What you need to know…
The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.41%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.53%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.43%.
Stocks on Wednesday finished higher, with the S&P 500 climbing to a 3-1/2 month high, the Dow Jones Industrials posting a 3-1/4 month high, and the Nasdaq 100 climbing to a 1-3/4 year high. Stocks are finding support today on some positive corporate news. EBay closed up more than +3% after a private equity group offered to buy Adevinta ASA for about $15 billion. EBay is one of Adevinta’s largest shareholders and agreed to sell half of its stake in Adevinta for $2.2 billion in cash and plans to exchange its remaining stock for a 20% holding in the newly privatized company. Also, HP Inc. closed up more than +2% after reporting Q4 adjusted operating margin above consensus.
A slight easing of geopolitical risks in the Middle East is a positive factor for stocks after Hamas agreed to free 50 hostages from Gaza in return for a four-day ceasefire with Israel and the release of 150 Palestinian prisoners.
Crude oil prices fell more than -1% Wednesday after this weekend’s OPEC+ meeting was delayed until Nov 30 as talks ran into trouble amid Saudi dissatisfaction with other members’ oil production levels.
On the negative side for stocks, T-note yields increased after weekly jobless claims fell more than expected and after the University of Michigan U.S. Nov inflation expectations unexpectedly rose. Also, Autodesk closed down more than -6% after forecasting 2024 adjusted EPS below consensus. In addition, Deere & Co fell more than -3% after forecasting 2024 net income well below consensus.
U.S. weekly initial unemployment claims fell -24,000 to a 5-week low of 209,000, showing a stronger labor market than expectations of 227,000. Weekly continuing claims unexpectedly fell -22,000 to 1.840 million, better than expectations of an increase to 1.875 million.
U.S. Oct capital goods new orders nondefense ex-aircraft, a proxy for capital spending, unexpectedly fell -0.1% m/m, weaker than expectations of +0.1% m/m.
The University of Michigan U.S. Nov consumer sentiment index was revised upward by +0.9 to 61.3, stronger than expectations of 61.0.
The University of Michigan U.S. Nov 1-year inflation expectations unexpectedly rose +0.1 to a 7-month high of 4.5%, above expectations of no change at 4.4%. Also, the Nov 5-10-year inflation expectations remained unchanged from Oct at 3.2%, stronger than expectations of a -0.1 point decline to 3.1%.
The markets are discounting a 5% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 9% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +20% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 65% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields Wednesday were mixed. The 10-year T-note yield rebounded from a 2-month low of 4.362% and finished up +2.3 bp at 4.416%. The 10-year German bund yield fell -0.6 bp to 2.560%. The 10-year UK gilt yield rose +5.0 bp to 4.155%.
ECB Governing Council member and Bundesbank President Nagel said, "I believe we are close to the level seen as terminal rate, and ECB interest rates will stay where they are for a while."
ECB Vice President Guindos said, "The outlook that markets are taking with respect to the evolution of the Eurozone economy, I would say, is a little bit sanguine and optimistic."
The Eurozone Nov consumer confidence indicator rose +0.9 to -16.9, stronger than expectations of -17.8.
Overseas stock markets on Wednesday settled mixed. The Euro Stoxx 50 closed up +0.46%. China’s Shanghai Composite Index closed down -0.79%. Japan’s Nikkei Stock Index closed up +0.29%.
Today’s stock movers…
EBay (EBAY) closed up more than +3% to lead gainers in the S&P 500 and Nasdaq 100 after an investor group led by Permira and Blackstone offered to buy Adevinta ASA for about $15 billion. EBay is one of Adevinta’s largest shareholders and agreed to sell half of its stake in Adevinta for $2.2 billion in cash and plans to exchange its remaining stock for a 20% holding in the newly privatized company.
HP Inc (HPQ) closed up more than +2% despite reporting weaker-than-expected Q4 revenue after reporting a Q4 adjusted operating margin of 9.00%, better than the consensus of 8.89%.
Amazon.com (AMZN) closed up more than +1% after Adobe Analytics said U.S. consumers had spent $63.2 billion online in the first 20 days of the holiday shopping season, up +5% from last year and above the consensus of +4.8%.
Microsoft (MSFT) closed up more than +1% after Open AI said it would bring back Sam Altman and overhaul its board with new directors, a victory for Microsoft, which backed the company with a $10 billion stake.
GoDaddy (GDDY) closed up more than +2% after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $124.
Bristol-Myers Squibb (BMY) closed up more than +1% on signs of insider buying after an SEC filing showed director Samuels bought $423,385 of shares on Monday.
Clorox (CLX) closed up nearly +1% after JPMorgan Chase upgraded the stock to neutral from underweight.
Autodesk (ADSK) closed down more than -6% to lead losers in the S&P 500 and Nasdaq 100 after forecasting 2024 adjusted EPS of $7.43-$7.49, the midpoint below the consensus of $7.47.
Deere & Co (DE) closed down more than -3% after forecasting 2024 net income of $7.75 billion-$8.25 billion, well below the consensus of $9.32 billion.
Nvidia (NVDA) closed down more than -2% despite reporting stronger than expected Q3 revenue when it forecast Q4 revenue of $20 billion, plus or minus 2%, above the consensus of $17.9 billion, but below an even loftier whisper number of $21 billion.
Guess (GES) closed down more than -12% after reporting Q3 EPS of 49 cents, weaker than the consensus of 61 cents, and cutting its full-year adjusted EPS forecast to $2.67-$2.74 from a previous estimate of $2.88-$3.08.
Urban Outfitters (URBN) closed down more than -12% after reporting Q3 net sales of $324.4 million, below the consensus of $325.5 million.
Nordstrom Inc (JWN) closed down more than -4% after reporting Q3 total revenue of $3.32 billion, below the consensus of $3.42 billion.
Walgreens Boots Alliance (WBA) closed down more than -1% to lead losers in the Dow Jones Industrials after Evercore ISI cut its price target on the stock to $22 from $25.
Across the markets…
December 10-year T-notes (ZNZ23) Wednesday closed down -4 ticks, and the 10-year T-note yield rose +2.3 bp to 4.416%. Dec T-notes Wednesday gave up an early advance and posted moderate losses. Wednesday’s stronger-than-expected U.S. economic news weighed on T-notes after weekly jobless claims fell more than expected and after the University of Michigan U.S. Nov inflation expectations unexpectedly rose. Also, T-note prices were undercut Wednesday as a rally in stocks curbed safe-haven demand for government debt. T-notes Wednesday initially moved higher after a plunge in crude prices pushed the 10-year breakeven inflation expectations rate down to a 2-1/4 month low of 2.236%.
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.
