What you need to know…
The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.46%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.82%.
The S&P 500 climbed to a 20-month high, while the Dow Jones Industrials and Nasdaq 100 climbed to 1-3/4 year highs. Stocks found support after Tuesday’s U.S. Nov CPI eased to a 5-month low, bolstering hopes the Fed will start cutting interest rates in the first half of 2024. The markets are awaiting the outcome of the 2-day FOMC meeting that ends Wednesday. Stocks also saw support after the 10-year T-note yield fell by -2.7 bp.
The U.S. Nov CPI eased to +3.1% y/y from +3.2% y/y in Oct, in line with expectations. The Nov CPI report of +3.1% was the smallest increase in 5 months and was just slightly above June’s 2-3/4 year low of +3.0%. The Nov core CPI report of +4.0% y/y was in line with expectations and was unchanged from October’s 2-1/4 year low.
M&A activity was also supportive of stocks. Icosavax (ICVX) rallied +50% after AstraZeneca Plc agreed to buy the company for about $1.1 billion. Also, Seagen (SGEN) rallied +3.6% after Pfizer said it had received all required regulatory approvals to close its acquisition of the company on December 14.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting. The markets are then discounting the chances for a -25 bp rate hike at 3% for the Jan 30-31 meeting, 43% for the March 19-20 meeting, and more than 100% for the April 30-May 1 meeting.
U.S. and European government bond yields fell on Tuesday. The 10-year T-note yield fell -2.7 bp to 4.206%. The 10-year German bund yield fell by -4.4 bp to 2.226%. The 10-year UK gilt yield fell sharply by -11.0 bp to 3.967%.
Overseas stock markets closed mixed on Tuesday. The Euro Stoxx 50 closed -0.08%. China’s Shanghai Composite Index closed up +0.40%. Japan’s Nikkei Stock Index closed up +0.16%.
Today’s stock movers…
Centene (CNC) rallied +2.8% after forecasting 2024 revenue of $142.5 billion-$145.5 billion, stronger than the consensus of $141.77 billion, and authorizing a $4 billion boost to its stock buyback program.
Seagen (SGEN) rallied +3.55% after Pfizer said it had received all required regulatory approvals to close its acquisition of the company on December 14.
Take-Two Interactive Software (TTWO) rallied +3.29% after Wolfe Research initiated coverage of the stock with an outperform recommendation.
A O Smith (AOS) rallied +2.09% after Northcoast Research upgraded the stock to buy from neutral with a price target of $90.
Icosavax (ICVX) rallied +50% after AstraZeneca Plc agreed to buy the company for about $1.1 billion.
Zillow Group (ZG) rallied +3.90% after JMP Securities upgraded the stock to market outperform from market perform with a price target of $60.
HubSpot (HUBS) rallied +5.35% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $610.
Oracle (ORCL) fell -12.23% to lead losers in the S&P 500 after reporting Q2 adjusted revenue of $12.90 billion, weaker than the consensus of $13.05 billion.
Johnson Controls (JCI) fell -5.97% after forecasting 2024 adjusted EPS of $3.65-$3.80, weaker than the consensus of $3.96.
Moderna (MRNA) fell -4.60% after announcing that CEO Bancel will take over sales and marketing management responsibilities in 2024.
Lucid Group (LCID) fell -8.24% after CFO House resigned effective immediately.
Macy’s (M) fell -8.06% after Citigroup downgraded the stock to sell from neutral.
Illumina (ILMN) rose +0.24% even though Bank of America downgraded the stock to underperform from neutral with a price target of $100.
Hasbro (HAS) fell -0.82% after it said it was cutting 1,100 positions, or 20% of its staff, following an additional strategic review as recent sales disappointed.
Airbnb (ABNB) fell -1.41% after Barclays downgraded the stock to underweight from equal weight with a price target of $100.
Across the markets…
March 10-year T-notes (ZNH24) rose +7 ticks, and the 10-year T-note yield fell -2.7 bp to 4.206%. T-note prices gained support from a friendly U.S. Nov CPI report. There was also some supply relief after the Treasury sold $21 billion of 30-year T-bonds, concluding this week’s $108 billion Treasury auction package of T-notes and T-bonds.
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.
