What you need to know…
The S&P 500 Index ($SPX) (SPY) on Thursday closed down -0.34%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.53%.
Stocks on Thursday settled mixed, with the S&P 500 and Nasdaq 100 falling to 3-week lows. Interest rate-sensitive technology stocks were under pressure Thursday after better-than-expected U.S. reports on the labor market pushed bond yields higher and reduced expectations for Fed interest rate cuts.
On the positive side, a decline in crude oil prices boosted airline stocks. Also, Callon Petroleum rose more than +3% after APA Corp acquired the company for $4.5 billion. In addition, Allstate, EPAM Systems, Revvity, Dollar General, and Merck & Co rose more than +1% after being upgraded.
U.S. weekly initial unemployment claims fell -18,000 to a 2-1/2 month low of 202,000, showing a stronger labor market than expectations of 216,000.
The U.S. Dec ADP employment change rose +164,000, showing a stronger labor market than expectations of +125,000 and the biggest increase in 4 months.
The markets are discounting the chances for a -25 bp rate cut at 7% at the next FOMC meeting on Jan 30-31 and 70% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields Thursday moved higher. The 10-year T-note yield rose +7.9 bp to 3.995%. The 10-year German bund yield rose to a 2-1/2 week high of 2.142% and finished up +10.0 bp at 2.124%. The 10-year UK gilt yield climbed to a 2-1/2 week high of 3.738% and finished up +8.8 bp at 3.727%.
The China Dec Caixin services PMI rose +1.4 to a 5-month high of 52.9, stronger than expectations of 51.6.
The Eurozone S&P Dec composite PMI was revised upward by +0.6 to 47.6 from the previously reported 47.0.
The German Dec CPI (EU harmonized) rose +0.2% m/m and +3.8% y/y, weaker than expectations of +0.3% m/m and +3.9% y/y.
Overseas stock markets on Thursday settled mixed. The Euro Stoxx 50 closed up +0.58%. China’s Shanghai Composite Index closed down -0.43%. Japan’s Nikkei Stock Index closed down -0.53%.
Today’s stock movers…
APA Corp (APA) closed down more than -7% to lead losers in the S&P 500 after acquiring Callon Petroleum for $4.5 billion, including debt.
Walgreens Boots Alliance (WBA) closed down more than -5% to lead losers in the Dow Jones Industrials and Nasdaq 100 after cutting its quarterly dividend to 25 cents per share from 48 cents per share.
Mobileye Global (MBLY) closed down more than -24% after forecasting 2024 revenue of $1.83 billion-$1.96 billion, well below the consensus of $2.58 billion. Other chip makers that supply the automotive industry also fell on the news, with ON Semiconductor (ON) and NXP Semiconductor NV (NXPI) closing down more than -3%.
Energy stocks and energy service providers retreated Thursday as crude prices fell. As a result, Marathon Petroleum (MPC), ConocoPhillips (COP), Diamondback Energy (FANG), Valero Energy (VLO), Devon Energy (DVN), Occidental Petroleum (OXY), Haliburton (HAL), and Marathon Oil (MRO) closed down more than +2%.
Qorvo (QRVO) closed down more than -2% after Piper Sandler downgraded the stock to neutral from overweight.
Apple (AAPL) closed down more than -1% after Piper Sandler downgraded the stock to neutral from overweight.
Conagra Brands (CAG) closed down more than -1% after reporting Q2 organic net sales fell -3.40%, weaker than the consensus of -2.26%, and cut its full-year organic net sales forecast to down -1% to -2% from a previous forecast of up +0.09%.
EPAM Systems (EPAM) closed up more than +2% after Wolfe Research upgraded the stock to outperform from peer perform.
Dollar General (DG) closed up more than +2% after Barclays upgraded the stock to overweight equal weight with a price target of $154.
Merck & Co (MRK) closed up more than +1% to lead gainers in the Dow Joines Industrials after Cowen upgraded the stock to outperform from market perform with a price target of $135.
Cruise line operators rose Thursday after losing more than -10% over the past two sessions. As a result, Carnival (CCL) closed up more than +3% to lead gainers in the S&P 500. Also, Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises Ltd (RCL) closed up more than +1%.
Callon Petroleum (CPE) closed up more than +3% after APA Corp acquired the company for $4.5 billion.
Allstate (ALL) closed up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $171.
Revvity (RVTY) closed up more than +2% after Evercore ISI upgraded the stock to outperform from in line.
Airline stocks rose as crude oil prices declined, which will lower jet fuel prices and is positive for earnings. As a result, United Airlines Holdings (UAL) and Southwest Airlines (LUV) closed up more than +2%. Also, Delta Air Lines (DAL) and American Airlines Group (AAL) closed up more than +1%.
Across the markets…
March 10-year T-notes (ZNH24) on Thursday closed down -17 ticks, and the 10-year T-note yield rose by +7.9 bp to 3.995%. Mar T-notes Thursday posted moderate losses and remained above Wednesday’s 3-week low. T-notes were under pressure on negative carryover from higher European government bond yields after the 10-year German bund yield, and the 10-year UK gilt yield rose to 2-1/2 week highs. Also, Thursday’s stronger-than-expected U.S. reports on Dec ADP employment and weekly jobless claims show strength in the labor market that is hawkish for Fed policy. In addition, an increase in inflation expectations is bearish for T-notes as the 10-year inflation breakeven rate Thursday rose to a 3-week high of 2.241%.
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.
