What you need to know…
The S&P 500 Index ($SPX) (SPY) this morning is up +0.97%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.24%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.42%.
Stocks this morning are up, with the S&P 500 at a 2-week high. U.S. stocks have carry-over support from a +1.3% rally in the Euro Stoxx 50 to a 5-week high today after Rishi Sunak was set to become the UK’s next prime minister, easing the political crisis in the UK. A rally in telecom stocks today is also supportive of the overall market. In addition, optimism ahead of earnings reports this week from mega-cap technology companies is supporting gains in the overall market
Higher T-note yields today are undercutting technology stocks and have pushed the Nasdaq 100 in negative territory. The 10-year T-note yield is up +4.7 bp at 4.264%. A jump in inflation expectations is pushing T-note yields higher after the 10-year breakeven inflation rate climbed to a 7-week high today of 2.60%.
This morning’s U.S. economic news was bearish for stocks after the Oct U.S. S&P Global manufacturing PMI fell -2.1 to 49.9, weaker than expectations of 51.0 and the steepest pace of contraction in 2-1/4 years. Also, the Oct U.S. S&P Global services PMI unexpectedly fell -2.7 to 46.6, weaker than expectations of an increase to 49.5.
Today’s stock movers…
U.S.-listed Chinese stocks are sinking today on concern China will pivot toward more state control versus a market-driven economy after Chinese President Xi Jinping moved to stack his leadership ranks with loyalists. Pinduoduo (PDD) is down more than -34% to lead losers in the Nasdaq 100. Also, JD.com (JD) is down more than -19%, and Baidu (BIDU) and Alibaba Group Holding (BABA) are down more than -18%. In addition, NetEase (NTES) is down more than -12%.
U.S.-listed casino stocks with exposure to Macau are falling in pre-market trading on concern China will maintain its strict Covid Zero policies. Las Vegas Sands (LVS) is down more than -12% to lead losers in the S&P 500. Also, Melco Resorts (MLCO) is down more than -18%, and Wynn Resorts (WYNN) is down more than -7%.
Tesla (TSLA) is down more than -6% today at a 16-month low after cutting the price of its cars in China by about 5%.
Williams- Sonoma (WSM) is down more than -4% today after Jeffries downgraded the stock to underperform from hold.
NXP Semiconductors (NXPI) is down more than -2% today after Barclays downgraded the stock to equal weight from overweight.
Telecom stocks are climbing today after Raymond James said, ”while we still caution investors that telecom stocks may not be the most defensive, the businesses definitely are, and we do not expect weakness in the fundamentals.” AT&T (T) is up more than +2% after Raymond James upgraded the stock to strong buy from outperform. Also, Verizon Communications (VZ) is up more than +2% to lead gainers in the Dow Jones Industrials.
Avis Budget Group (CAR) is up more than +7% today after JPMorgan Chase upgraded the stock to overweight from neutral.
Across the markets…
Dec 10-year T-notes (ZNZ22) today are down by -8 ticks, and the 10-year T-note yield is up +4.7 bp at 4.264%. Dec T-note prices this morning are under pressure from rising U.S. inflation expectations after the 10-year breakeven inflation rate today rose to a 7-week high of 2.600%. T-notes recovered from their worst levels after today’s economic news showed the Oct S&P Global manufacturing PMI fell more than expected.
T-notes this morning initially moved lower on negative carry-over from a jump in European government bond yields after the 10-year German bund yield climbed to an 11-year high of 2.532%.
The dollar index (DXY00) this morning is down by -0.06%. The dollar index dropped to a 2-week low and is modestly lower on economic concerns after today’s economic news showed a gauge of U.S. manufacturing activity in October contracted at its steepest pace in 2-1/4 years. The dollar today initially moved higher on weakness in the Chinese yuan, which slumped to a 14-year low against the dollar on concern the Chinese economy may stagnate as the government maintains its strict Covid Zero policies.
EUR/USD (^EURUSD) today is up by +0.10%. The euro today climbed to a 2-week high and is modestly higher. The euro has support for expectations that the ECB will increase interest rates by 75 bp at this Thursday’s policy meeting. Also, an easing of energy crisis concerns in the Eurozone is supportive for EUR/USD after European nat-gas prices today tumbled to a 4-1/4 month low. Gains in the euro are limited after today’s economic news showed Eurozone manufacturing activity this month posted its steepest pace of contraction in nearly 2-1/2 years.
Today’s Eurozone economic news was bearish for EUR/USD. The Eurozone Oct S&P Global manufacturing PMI fell -1.8 to 46.6, weaker than expectations of 47.9 and the steepest pace of contraction in nearly 2-1/2 years. Also, the Eurozone Oct S&P Global composite PMI fell -1.0 to 47.1, weaker than expectations of 47.6 and the steepest pace of contraction in nearly 2 years.
USD/JPY (^USDJPY) today is up by +0.83%. The yen today fell back from a 1-1/2 week high against the dollar and is moderately lower. The yen today initially moved higher on suspected intervention in the currency market by Japanese authorities to prop up the yen. However, the yen gave up its gains and turned lower on policy divergence between the Fed and BOJ. The Fed continues to raise interest rates, while the BOJ is expected to maintain QE and record low-interest rates.
December gold (GCZ2) is down -2.2 (-0.13%), and December silver (SIZ22) is up +0.104 (+0.55%). Precious metals this morning are mixed, with silver climbing to a 1-1/2 week high. A weaker dollar today is supportive of metals prices. Gold is being undercut today by higher T-note yields. Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low last Friday.
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