What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.30%.
Stocks this morning are mixed, with the S&P 500 and Nasdaq 100 posting 1-3/4 year highs. Stocks are finding support from today’s friendly U.S. Nov PPI report, which showed easing producer price pressures that are dovish for Fed policy. The markets are now awaiting the conclusion of the 2-day FOMC meeting this afternoon.
The FOMC today is expected to hold interest rates steady for the third consecutive meeting, keeping its federal funds rate target range unchanged at 5.25%-5.50%. Fed Chair Powell is then expected to hold a press conference after the conclusion of today’s meeting. The markets will look for clues from the post-FOMC meeting statement and comments from Powell about whether and when the Fed expects to cut interest rates next year.
U.S. Nov PPI final demand eased to +0.9% y/y from +1.2% y/y in Oct, better than expectations of +1.0% y/y and the smallest increase in 5 months. Also, Nov PPI ex-food and energy eased to +2.0% y/y from +2.3% y/y in Oct, better than expectations of +2.2% and the smallest increase in 2-3/4 years.
On the bullish side for stocks, Vertex Pharmaceuticals is up more than +9% after it announced positive results from a mid-stage study of its non-opioid drug to treat diabetic peripheral neuropathy. Also, Take-Two Interactive Software is up more than +5% after the Nasdaq said the company will be added to the Nasdaq 100 Index before the market opens on Monday, December 18.
On the bearish side, Pfizer is down more than -6% after forecasting 2024 revenue well below consensus. Also, airline stocks are lower, led by a -5 % fall in Southwest Airlines after it kept its year-end outlook unchanged despite stronger-than-expected holiday travel, disappointing analysts expecting an upgrade to guidance.
The markets are discounting a 1% chance for a +25 bp rate hike at the conclusion of today’s 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 49% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and have more than fully discounted (113%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -4.4 bp at 4.157%. The 10-year German bund yield is down -5.3 bp at 2.173%. The 10-year UK gilt yield fell to a 6-3/4 month low of 3.834% and is down -13.2 bp at 3.835%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.07%. China’s Shanghai Composite Index closed down -1.15%. Japan’s Nikkei Stock Index closed up +0.25%.
Today’s stock movers…
Vertex Pharmaceuticals (VRTX) is up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after announcing positive results from a mid-stage study of its non-opioid drug to treat diabetic peripheral neuropathy.
Take-Two Interactive Software (TTWO) is up more than +3% after the Nasdaq said the company will be added to the Nasdaq 100 Index before the market opens on Monday, December 18.
Revvity (RVTY) is up more than +3% after Nephron Research upgraded the stock to buy from hold on Tuesday with a price target of $104.
Incyte (INCY) is up more than +2% after Leerink Partners upgraded the stock to outperform from market perform with a price target of $78.
MSCI Inc (MSCI) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $600 and put it on its top picks’ list.
Mohawk Industries (MHK) is up more than +2% after Barclays upgraded the stock to equal weight from underweight with a price target of $100.
Roblox (RBLX) gained more than +2% in pre-market trading after Wells Fargo Securities initiated coverage on the stock with a buy recommendation and a price target of $49.
Neurocrine Biosciences (NBIX) is up more than +1% after William O’Neil reinstated coverage on the stock with a buy rating.
Pfizer (PFE) is down more than -8% to lead losers in the S&P 500 after forecasting 2024 revenue of $58.5 billion-$61.5 billion, well below the consensus of $62.94 billion.
Southwest Airlines (LUV) is down more than -5% and leading airline stocks lower after it kept its year-end outlook unchanged despite stronger-than-expected holiday travel, disappointing analysts expecting an upgrade to guidance. Also, American Airlines Group (AAL), United Airlines Holdings (UAL), and Delta Air Lines (DAL) are down more than -1%.
Moderna (MRNA) is down more than -5% to lead losers in the Nasdaq 100 and adding to Tuesday’s -4% fall after announcing that CEO Bancel will take over sales and marketing management responsibilities in 2024.
Coherent (COHR) is down more than -2% after Morgan Stanley downgraded the stock to equal weight from overweight.
Hertz Global Holdings (HTZ) is down more than -2% after Oppenheimer downgraded the stock to perform from outperform.
Johnson Controls (JCI) is down more than -2% after Vertical Research Partners downgraded the stock to hold from buy.
Tesla (TSLA) is down more than -1% after recalling more than 2 million vehicles to fix autopilot safety flaws.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +7 ticks, and the 10-year T-note yield is down -4.4 bp at 4.157%. Mar T-note prices this morning are moving moderately higher after U.S. Nov producer prices rose less than expected. T-notes also have carryover support today from a rally in 10-year UK gilts to a 6-3/4 month high. In addition, falling inflation expectations are bullish for T-notes after the 10-year breakeven inflation rate today fell to a 6-1/2 month low of 2.152%.
The dollar index (DXY00) today is down by -0.06%. The dollar today is under pressure as T-note yields fell on the weaker-than-expected U.S. Nov PPI report, a dovish factor for Fed policy. Also, strength in stocks today has reduced liquidity demand for the dollar.
EUR/USD (^EURUSD) today is down by -0.08%. The euro today is moderately lower on economic concerns after news that that Eurozone Oct industrial production fell more than expected.
Eurozone Oct industrial production fell -0.7% m/m, weaker than expectations of -0.3% m/m.
Swaps tied to ECB meeting dates have now priced in a 59% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting.
USD/JPY (^USDJPY) today is down by -0.14%. The yen recovered from overnight losses and moved higher against the dollar after the weaker-than-expected U.S. Nov PPI report knocked T-note yields lower and undercut the dollar. Today’s stronger-than-expected Q4 Japan Tankan large manufacturer’s sentiment index supported the yen.
The Japan Q4 Tankan sentiment of large manufacturers rose +3 to 12, stronger than expectations of 10.
February gold (GCG4) this morning is up +4.4 (+0.22%), and Mar silver (SIH24) is down -0.101 (-0.44%). Gold and silver prices this morning are mixed, with silver falling to a 1-month low. Today's weaker dollar and lower global bond yields are bullish factors for precious metals. Silver prices are under pressure from industrial metals demand concerns after the Eurozone's October industrial production fell more than expected. Also, falling inflation expectations are curbing demand for gold as an inflation hedge after the 10-year breakeven inflation rate today fell to a 6-1/2 month low.
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.
