What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.18%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.42%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.05%.
Stocks this morning are mixed. Bond yields tumbled today after the Oct JOLTS job openings fell more than expected to a 2-1/2 year low, a sign the labor market is cooling and is a dovish factor for Fed policy. Stocks have positive carryover from today’s rally in the Euro Stoxx 50 to a 4-month high as European government bond yields fell after ECB Executive Board member Schnabel said another hike in interest rates by the ECB was "rather unlikely." Stock gains are limited after China’s Shanghai Composite fell to a 5-week low when Moody's Investors Service cut its outlook on China’s sovereign debt to negative, which is bearish for global growth prospects.
On the positive side for stocks, JM Sucker is up more than +4% after reporting better-than-expected Q2 adjusted EPS. Also, Tesla is up more than +4% after reporting its China November vehicle shipments rose +14.3% m/m to 82,432. In addition, CVS Health Corp is up more than +2% after forecasting stronger-than-expected 2024 revenue.
On the negative side, KeyCorp is down more than -3% after cutting its Q4 noninterest income estimate. Also, Procter & Gamble is down more than -2% after it said it expects to record $2.0 billion to $2.5 billion of charges from restructuring its business operations in certain enterprise markets. In addition, Designer Brands is down more than -32% after reporting Q4 adjusted EPS well below consensus and cutting its 2024 EPS forecast.
U.S. Oct JOLTS job openings fell -617,000 to a 2-1/2 year low of 8.733 million, showing a weaker labor market than expectations of 9.300 million.
The U.S. Nov ISM services index rose +0.9 to 52.7, stronger than expectations of 52.3.
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 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 76% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than discounting (148%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield fell to a 3-month low of 4.159% and is down -7.9 bp at 4.174%. The 10-year German bund yield fell to a 6-month low of 2.242% and is down -10.6 bp at 2.248%. The 10-year UK gilt yield dropped to a 6-1/4 month low of 4.008% and is down -17.7 bp at 4.016%.
Moody's Investors Service kept its long-term rating on China's sovereign bond at A1 but cut its outlook to negative from stable, saying China's usage of fiscal stimulus to support local governments and its spiraling property downturn poses risks to its economy.
The China Nov Caixin services PMI rose +1.1 to 51.5, stronger than expectations of 50.5.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.92%. China’s Shanghai Composite Index closed down -1.67%. Japan’s Nikkei Stock Index closed down -1.37%.
Today’s stock movers…
JM Sucker (SJM) is up more than +4% after reporting Q2 adjusted EPS of $2.59, better than the consensus of $2.45.
Tesla (TSLA) is up more than +4% to lead gainers in the Nasdaq 100 after reporting its China November vehicle shipments rose +14.3% m/m to 82,432.
CVS Health Corp (CVS) is up more than +2% after forecasting 2024 revenue of at least $366 billion, stronger than the consensus of $345.52 billion.
AT&T (T) is up more than +2% after it selected Ericsson AB to modernize its wireless network and said the new network will let it “quickly capitalize on the next generation of wireless technology.”
Gitlab (GTLB) is up more than +13% after reporting Q3 revenue of $149.7 million, better than the consensus of $141.7 million, and raising its 2024 revenue forecast to $573 million-$574 million from a previous forecast of $555 million-$557 million, stronger than the consensus of $556.3 million.
XP Inc (XP) is up more than +5% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30.
Ferguson Plc (FERG) is up more than +4% after reporting Q1 revenue of $7.71 billion, above the consensus of $7.62 billion.
Nvidia (NVDA) is up more than+1% after it said it plans to partner with Japanese research organizations, companies, and startups to build AI factories in Japan.
Albemarle (ALB) is down more than -3% after Piper Sandler downgraded the stock to underweight from neutral, citing a significant deterioration of global lithium markets.
KeyCorp (KEY) is down more than -3% after it cut its Q4 noninterest income estimate to down -5% to -8% from a previous view of up +1% to +3%.
Procter & Gamble (PG) is down more than -2% to lead losers in the Dow Jones Industrials after it said it expects to record $2.0 billion to $2.5 billion of charges from restructuring its business operations in certain enterprise markets to address “challenging macroeconomic and fiscal conditions.”
Designer Brands (DBI) is down more than -32% after reporting Q4 adjusted EPS of 24 cents, well below the consensus of 49 cents, and cutting its 2024 EPS forecast to 40 cents-70 cents from a prior view of $1.20-$1.50, weaker than the consensus of $1.28.
Vornado Realty Trust (VNO) is down more than -3% after Moody’s Investors Service cut the company’s senior unsecured debt rating to junk or Ba1 from Baa3.
Atlassian Corp (TEAM) is down more than -2% on signs of insider selling after an SEC filing showed Co-CEO and founder Farquhar sold $1.6 million of shares last Friday.
SpringWorks Therapeutics (SWTX) is down more than -8% after pricing an offering of 9.5 million shares at $29 per share, below Monday’s closing price of $31.66.
Take-Two Interactive Software (TTWO) is down more than 1% on disappointment that the company did not give a release date for its Grand Theft Auto VI game and only said it would be released in 2025.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +22 ticks, and the 10-year T-note yield is down -7.9 bp at 4.174%. Mar T-note prices this morning climbed to a 3-month high, and the 10-year T-note yield dropped to a 3-month low of 4.159%. T-notes have carryover support today from a rally in 10-year German bunds to a 6-month high. Also, a fall in inflation expectations supports T-notes after the 10-year U.S. breakeven inflation rate dropped to a 4-1/2 month low today at 2.207%. T-notes extended their gains this morning on signs of weakness in the U.S. labor market after the Oct JOLTS job openings fell more than expected to a 2-1/2 year low.
The dollar index (DXY00) today is up by +0.05% and posted a 1-1/2 week high. Today, the dollar found support on increased safe-haven demand after Moody’s Investors Service downgraded China’s credit outlook to negative from stable due to rising debt. Weakness in the euro also supported the dollar after dovish ECB comments knocked EUR/USD down to a 3-week low today. The dollar fell back from its best levels after the U.S. Oct JOLTS job openings fell more than expected to a 2-1/2 year low, a dovish factor for Fed policy.
EUR/USD (^EURUSD) today is down by -0.22% and slid to a 3-week low. The euro tumbled today on dovish comments from ECB Executive Board member Schnabel, who said another hike in interest rates by the ECB was "rather unlikely." Losses in the euro were limited after the ECB’s Oct 1-year inflation expectations were higher than expected and after the Eurozone Nov S&P composite PMI was revised upward.
ECB Executive Board member Schnabel said inflation in the Eurozone is showing a "remarkable" slowdown, making another hike in interest rates "rather unlikely."
The Eurozone Nov S&P composite PMI was revised upward by +0.5 to 47.6 from the previously reported 47.1.
Eurozone Oct PPI rose +0.2% m/m and fell -9.4% y/y, close to expectations of +0.2% m/m and -9.5% y/y.
The ECB's monthly inflation expectations survey showed Oct 1-year inflation expectations unchanged at 4.0% from Sep, stronger than expectations of 3.8%. 3-year inflation expectations were 2.5%, unchanged from Sep and right on expectations.
Swaps tied to ECB meeting dates have now priced in an 85% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have priced in a 72% chance of -50 bp of rate cuts by the April 11 ECB meeting.
USD/JPY (^USDJPY) today is down by -0.06%. The yen today is slightly higher and just below Monday’s 2-3/4 month high against the dollar. A slump in T-note yields today is supportive of the yen. Also, today’s decline in the Nikkei Stock Index to a 3-week low boosted some safe-haven demand for the yen. Gains in the yen are limited after Tokyo's November CPI rose less than expected, a dovish factor for BOJ policy.
The Japan Nov Jibun Bank services PMI was revised downward by -0.9 to 50.8 from the previously reported 51.7.
Tokyo Nov CPI eased to +2.6% y/y from +3.2% y/y in Oct, weaker than expectations of +3.0% y/y and the slowest pace of increase in 16 months. The Tokyo Nov CPI ex-fresh food and energy eased to +3.6% y/y from +3.8% y/y in Oct, better than expectations of +3.7% y/y.
February gold (GCG4) today is down -13.9 (-0.68%), and Mar silver (SIH24) is down -0.482 (-1.94%). Gold and silver this morning are moderately lower and posted 1-week lows. Today’s rally in the dollar index to a 1-1/2 week high undercut metals prices. A slump in the 10-year breakeven inflation rate today to a 4-1/2 month low has also curbed demand for gold as an inflation hedge. A decline in global bond yields today is limiting losses in precious metals. Also, dovish comments from ECB Executive Board member Schnabel were bullish for precious metals when she said another hike in interest rates by the ECB is "rather unlikely."
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.
