The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.29%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.86%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.17%.
Stock indexes settled moderately lower on Tuesday as they consolidated the past week’s rally to record highs. Higher bond yields Tuesday fueled some profit-taking pressures in stocks following five straight sessions of gains. Also, long liquidation in stocks ahead of Wednesday's US consumer price report weighed on the overall market.
Stocks have rallied sharply over the past week, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new record highs on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.
Positive Fed comments on Tuesday were bullish for stocks. Richmond Fed President Barkin said the US economy looks "pretty good," and the Fed is in a position to respond however the economy evolves. Also, Minneapolis Fed President Kashkari said only inflation could derail a Fed rate cut in December, and "if we saw inflation surprises to the upside between now and then, that might give us pause."
The markets are looking ahead to Wednesday’s US consumer price report for October, with Oct CPI expected to climb to +2.6% y/y, up from +2.4% y/y in Sep, and core Oct CPI expected to remain unchanged from Sep at +3.3% y/y. Also, Friday’s report on retail sales will be looked at to see if consumer spending is holding up. Oct retail sales are expected to be up +0.3% m/m, and Oct retail sales ex-autos are also expected to be up +0.3% m/m.
Of the 85% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average. According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.4% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.
The markets are discounting the chances at 62% for a -25 bp rate cut at the December 17-18 FOMC meeting.
Overseas stock markets Tuesday settled lower. The Euro Stoxx 50 tumbled to a 2-month low and closed down -2.25%. China's Shanghai Composite Index closed down -1.39%. Japan's Nikkei Stock 225 closed down -0.40%.
Interest Rates
December 10-year T-notes (ZNZ24) Tuesday closed down by -15.5 ticks. The 10-year T-note yield rose +13.1 bp to 4.435%. T-notes were under pressure Tuesday from carryover weakness in European government bonds. Also, upbeat comments Tuesday from Richmond Fed President Barkin curbed safe-haven demand for T-notes when he said the US economy looks "pretty good." In addition, concerns about inflationary pressures of future policies from President-elect Trump are weighing on T-notes.
European government bond yields Tuesday moved higher. The 10-year German bund yield rebounded from a 1-1/2 week low of 2.299% and finished up +3.6 bp to 2.362%. The 10-year UK gilt yield rose +7.4 bp to 4.499%.
The German Nov ZEW survey expectations of economic growth unexpectedly fell -3.7 to 7.4 versus expectations of an increase to 13.2.
ECB Governing Council member Rehn said disinflation in the Eurozone is "well on track," and the growth outlook "seems to be weakening," and "that strengthens the case for an ECB rate cut in December."
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 23% for a -50 bp rate cut at the same meeting.
US Stock Movers
Mosaic (MOS) closed down more than -7% to lead losers in the S&P 500 after reporting Q3 net sales of $2.8 billion, weaker than the consensus of $3.14 billion.
GE Vernova (GEV) closed down more than -7% after the Financial Times reported that CEO Strazik said the company plans to postpone searching for new offshore turbine orders until market conditions improve.
Home builders retreated Tuesday after the 10-year T-note yield jumped more than +13 bp, which boosts mortgage rates and is negative for housing demand. As a result, PulteGroup (PHM), Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) closed down more than -3%.
Elevance Health (ELV) closed down more than -2% after the CFO said he sees pressure in Medicaid persisting in 2025 and sees Medicare Advantage margins missing their 2025 targets.
Neurogene (NGNE) closed down more than -43% after a disclosure indicated an emerging serious adverse event in a trial participant for the experimental Rett syndrome drug.
Alnylam Pharmaceuticals (ALNY) closed down more than -3% after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $205.
Knight-Swift Transportation Holdings (KNX) closed down more than -4% after Citigroup downgraded the stock to sell from neutral with a price target of $56.
Airbnb (ABNB) closed down more than -2% after Phillip Securities downgraded the stock to reduce from neutral with a price target of $120.
Tyson Foods (TSN) closed up more than +6% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 92 cents, stronger than the consensus of 72 cents.
Honeywell International (HON) closed up more than +3% to lead gainers in the Dow Jones Industrials and Nasdaq 100 after Elliot Investment Management said it built a $5 billion stake in the company and is calling for a breakup of the company.
Live Nation Entertainment (LYV) closed up more than +4% after reporting Q3 adjusted operating income of $909.8 million, stronger than the consensus of $856.6 million.
Nvidia (NVDA) closed up more than +2% after Redburn initiated coverage on the stock with a buy recommendation and a price target of $178.
Shopify (SHOP) closed up more than +21% after reporting Q3 revenue of $2.16 billion, better than the consensus of $2.12 billion.
Twilio (TWLO) closed up more than +2% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $120.
Molson Coors Beverage (TAP) closed up more than +2% after JPMorgan Chase said the latest data showed improving trends for the company as the latest 4-week trend to November 2 saw dollar takeaway down -1.9%, an improvement of 200 bp over the prior 4-week period.
Earnings Reports (11/13/2024)
Cisco Systems Inc (CSCO), Loar Holdings Inc (LOAR), NU Holdings Ltd/Cayman Islands (NU), Tetra Tech Inc (TTEK).
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.
