What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.19%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.43%.
Stocks this morning are modestly higher, with the Dow Jones Industrials posting a 1-3/4 year high and the Nasdaq 100 posting a 1-week high. The broader market is wavering ahead of Tuesday’s U.S. consumer price report and the Tue/Wed FOMC meeting results. U.S. Nov CPI is expected to ease to +3.1% y/y from +3.2% y/y in Oct, while Nov CPI ex-food and energy is expected to remain unchanged at +4.0% y/y.
The markets will look to the results of this week’s central bank meetings from the Fed, ECB, and BOE to see if policymakers support pausing their interest rate hike campaigns and when they may begin to pivot to easier policies.
Strength in chip stocks is boosting the technology sector and the overall market after Bloomberg Intelligence said that with a bottom confirmed across most end markets and secular tailwinds from generative AI, 2024 is poised to be a year of robust fundamental growth for chip stocks.
M&A activity is supporting stocks after Occidental Petroleum agreed to acquire CrownRock LP in a cash-and-stock deal valued at about $12 billion. Also, Macy’s reportedly received a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
Also, on the bullish side, Cigna is up more than +16% after it ended talks on acquiring Humana, and it said it will boost its stock buyback program by an additional $10 billion. Also, Macy’s is up more than +16% after receiving a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management. In addition, Broadcom, Snap, and Universal Health Services are up more than +3% after being upgraded.
On the bearish side for stocks, Meta Platforms, Amazon.com, and Alphabet are down more than -2% after Bloomberg Intelligence said companies offering digital wallets and payment apps might come under Consumer Financial Protection Bureau (CFPB) supervision, increasing compliance costs and regulatory demands. Also, Albemarle is down more than -2% after Morgan Stanley cut its view for the North American chemicals sector to in-line from attractive. In addition, Paramount Global is down more than -3% after Loop Capital Markets downgraded the stock to sell from hold.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting 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 42% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are nearly fully discounting (99%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are mixed. The 10-year T-note yield is up +3.6 bp at 4.262%. The 10-year German bund yield is down -0.0 bp at 2.267%. The 10-year UK gilt yield is up +3.1 bp at 4.072%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.33%. China’s Shanghai Composite Index closed up +0.74%. Japan’s Nikkei Stock Index closed up +1.50%.
Today’s stock movers…
Cigna (CI) is up more than +16% to lead gainers in the S&P 500 after it ended talks on acquiring Humana and said it would boost its stock buyback program by an additional $10 billion.
Semiconductor stocks are climbing today after Bloomberg Intelligence said that with a bottom confirmed across most end markets and secular tailwinds from generative AI, 2024 is poised to be a year of robust fundamental growth for chip stocks. As a result, Globalfoundries (GFS) is up more than +5% to lead gainers in the Nasdaq 100. Also, KLA Corp (KLAC) and Applied Materials (AMAT) are up more than +4%. In addition, Intel (INTC) is up more than +3% to lead gainers in the Dow Jones Industrials. Finally, Micron Technology (MU) and Lam Research (LRCX) are up more than +3%, and Microchip Technology (MCHP), Advanced Micro Devices (AMD), and ON Semiconductor Corp (ON) are up more than +2%.
Broadcom (AVGO) is up more than +5% after Citigroup restarted coverage of the stock with a buy rating and a price target of $1,100.
Macy’s (M) is up more than +16% after receiving a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management.
Snap (SNAP) is up more than +3% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $22.
Universal Health Services (UHS) is up more than +3% after Goldman Sachs double-upgraded the stock to buy from sell.
Nike (NKE) is up more than +2% after Citigroup upgraded the stock to buy from neutral with a price target of $135.
HP Inc (HPQ) is up more than +2% after Evercore ISI upgraded the stock to outperform from in-line with a price target of $40.
Paramount Global (PARA) is down more than -3% to lead losers in the S&P 500 after Loop Capital Markets downgraded the stock to sell from hold with a price target of $12.
Meta Platforms (META), Amazon.com (AMZN), and Alphabet (GOOGL) are down more than -2% after Bloomberg Intelligence said companies offering digital wallets and payment apps might come under Consumer Financial Protection Bureau (CFPB) supervision, increasing compliance costs and regulatory demands. Also, Apple (AAPL) is down more than -1% on the news to lead losers in the Dow Jones Industrials.
JD.com (JD) is down more than -3% to lead losers in the Nasdaq 100 after the Nasdaq 100 announced the stock would be removed from the index before the market opens on Monday, December 18.
Albemarle (ALB) is down more than -2% after Morgan Stanly cut its view for the North American chemicals sector to in-line from attractive.
Biomea Fusion (BMEA) is down more than -32% after reporting underwhelming topline updates from a dosing cohort of a mid-stage trial for its drug in treating patients with type 2 diabetes.
Super Micro Computer (SMCI) is down more than -1% after Susquehanna Financial Group downgraded the stock to negative from neutral.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -5 ticks, and the 10-year T-note yield is up +3.6 bp at 4.262%. Mar T-note prices this morning are moderately lower on supply pressures, as the Treasury will auction $50 billion of 3-year T-notes and $37 billion of 10-year T-notes later today. Also, position squaring is weighing on T-notes ahead of the results of the Tue/Wed FOMC meeting.
The dollar index (DXY00) today is up by +0.17% and just below last Friday’s 3-week high. Higher T-note yields today are supportive of the dollar. Also, weakness in the yen today is supportive of the dollar on a report that the BOJ is in no hurry to end negative interest rates. The dollar also has carryover support from last Friday’s stronger-than-expected U.S. Nov payroll report.
EUR/USD (^EURUSD) today is down by -0.12% and is modestly above last Friday's 3-1/2 week low. A stronger dollar today is undercutting the euro. Also, position squaring is weighing on the euro ahead of Thursday’s ECB meeting results. Losses in the euro are limited as swap prices show that the chances of an ECB rate cut in Q1-2024 have fallen.
Swaps tied to ECB meeting dates have now priced in a 60% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting, falling back from last Friday’s 67%.
USD/JPY (^USDJPY) today is up by +0.80%. The yen today is under pressure on a report that the BOJ is in no hurry to exit its negative interest rate policy. Also, higher T-note yields today are undercutting the yen. In addition, the sharp +1.5% rally in the Nikkei Stock Index today reduced the safe-haven demand for the yen.
BOJ officials reportedly see little need to rush into scrapping its negative interest rate policy as they have yet to see enough evidence of wage growth that would support sustainable inflation.
Japan's Nov machine tool orders fell -13.6% y/y, the eleventh consecutive month orders have declined.
The Japan Q4 BSI large manufacturing business conditions rose to 5.7 from 5.4 in Q3, the highest in 2 years.
February gold (GCG4) this morning is down -9.9 (-0.49%), and Mar silver (SIH24) is down -0.116 (-0.50%). Gold and silver prices this morning are moderately lower, with gold falling to a 2-1/2 week low and silver falling to a 3-1/2 week low. A stronger dollar today is negative for metal prices. Also, higher T-note yields are bearish for precious metals. In addition, gold is under pressure on negative carryover from last Friday’s stronger-than-expected Nov payroll report that dampened expectations for the Fed to ease monetary policy. Finally, silver prices are sliding on industrial metals demand concerns after Japan’s Nov machine tool orders fell -13.6% y/y, the eleventh consecutive month that machine tool orders have declined.
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.
