What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.67%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.16%.
Stocks this morning are moderately higher, led by strength in technology stocks. Artificial intelligence (AI) euphoria is boosting Alphabet and Advanced Micro Devices by more than +5%. Stocks maintained their gains after weekly U.S. jobless claims came in near expectations, although continuing claims fell more than expected, indicating that laid-off workers are finding jobs.
On the positive side for stocks, Alphabet is up more than +5% after Google released Gemini, the “largest and most capable AI model” the company has ever built. Also, Advanced Micro Devices is up more than +5% after unveiling its new MI300 accelerator chip, saying the processor will be able to run AI software faster than rival products. In addition, regional bank stocks are climbing today to give a boost to the broader market.
On the negative side, C3.ai is down more than -8% after reporting Q2 revenue below consensus and forecasting 2024 revenue below consensus. Also, Veeva Systems is down more than -4% after forecasting Q4 revenue below consensus. In addition, Chewy is down more than -4% after reporting Q3 net sales below consensus and cutting its 2024 net sales forecast.
U.S. weekly initial unemployment claims rose +1,000 to 220,000, right on expectations. Weekly continuing claims fell -64,000 to 1.861 million, showing a stronger labor market than expectations of 1.910 million.
U.S. Oct wholesale trade sales unexpectedly fell -1.3% m/m, weaker than expectations of +1.0% m/m and the biggest decline in 7 months.
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 73% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and are more than fully discounting (147%) 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 +4.9 bp at 4.153%. The 10-year German bund yield recovered from an 8-month low of 2.166% and is up +0.5 bp at 2.205%. The 10-year UK gilt yield is up +4.6 bp at 3.989%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.25%. China’s Shanghai Composite Index closed down -0.09%. Japan’s Nikkei Stock Index closed down -1.76%.
Today’s stock movers…
Advanced Micro Devices (AMD) is up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 after unveiling its new MI300 accelerator chip, saying the processor can run AI software faster than rival products.
Alphabet (GOOGL) is up more than +5% after Google released Gemini, the “largest and most capable AI model” the company has ever built.
Lithium producers rose after the U.S. government’s new rules aimed at limiting China’s grip on the electric vehicle industry came in less stringent than feared. As a result, Albemarle (ALB) is up more than +4%.
Regional bank stocks are climbing today to boost the broader market. Truist Financial (TFC) is up more than +3%, and Comerica (CMA), Zions Bancorp (ZION), and KeyCorp (KEY) are up more than +2%. Also, M&T Bank (MTB), US Bancorp (USB), Huntington Bancshares (HBAN), and Synchrony Financial (SYF) are up more than +1%.
Semtech (SMTC) is up more than +21% after reporting an unexpected Q3 adjusted EPS profit of 2 cents, better than the consensus for a loss of -15 cents.
Cerevel Therapeutics (CERE) is up more than +12% after AbbVie acquired the company in a deal valued at about $8.7 billion.
Rivian Automotive (RIVN) is up more than +1% after Stifel initiated coverage on the stock with a buy recommendation and a price target of $23.
Datadog (DDOG) is up more than +1% after Stifel upgraded the stock to buy from hold with a price target of $140.
Take-Two Interactive Software (TTWO) is down more than -2% after Bank of America Global Research downgraded the stock to neutral from buy.
C3.ai (AI) is down more than -8% after reporting Q2 revenue of $73.2 million, below the consensus of $74.3 million, and forecast 2024 revenue of $295 million-$320 million, the midpoint below the consensus of $308.2 million.
Veeva Systems (VEEV) is down more than -4% after forecasting Q4 revenue of $620 million-$622 million, weaker than the consensus of $623.5 million.
Chewy (CHWY) is down more than -4% after reporting Q3 net sales of $2.74 billion, below the consensus of $2.75 billion, and cut its 2024 net sales forecast to $11.08 billion-$11.10 billion from a previous estimate of $11.15 billion-$11.35 billion, weaker than the consensus of $11.24 billion.
Merck & Co (MRK) is down more than -1% to lead losers in the Dow Jones Industrials after saying it will stop a Phase 3 trial evaluating Keytruda in combination with Lynparza for the treatment of patients with metastatic non-small cell lung cancer for futility.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -4 ticks, and the 10-year T-note yield is up +5.1 bp at 4.155%. Mar T-note prices this morning are moderately lower on negative carryover from a jump in Japanese government bond yields. The 10-year JGB bond yield rose to a 1-week high today on comments from BOJ Governor Ueda that fueled speculation the BOJ would soon exit its negative interest rate policy. Also, a bigger-than-expected decline in U.S. weekly continuing unemployment claims weighed on T-notes.
The dollar index (DXY00) today is down by -0.27%. The dollar today is moderately lower. Today's main bearish factor for the dollar is a rally in the yen to a 3-month high on speculation that the BOJ will soon exit its ultra-easy monetary policy. Today’s rally in stocks has also curbed the liquidity demand for the dollar.
EUR/USD (^EURUSD) today is up by +0.12%. The euro today recovered from a 3-month low and is moderately higher as dollar weakness parked short covering in EUR/USD. The euro today initially fell to a 3-week low after an unexpected decline in German Oct industrial production knocked the 10-year German bund yield down to an 8-month low of 2.166%.
Eurozone Q3 employment was revised lower to +0.2% q/q and +1.3% y/y from the previously reported +0.3% q/q and +1.4% y/y.
German Oct industrial production unexpectedly fell -0.4% m/m, weaker than expectations of +0.2% m/m.
Swaps tied to ECB meeting dates have now priced in a 75% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting.
USD/JPY (^USDJPY) today is down by -1.76%. The yen today rallied sharply and posted a 3-month high against the dollar. Massive short covering emerged in the yen today, and the 10-year JGB bond yield soared to a 1-week high of 0.769% after comments from BOJ Governor Ueda to the Japanese parliament bolstered speculation the BOJ would soon exit its ultra-easy monetary policy. Also, a sharp -1.76% decline in the Nikkei Stock Index today boosted safe-haven demand for the yen.
BOJ Governor Ueda told the Japanese parliament today that handling monetary policy "will become even more challenging from the year-end and through next year," stoking speculation that the BOJ would soon end its negative interest rate monetary policy.
The Japan Oct leading index CI fell -0.2 to 108.7, a smaller decline than expectations of 108.2.
February gold (GCG4) today is up +1.4 (+0.06%), and Mar silver (SIH24) is down -0.033 (-0.14%). Gold and silver prices this morning are mixed, with silver falling to a 1-week low. Weakness in the dollar today is supporting modest gains in gold prices. However, higher global bond yields today are limiting the upside in gold. Also, speculation the BOJ will soon exit its negative interest rate policy is bearish for gold. Silver prices are under pressure on industrial metals demand concerns after German Oct industrial production unexpectedly declined.
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.
