What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.75%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.84%.
Stocks this morning are modestly higher after U.S. economic reports signal the economy is slowing, bolstering expectations for Fed rate cuts next year. Positive corporate news supports equities, with Micron Technology up more than +6% after reporting better-than-expected Q1 revenue and forecasting Q2 revenue above consensus. Also, Cintas is up more than +6% after raising its full-year revenue forecast.
Stocks maintained their gains after this morning’s U.S. economic 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.
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 price data was revised lower as the Q3 GDP price index was revised 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 12% at the next FOMC meeting on Jan 30-31 and 87% at the following meeting on March 19-20.
U.S. and European government bond yields today are higher. The 10-year T-note yield dropped to a 4-3/4 month low of 3.827% but rebounded and is up +1.7 bp at 3.864%. The 10-year German bund yield dropped to a 9-month low of 1.941% but rebounded and is up +0.4 bp at 1.975%. The 10-year UK gilt yield fell to an 8-1/4 month low of 3.481% but recovered and is up +2.2 bp at 3.550%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.34%. 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) is up more than +7% 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.
CarMax (KMX) climbed more than +5% in pre-market trading after reporting Q3 EPS of 52 cents, stronger than the consensus of 42 cents.
Cintas (CTAS) is 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 are climbing today 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) is up more than +3%, and Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises (RCL) are up more than +2%.
Chip stocks are moving higher today after the 10-year T-note yield fell to a 4-3/4 month low. As a result, Marvell Technology (MRVL) is up more than +3%. Also, Globalfoundries (GFS), Applied Materials (AMAT), and ASML Holding NV (ASML) are up more than +2%. In addition, Qualcomm (QCOM), ON Semiconductors (ON), KLA Corp (KLAC), NXP Semiconductors NV (NXPI), Advanced Micro Devices (AMD), and Lam Research (LRCX) are up more than +1%.
Immunovant (IMVT) is up more than +8% after Phase 2 trial results showed its batoclimab exceeded 50% in treating patients with Graves’ disease.
Spotify Technology (SPOT) is up more than +2% after Pivotal Research Group upgraded the stock to buy from hold with a price target of $265.
Salesforce (CRM) is up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $350.
Paychex (PAYX) is down more than -5% 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.
Warner Bros Discovery (WBD) is down more than -4%, adding to Wednesday’s -5% drop after Axios reported the company is in talks with Paramount Global on a possible merger.
Comcast (CMCSA) is down more than -1%, adding to Wednesday’s -1% fall after it said hackers may have accessed usernames and stolen passwords of some customers.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -2 ticks, and the 10-year T-note yield is up +1.7 bp at 3.864%. Mar T-note prices this morning fell back from a 5-month nearest-futures high, and the 10-year T-note yield rebounded from a 4-3/4 month low of 3.827%. T-notes gave up early gains as today’s stock rally curbed safe-haven demand for T-notes. T-notes today 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 to an 8-1/4 month low. T-notes extended their gains on this morning’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. Also, a decline in inflation expectations supports T-notes after the 10-year breakeven inflation rate fell to a 1-week low today at 2.179%.
The dollar index (DXY00) today is down by -0.42%. The dollar is under pressure today after bond yields fell due to weaker-than-expected U.S. economic reports on Q3 GDP and Dec Philadelphia Fed business outlook survey. Also, the strength in stocks today has reduced liquidity demand for the dollar.
EUR/USD (^EURUSD) today is up by +0.43%. A weaker dollar today has sparked short covering in the euro. Also, hawkish comments from ECB Vice President Guindos boosted the euro when he said Eurozone inflation must converge toward 2% before the ECB can cut interest rates.
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."
Swaps tied to ECB meeting dates have now priced in a 48% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting.
USD/JPY (^USDJPY) today is down by -0.95%. A slump in T-note yields today is bullish for the yen. Also, today’s -1.59% fall in the Nikkei Stock Index sparked safe-haven yen buying. The yen also found support after the Japanese government lifted its forecast for price gains, including fresh food, to 2.5% in the fiscal year starting in April, up from a previous estimate of 1.9% and above the BOJ’s 2.0% price target.
February gold (GCG4) this morning is up +5.8 (+0.28%), and Mar silver (SIH24) is down -0.036 (-0.15%). Gold and silver prices this morning are mixed, with silver climbing to a 2-week high. A weaker dollar today is bullish for metals prices. Also, a slide in global bond yields today has boosted demand for gold as a store of value. However, gains in precious metals are limited from today’s stock rally. Also, silver prices are under pressure after today’s U.S. reports on Q3 GDP and Dec Philadelphia Fed business outlook survey were weaker than expected, a bearish factor for industrial metals demand.
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.
