What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.61%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.57%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.63%.
This afternoon, Fed Chair Powell spoke at the IMF’s annual research conference. In a prepared speech, Powell said he and his colleagues are pleased to see inflation slowing down, but they're not sure if they've done enough to keep it that way. “The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance,” said Powell.
As a result, stocks came under pressure and bond yields moved higher.
This morning, weekly jobless claims came in near expectations and had little market impact.
Becton Dickinson & Co is down more than -9% after reporting Q4 adjusted EPS below consensus and forecasting 2024 adjusted EPS below estimates. Also, FleetCor Technologies is down more than -2% after reporting weaker-than-expected Q3 revenue and cutting its full-year revenue forecast. In addition, Veeva Systems is down more than -9% after cutting its full-year revenue forecast, and Arm Holdings is down more than -4% after forecasting Q3 total revenue below consensus.
On the positive side, TransDigm Group is up more than +8% after reporting Q4 adjusted EPS of $8.03, well above consensus and forecasting stronger-than-expected 2024 adjusted EPS. Also, Walt Disney is up more than +6% after reporting a larger-than-expected amount of Q4 Disney+ subscribers. In addition, Affirm Holdings is up more than +22% after reporting Q1 revenue above consensus and forecasting Q2 revenue above estimates.
U.S. weekly initial unemployment claims unexpectedly fell -3,000 to 217,000, close to expectations of 218,000. However, weekly continuing claims rose +22,000 to a 6-1/2 month high of 1.834 million, showing a weaker labor market than expectations of 1.820 million.
Comments from a couple of Fed members suggest they favor maintaining interest rates at current levels when Atlanta Fed President Bostic agreed with Richmond Fed President Barkin's assessment that "In aggregate, we are still not seeing the full effects of monetary policy." Atlanta Fed President Bostic added that the Fed will stay restrictive until it is sure inflation falls to 2%.
Bitcoin (^BTCUSD) is up more than +4% to a 1-1/2 year high on optimism the Securities and Exchange Commission (SEC) will soon approve a spot Bitcoin ETF. Bloomberg Intelligence predicts there’s a 90% chance the SEC will approve a spot Bitcoin ETF by January 10.
The markets are discounting a 14% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 22% chance 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 government bond yields today are moving higher. The 10-year T-note yield is up +6.3 bp at 4.555%. The 10-year German bund yield is up +3.8 bp at 2.654%. The 10-year UK gilt yield is up +3.8 bp at 4.278%.
China Oct CPI fell -0.2% y/y, weaker than expectations of -0.1% y/y. China Oct PPI fell -2.6% y/y, a smaller decline than expectations of -2.9% y/y.
Overseas stock markets are higher. The Euro Stoxx 50 is up +1.05%. China’s Shanghai Composite Index closed up +0.03%. Japan’s Nikkei Stock Index closed up +1.49%.
Today’s stock movers…
Becton Dickinson & Co (BDX) is down more than -8% to lead losers in the S&P 500 after reporting Q4 adjusted EPS of $3.42, below the consensus of $3.43, and forecasting 2024 adjusted EPS of $12.70-$13.00, weaker than the consensus of $13.53.
FleetCor Technologies (FLT) is down more than -4% after reporting Q3 revenue of $970.9 million, below the consensus of $979.1 million, and cutting its full-year revenue forecast to $3.77 billion-$3.80 billion from a previous forecast of $3.84 billion-$3.86 billion, weaker than the consensus of $3.81 billion.
Tesla (TSLA) is down more than -3% to lead losers in the Nasdaq 100 after HSBC initiated coverage on the stock with a recommendation of reduce, with a price target of $146.
Biogen (BIIB) is down more than -3% after Wedbush Securities cut its price target on the stock to $239 from $266.
Veeva Systems (VEEV) is down more than -9% after cutting its full-year revenue forecast to $2.35 billion-$2.36 billion from a prior forecast of $2.37 billion.
Bill Holdings (BILL) is down more than -9% after Bloomberg News reported the company is in advanced talks to acquire Melio Payments for $1.95 billion.
Arm Holdings (ARM) is down more than -4% after forecasting Q3 total revenue of $720 million-$800 million, the midpoint below the consensus of $773 million.
Corteva Inc (CTVA) is down more than -3% after reporting Q3 adjusted organic sales of $2.41 billion, weaker than the consensus of $2.67 billion, and forecasting full-year net sales of $17.00 billion-$17.30 billion, below the consensus of $17.57 billion.
TransDigm Group (TDG) is up more than +9% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $8.03, well above the consensus of $7.55, and forecasting 2024 adjusted EPS of $31.00-$32.94, the midpoint stronger than the consensus of $31.09.
Walt Disney (DIS) is up more than +6% to lead gainers in the Dow Jones Industrials after reporting 150.2 million Q4 Disney+ subscribers, above the consensus of 147.07 million.
Affirm Holdings (AFRM) is up more than +22% after reporting Q1 revenue of $497 million, well above the consensus of $445.6 million, and forecasting Q2 revenue of $495 million-$520 million, the midpoint higher than the consensus of $505.9 million.
Tapestry (TPR) is up more than +4% after forecasting full-year adjusted EPS of $4.10 to $4.15, the midpoint above the consensus of $4.12.
Atmos Energy (ATO) is up more than +3% after reporting Q4 EPS of 80 cents, better than the consensus of 72 cents, and forecasting 2024 EPS of $6.45-$6.65, stronger than the consensus of $6.47.
Twilio (TWLO) is up more than +4% after reporting Q3 revenue of $1.03 billion, above the consensus of $988.4 million.
Nvidia (NVDA) is up more than +2% after Chinastarmarket reported the company has completed designs of three new artificial intelligence chips for China.
Take-Two Interactive Software (TTWO) is up more than +2% after reporting Q2 net bookings of $1.44 billion, stronger than the consensus of $1.33 billion.
Across the markets…
December 10-year T-notes (ZNZ23) this morning are down -9 ticks, and the 10-year T-note yield is up +6.3 bp at 4.555%. Negative carryover from a decline in European government bond markets is weighing on T-notes this morning, along with caution ahead of comments from Fed Chair Powell later today. Also, supply pressures are undercutting T-notes as the Treasury will auction $24 billion of 30-year T-bonds today to conclude this week’s quarterly refunding package of $112 billion of T-notes and T-bonds.
The dollar index (DXY00) today is down by -0.03%. The dollar this morning is slightly lower. Hawkish ECB comments today pushed the euro higher and weighed on the dollar. The dollar was also under pressure after today’s news that weekly U.S. continuing unemployment claims rose more than expected to a 6-1/2 month high, a sign of labor market weakness that is dovish for Fed policy.
EUR/USD (^EURUSD) today is up by +0.06%. The euro today recovered from early losses and is slightly higher. Short covering in the euro emerged today on hawkish comments from ECB Vice President Guindos, who said talks of interest rate cuts by the ECB in the coming months are "clearly premature." The euro had opened lower on comments from ECB Governing Council member Villeroy de Galhau, who said the ECB was done raising interest rates.
ECB Governing Council member Villeroy de Galhau said the inflation rate in the Eurozone has fallen threefold in a year and, despite some volatility, the trend is "clearly downward," so the ECB is done with interest rate increases unless it has to deal with additional shocks.
ECB Vice President Guindos said talks of interest rate cuts by the ECB in the coming months are "clearly premature," citing risks to the inflation outlook.
USD/JPY (^USDJPY) today is down by -0.07%. The yen today recovered from a 1-week low against the dollar and is slightly higher. A fall in T-note yields today has sparked short covering in the yen. The yen today initially moved lower after the 10-year JGB bond yield fell to a 3-week low of 0.833% on dovish comments from BOJ Governor Ueda, who said the BOJ won't rush to normalize monetary policy.
The Japan Oct eco watchers outlook survey fell -1.1 to a 10-month low of 48.4, weaker than expectations of no change at 49.5.
BOJ Governor Ueda said the BOJ won't rush to normalize monetary policy, saying that lower-than-desired inflation would be harder to deal with given the current situation in Japan.
December gold (GCZ3) today is up +4.8 (+0.25%), and Dec silver (SIZ23) is up +0.122 (+0.54%). Precious metals prices today are moderately higher. Gold prices today recovered from a 3-week low and moved higher due to a weaker dollar. Precious metals also rose today after weekly U.S. weekly continuing jobless claims rose more than expected to a 6-1/2 month, which is dovish for Fed policy. Gains in precious metals are limited by higher global bond yields and hawkish comments from ECB Vice President Guindos, who said talks of interest rate cuts by the ECB in the coming months are "clearly premature."
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