What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.76%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.60%.
The broader indexes are moderately higher today on some positive corporate news, along with M&A activity. Western Digital is up more than +6% after reporting better-than-expected Q1 revenue, and Meta Platforms is up more than +2% on plans to offer people in the EU and Switzerland the option to pay a monthly subscription to use Facebook and Instagram without any ads.
Also, M&A activity is supporting equities after Healthpeak Properties acquired Physicians Realty Trust in a deal valued around $2.64 billion. Also, Realty Income acquired Spirit Realty Capital in a deal valued at around $9.3 billion.
Stocks also garnered support today, and crude oil prices dropped more than -2%, as Israel’s military action in Gaza is proceeding at a more cautious pace than expected, easing concerns that the conflict will widen in the Middle East. In addition, Iran’s foreign ministry said today that Hamas has pledged to release non-Israeli hostages “in the shortest time possible.”
U.S. Oct Dallas Fed manufacturing activity unexpectedly fell by -1.1 to -19.2, weaker than expectations of an increase to -16.0.
The markets are discounting a 0% chance that the FOMC will raise the funds rate by +25 bp at this week’s FOMC meeting (Tue/Wed), a 23% chance for that +25 bp rate hike at the following meeting on Dec 12-13, and a 36% chance for that +25 bp rate hike at the FOMC meeting after that on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields are higher. The 10-year T-note yield is up +7.0 bp at 4.905%. The 10-year German bund yield rebounded from a 2-week low of 2.762% and is up +0.3 bp at 2.835%. The 10-year UK gilt yield is up +4.3 bp at 4.586%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.34%. China’s Shanghai Composite Index today closed up +0.12%. Japan’s Nikkei 225 today closed down -0.95%.
Today’s stock movers…
Western Digital (WDC) is up more than +6% to lead gainers in the S&P 500 after reporting Q1 net revenue of $2.75 billion, above the consensus of $2.66 billion, and forecasting Q2 revenue of $2.85 billion-$3.05 billion, the midpoint higher than the consensus of $2.9 1billion.
AbbVie (ABBV) is up more than +3% after Barclay’s upgraded the stock to overweight from equal weight with a price target of $170.
Meta Platforms (META) is up more than +2% on plans to offer people in the EU and Switzerland the option to pay a monthly subscription to use Facebook and Instagram without any ads.
Amazon.com (AMZN) is up more than +2% after Guotai Junan Securities initiated coverage on the stock with an overweight recommendation and a price target of $162.80.
Entergy (ETR) is up more than +2% after it agreed to sell its gas distribution business to Bernhard Capital Partners for approximately $484 million.
Spirit Realty Capital (SRC) is up more than +8% after Realty Income acquired the company in a deal valued at around $9.3 billion.
Physicians Realty Trust (DOC) is up more than +2% after Healthpeak Properties acquired the company in a deal valued at around $2.64 billion.
McDonald’s (MCD) is up more than +1% after reporting Q3 comparable sales rose +8.8%, higher than the consensus of +7.8%.
L3Harris Technologies (LHX) is up more than +1% after Raymond James upgraded the stock to outperform from market perform with a price target of $210.
ON Semiconductor (ON) is down more than -19% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q4-adjusted EPS of $1.13-$1.27, weaker than the consensus of $1.36.
Revvity (RVTY) is down more than -18% after cutting its full-year revenue forecast to $2.72 billion-$2.74 billion from a previous forecast of $2.80 billion-$2.85 billion.
Align Technology (ALGN) is down more than -7% as analysts have cut their average price target on the stock by an average of -27% since the company reported earnings last Wednesday.
Realty Income (O) is down more than -5% after acquiring Spirit Realty Capital in a deal valued at around $9.3 billion.
Datadog (DDOG) is down more than -2% after Baird downgraded the stock to neutral from outperform.
Check Point Software (CHKP) is down more than -1% after reporting Q3 deferred revenue of $1.71 billion, weaker than the consensus of $1.74 billion.
Healthpeak Properties (PEAK) is down more than -1% after acquiring Physicians Realty Trust in a deal valued at around $2.64 billion.
Across the markets…
December 10-year T-notes (ZNZ23) are down -15 ticks, and the 10-year T-note yield is up +7.0 bp at 4.905%. A rally in stocks today has curbed the safe-haven demand for T-notes. Also, supply pressures are weighing on T-notes ahead of Wednesday’s refunding announcement when the Treasury is expected to announce it will sell $114 in T-notes and T-bonds in November’s quarterly refunding, unchanged from last quarter. Losses in T-notes are limited by expectations the FOMC will leave interest rates unchanged at the Tue-Wed policy meeting.
The dollar index (DXY00) today is down -0.24. Strength in equity markets today has reduced liquidity demand for the dollar. The dollar is also under pressure on the likelihood that the Fed will keep its monetary policy unchanged at the Tue-Wed FOMC meeting. Rising T-note yields today are providing underlying support for the dollar.
EUR/USD (^EURUSD) today is up +0.41%. A weaker dollar today is supportive of the euro. EUR/USD also garnered support on today’s news that German Q3 GDP contracted less than expected and Eurozone Oct economic confidence fell less than expected. On the negative side is today’s decline in the 10-year German bund yield to a 2-week low and the smaller-than-expected increase in German Oct CPI, a dovish factor for ECB policy.
Eurozone Oct economic confidence fell -0.1 to 93.3, stronger than expectations of 93.0.
German Q3 GDP fell -0.1% q/q, stronger than expectations of -0.2% q/q.
German Oct CPI (EU harmonized) eased to +3.0% y/y from +4.3% y/y in Sep, better than expectations of +3.3% y/y and the smallest increase in 2-1/4 years.
ECB comments today were mixed for the euro. On the positive side, ECB Governing Council member Kazimir said, "Bets on ECB interest rate cuts happening in the first half of next year are entirely misplaced," and the ECB "will have to stay at the peak for the next few quarters." Conversely, ECB Governing Council member Simkus believes the ECB won't need to increase interest rates at its December policy meeting, saying, "the current restrictive levels are sufficient."
USD/JPY (^USDJPY) today is up +0.07%. The yen today fell back from a 1-1/2 week high against the dollar and is slightly lower as rising T-note yields weighed on the yen. The yen today initially moved higher after the 10-year JGB bond yield rose to a new 10-year high at 0.897%, which strengthened the yen’s interest rate differentials.
December gold (GCZ3) today is up +8.8 (+0.44%), and Dec silver (SIZ23) is up +0.578 (+2.53%). Precious metals prices today are moderately higher, with silver climbing to a 1-week high. A weaker dollar today is bullish for metals prices. Also, the ongoing Israeli-Hamas conflict continues to support safe-haven demand for precious metals. Silver prices found support from today’s slightly stronger-than-expected German Q3 GDP report, a supportive 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.
