What you need to know…
The S&P 500 Index ($SPX) (SPY) Wednesday rose by +1.05%, the Dow Jones Industrials Index ($DOWI) (DIA) rose by +0.67%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose by +1.77%.
Stocks on Wednesday rallied, with the S&P 500 and Nasdaq 100 posting 1-week highs and the Dow Jones Industrials posting a 1-1/2 week high. Stocks rose Wednesday as weaker-than-expected U.S. ADP employment and ISM manufacturing reports knocked bond yields lower and boosted stocks, since the weak news may keep the Fed from further tightening monetary policy.
Stocks extended their gains Wednesday afternoon after comments from Fed Chair Powell suggested the Fed could pause its interest rate hiking campaign indefinitely when he said, "Given how far we have come, along with the uncertainties and risks we face, the FOMC is proceeding carefully."
On the negative side, Paycom Software closed down more than -38% after cutting its full-year revenue forecast. Also, Estee Lauder closed down more than -18% after reporting Q1 adjusted net sales below consensus and forecasting Q2 EPS below consensus. In addition, Match Group and Trimble closed down more than -12% after forecasting Q4 revenue below consensus.
The FOMC voted 12-0 to keep the federal funds target range unchanged at 5.25%-5.50%. The FOMC said, "tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation." The committee added that they would take into account the cumulative tightening of monetary policy, as well as lag effects on the economy and inflation, in determining "the extent of additional policy firming that may be appropriate to return inflation to 2% over time."
The U.S. Oct ADP employment change rose +113,000, weaker than expectations of +150,000.
The U.S. Oct ISM manufacturing index unexpectedly fell -2.3 to 46.7, weaker than expectations of no change at 49.0.
U.S Sep JOLTS job openings unexpectedly rose +53,000 to a 4-month high of 9.553 million, stronger than expectations of a decline to 9.400 million.
The markets are discounting the chances at 19% for a +25 bp rate hike at the next FOMC meeting on Dec 12-13, and the chances at 27% for that +25 bp rate hike at the following FOMC meeting 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 Wednesday moved lower. The 10-year T-note yield fell to a 2-week low of 4.751% and finished down -16.1 bp at 4.770%. The 10-year German bund yield fell to a 2-week low of 2.749% and finished down -4.2 bp at 2.764%. The 10-year UK gilt dropped to a 2-week low of 4.450% and finished down -1.3 bp at 4.499%.
The China Oct Caixin manufacturing PMI unexpectedly fell -1.1 to 49.5, weaker than expectations of an increase to 50.8.
Overseas stock markets Wednesday settled higher. The Euro Stoxx 50 closed up +0.75%. China’s Shanghai Composite Index today closed up +0.14%. Japan’s Nikkei 225 today closed up +2.41%.
Today’s stock movers…
Generac Holdings (GNRC) closed up more than +14% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $1.64, stronger than the consensus of $1.51.
Trane Technologies Plc (TT) closed up more than +12% after reporting Q3 adjusted EPS continuing operations of $2.79, better than the consensus of $2.66.
Assurant (AIZ) closed up more than +11% after reporting Q3 net premiums earned of $2.36 billion, above the consensus of $2.28 billion.
Garmin Ltd (GRMN) closed up more than +10% after reporting Q3 revenue of $1.28 billion, above the consensus of $1.20 billion, and raising its full-year revenue forecast to $5.15 billion from a prior forecast of $5.05 billion.
Advanced Micro Devices (AMD) closed up more than +9% to lead gainers in the Nasdaq 100 despite reporting a disappointing Q4 forecast after it said its new MI300 AI chip will generate $2 billion in sales next year.
Martin Marietta Materials (MLM) closed up more than +7% after reporting Q3 adjusted Ebitda from continuing operations of $705.2 million, well above the consensus of $648.7 million, and raising its full-year adjusted Ebitda forecast to $2.05 billion-$2.15 billion from a previous forecast of $2.00 billion-$2.10 billion.
Homebuilders rallied Wednesday after the 10-yer T-note yield tumbled to a 2-week low, a supportive factor for housing demand. Toll Brothers (TOLL), PulteGroup (PHM), DR Horton (DHI), and Lennar (LEN) closed up more than +4%.
TE Connectivity Ltd (TEL) closed up more than +4% after reporting Q4 net sales of $4.04 billion, above the consensus of $4.01 billion.
Paycom Software (PAYC) closed down more than -38% to lead losers in the S&P 500 after reporting Q3 revenue of $406.3 million, below the consensus of $411.1 million, and cut its full-year revenue forecast to $1.68 billion from a previous forecast of $1.72 billion, weaker than the consensus of $1.72 billion.
Estee Lauder (EL) closed down more than -18% after reporting Q1 adjusted net sales of $3.52 billion, weaker than the consensus of $3.54 billion, and forecasting Q2 adjusted EPS of 48 cents-58 cents, well below the consensus of $1.25.
Match Group (MTCH) closed down more than -15% after forecasting Q4 revenue of $855 million-$865 million, well below the consensus of $893.6 million.
Trimble Inc (TRMB) closed down more than -13% after forecasting Q4 revenue of $890 million-$930 million, well below the consensus of $992.6 million.
Dupont de Nemours (DD) closed down more than -8% after reporting Q3 net sales of $3.10 billion, weaker than the consensus of $3.15 billion, and cut its full-year net sales forecast to $12.17 billion from a prior forecast of $12.45 billion-$12.55 billion.
Yum China Holdings (YUMC) closed down more than -15% after reporting Q3 comparable sales rose +4.00%, weaker than the consensus of +4.92%.
Humana (HUM) closed down more than -6% after forecasting full-year adjusted EPS of $28.25, below the consensus of $28.30.
Verisk Analytics (VRSK) closed down more than -2% after forecasting full-year consolidated revenue of $2.63 billion-$2.66 billion, below the consensus of $2.67 billion.
Across the markets…
December 10-year T-notes (ZNZ23) on Wednesday closed up +22 ticks, and the 10-year T-note yield fell by -16.1 bp to 4.770%. Dec T-notes Wednesday rallied to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 4.751%. T-notes opened higher after the Treasury said it would sell $112 billion of T-notes and T-bonds in next week’s quarterly refunding, below expectations of $114 billion. T-notes extended their gains on Wednesday’s weaker-than-expected ADP employment and ISM manufacturing reports.
T-notes raced to their highs Wednesday afternoon after the FOMC paused its rate hiking campaign for the second straight meeting and after Fed Chair Powell said the FOMC would “proceed carefully” on future policy moves, bolstering speculation the Fed might be done tightening for this cycle. Finally, easing inflation expectations supported T-notes after the 10-year breakeven inflation rate fell to a 1-week low Wednesday of 2.383%.
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.
