What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.22%.
Stocks this morning are moderately higher, with the S&P 500 posting a 4-1/4 month high and the Nasdaq 100 posting a 1-week high. This morning, stocks recovered early losses and moved higher after U.S. economic reports bolstered the outlook for an economic soft landing. Stocks initially moved lower as bond yield jumped after the monthly U.S. payroll report showed a larger-than-expected increase in nonfarm payrolls and an unexpected decline in the unemployment rate to a 4-month low, dampening speculation that the Fed will cut interest rates as early as Q1 next year.
However, stocks reversed and moved higher, as easing inflation expectations, and a larger-than-expected increase in the University of Michigan’s U.S. Dec consumer sentiment index improved soft-landing prospects. U.S. stocks also have a positive carryover from today’s rally in the Euro Stoxx 50 to a 16-year high.
U.S. Nov nonfarm payrolls rose +199,000, stronger than expectations of +185,000. The Nov unemployment rate fell -0.2 to a 4-month low of 3.7%, showing a stronger labor market than expectations of no change at 3.9%.
U.S. Nov average hourly earnings were +4.0% y/y, unchanged from Oct and right on expectations.
The University of Michigan U.S. Dec consumer sentiment index rose +8.1 to a 4-month high of 69.4, stronger than expectations of 62.0.
The University of Michigan U.S. Dec 1-year inflation expectations eased to a 2-3/4 year low of 3.1% from 4.5% in Nov, better than expectations of 4.3%. Also, the Dec 5-10 year inflation expectations eased to 2.8% from 3.2% in Nov, better than expectations of 3.1%.
On the positive side for stocks, Paramount Global is up more than +11% after a Deadline report said Davud Elison and RedBird Capital had expressed interest in buying the company. Also, Warner Bros Discovery is up more than +6% after Reuters said All3Media, jointly owned by Liberty Global and Warner Bros Discovery, said an unnamed buyer was pursuing it. In addition, Carrier Global is up more than +5% after Honeywell International agreed to buy the company’s security unit for $5 billion.
On the negative side, RH is down more than -13% after cutting its 2024 adjusted operating margin forecast. Also, SBA Communications is down more than -2% on signs of insider selling after an SEC filing showed director Bernstein sold $13.4 million of shares Tuesday and Wednesday. In addition, Cooper Cos is down more than -1% after forecasting 2024 adjusted EPS below consensus.
The markets are discounting a 1% 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 50% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (115%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are higher. The 10-year T-note yield is up +9.7 bp at 4.247%. The 10-year German bund yield is up +8.4 bp at 2.275%. The 10-year UK gilt yield is up +5.0 bp at 4.018%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +1.12%. China’s Shanghai Composite Index closed up +0.11%. Japan’s Nikkei Stock Index closed down -1.6%.
Today’s stock movers…
Paramount Global (PARA) is up more than +11% to lead gainers in the S&P 500 after a Deadline report said Davud Elison and RedBird Capital had expressed interest in buying the company.
Warner Bros Discovery (WBD) is up more than +6% to lead gainers in the Nasdaq 100 after Reuters said All3Media, jointly owned by Liberty Global and Warner Bros Discovery, said an unnamed buyer was pursuing it.
Carrier Global (CARR) is up more than +5% after Honeywell International agreed to buy the company’s security unit for $5 billion.
Freeport McMoRan (FCX) is up more than +4% after Moody’s Investors Service upgraded Freeport’s senior unsecured debt rating to Baa2 from Baa3.
Qorvo (QRVO) is up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $134.
Equifax (EFX) is up more than +2% after Deutsche Bank upgraded the stock to buy from hold.
Boeing (BA) is up more than +1% to lead gainers in the Dow Jones Industrials after people close to the matter said Boeing is closing on a sale of as many as 80 of its 787 Dreamliner jets to Thai Airways International.
SBA Communications (SBAC) is down more than -2% to lead losers in the S&P 500 on signs of insider selling after an SEC filing showed director Bernstein sold $13.4 million of shares Tuesday and Wednesday.
Newmont (NEM) is down more than -1% on weakness in mining stocks after gold prices fell to a 2-week low and silver prices fell to a 3-week low.
Cooper Cos (COO) is down more than -1% after forecasting 2024 adjusted EPS of $13.60-$14.00, weaker than the consensus of $14.05.
HashiCorp (HCP) is down more than -19% after several analysts cut their price targets on the stock after results showed a slowdown in key metrics, such as revenue from the previous quarter.
RH (RH) is down more than -13% after cutting its 2024 adjusted operating margin forecast to 13.6%-14% from a previous forecast of 14.5%-15.5 %, weaker than the consensus of 15.2%.
DocuSign (DOCU) is down more than -3% after giving a margin outlook that some analysts said was seen as cautious, considering its strong Q3 results.
Verisk Analytics (VRSK) is down more than -1% after Deutsche Bank downgraded the stock to hold from buy.
Pool Corp (POOL) is down more than -1% after Deutsche Bank downgraded the stock to hold from buy.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -27 ticks, and the 10-year T-note yield is up +9.7 bp at 4.247%. Mar T-note prices retreated this morning after U.S. Nov nonfarm payrolls rose more than expected, and the Nov unemployment rate unexpectedly declined to a 4-month low, showing strength in the labor market that is hawkish for Fed policy. T-notes recovered from their worst levels after the University of Michigan U.S. Dec inflation expectations eased more than expected.
The dollar index (DXY00) today is up by +0.27% and climbed to a 3-week high. The dollar jumped this morning after today’s stronger-than-expected U.S. Nov payroll report dampened speculation the Fed would begin cutting rates as soon as Q1. The dollar fell back from its best levels after stocks recovered early losses and moved higher, curbing liquidity demand for the dollar.
EUR/USD (^EURUSD) today is down by -0.11% and fell to a 3-1/2 week low. Today’s better-than-expected U.S Nov payrolls report boosted the dollar and undercut the euro. Losses in EUR/USD were limited as swap markets priced lower the chances of the ECB cutting interest rates early next year.
Swaps tied to ECB meeting dates have now priced in a 67% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting, falling back from an earlier chance of 75%.
USD/JPY (^USDJPY) today is up by +0.06%. The yen today is modestly lower as the stronger-than-expected U.S. Nov payroll report boosted the dollar. Also, higher T-note yields today are weighing on the yen. Losses in the yen are limited on carryover from Thursday after comments from BOJ Governor Ueda to the Japanese parliament bolstered speculation the BOJ would soon exit its ultra-easy monetary policy.
Today’s Japanese economic news was mixed for the yen. On the bearish side, Japan's Q3 GDP was unexpectedly revised lower to -2.9% (y/y annualized) from -2.1%, weaker than expectations of -2.0% and the steepest pace of contraction since the pandemic. Conversely, Oct labor cash earnings rose +1.5% y/y, stronger than expectations of +1.0% y/y. Also, the Nov eco watches survey outlook unexpectedly rose +1.0 to 49.3, stronger than expectations of a decline to 48.1.
February gold (GCG4) this morning is down -15.9 (-0.78%), and Mar silver (SIH24) is down -0.254 (-1.06%). Gold and silver prices this morning are moderately lower, with gold falling to a 2-week low and silver falling to a 3-week low. Today’s rally in the dollar index to a 3-week high is bearish for metals. Also, higher global bond yields today are weighing on precious metals. In addition, metals fell after today’s stronger-than-expected U.S. Nov payroll report dampened expectations for the Fed to ease monetary policy. Finally, an easing of inflation expectations curbs demand for gold as an inflation hedge and is bearish for prices after the University of Michigan’s U.S. Dec inflation expectations eased more than expected.
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.
