the past several weeks, with the conflict in Israel making sea-goers wary of travel. As a result, Carnival (CCL) is down more than -3%, and Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises Ltd (RCL) are down more than -2%.
Kohl’s (KSS) is down more than -12% after reporting Q3 same-store sales fell -5.5%, a bigger decline than the consensus of -3.45%.
Incyte Corp (INCY) is down more than -3% after Goldman Sachs downgraded the stock to neutral from buy.
Lowe’s (LOW) is down more than -2% after reporting a -7.4% drop in Q3 same-store sales, weaker than the consensus of -4.9%, and lowered its full-year adjusted revenue forecast to a decline of -5% from a previous view of 02% to -4%.
Agilent (A) is up more than +8% to lead gainers in the S&P 500 after reporting Q4 net revenue of $1.69 billion, better than the consensus of $1.67 billion.
Medtronic Plc (MDT) is up more than +4% after reporting Q2 adjusted EPS of $1.25, stronger than the consensus of $1.18.
Tesla (TSLA) is up more than +2% to lead gainers in the Nasdaq 100 after Bloomberg reported that it is nearing an agreement with India to allow exports of its cars to India from next year and set up a factory there within two years.
Burlington Stores (BURL) is up more than +18% after reporting Q3 comparable sales rose +6.00%, above the consensus of +5.88%.
Hibbett (HIBB) is up more than +14% after reporting Q3 EPS of $2.05, well above the consensus of $1.18, and raising its 2024 EPS forecast to $8.00-$8.30 from a previous estimate of $7.00-$7.75, stronger than the consensus of $7.27.
Dick’s Sporting Goods (DKS) is up more than +10% after reporting Q3 net sales of $3.04 billion, above the consensus of $2.95 billion, and raised its 2024 comparable sales forecast to +0.5% to +2.0% from a previous view of 0% to +2.0%, the midpoint above the consensus of +1.02%.
Gen Digital (GEN) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal with a price target of $26.
Cloudflare (NET) is up more than +2% after Oppenheimer upgraded the stock to outperform from perform with a price target of $85.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are up +5 ticks, and the 10-year T-note yield is down -1.8 bp at 4.402%. Dec T-note prices this morning are moving moderately higher. Weaker-than-expected U.S. economic news is boosting T-notes after the Oct Chicago Fed national activity index fell to a 7-month low and Oct existing home sales dropped to a 13-year low. Also, a decline in inflation expectations is supporting T-notes after the 10-year breakeven inflation rate dropped to a 1-1/4 month low today at 2.273%.
The dollar index (DXY00) today is down by -0.214 and posted a new 2-1/2 month low. Weaker-than-expected U.S. economic news today on the Oct Chicago Fed national activity index and Oct existing home sales is dovish for Fed policy and is undercutting the dollar. Also, today’s action by China to boost stimulus pushed the yuan to a 3-3/4 month high against the dollar.
EUR/USD (^EURUSD) today is up by +0.052% and climbed to a new 2-1/2 month high. A weaker dollar today is supporting gains in the euro. Also, signs of strength in the Eurozone economy are positive for the euro after Eurozone Oct new car registrations rose for the fifteenth consecutive month. Gains in the euro were limited by dovish comments from ECB Governing Council member Simkus, who signaled that he favors keeping ECB policy steady.
Eurozone Oct new car registrations rose +14.6% y/y to 855,000 units, the fifteenth consecutive month registrations have increased.
Comments from ECB Governing Council member Simkus suggest he favors keeping ECB policy steady when he said, "There's no reason to speak about a further increase this December, and market expectations that there will be ECB interest rate cuts in a few months are too optimistic in my view."
USD/JPY (^USDJPY) today is down by -0.4%. The yen today rallied for the fourth consecutive session and posted a 2-1/4 month high against the dollar. Today’s weaker-than-expected U.S. Chicago Fed and existing home sales reports boosted speculation that the Fed is nearing the end of its policy tightening and undercut the dollar to the yen’s benefit. The yen also has support today from lower T-note yields.
December gold (GCZ3) today is up +25.3 (+1.28%), and Dec silver (SIZ23) is up +0.321 (+1.36%). Precious metals prices today are moderately higher, with gold posting a 2-week high. Today’s fall in the dollar index to a 2-1/2 month low is bullish for metals prices. Also, lower global bond yields today are supportive of precious metals prices. In addition, precious metals are climbing as today’s weaker-than-expected U.S. Chicago Fed and existing home sales reports bolstered speculation that the Fed is finished raising interest rates.
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.
