Stocks Higher on Corporate Earnings and Lower Bond Yields

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.62%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.76%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.24%.  

Stocks this morning on moderately higher.  A jump of more than +9% in Best Buy today has improved market sentiment about the upcoming holiday shopping season after the company raised its profit forecast for the year. Also, Analog Devices is up more than 4% to lead gains in technology stocks after the company reported better-than-expected Q4 earnings and raised its forecast for Q1 earnings.  In addition, energy stocks are climbing today, with crude up nearly +2% after Saudi Arabia pushed back on talk of higher OPEC+ crude production.

In a supportive factor, the 10-year T-note yield this morning is down -5.4 bp at 3.773%. The 10-year yield is trading at a comfortable half-percentage-point below the mid-October 15-year high of 4.34%.

Bitcoin (^BTCUSD) is up more than +3% this morning as prices recover from Monday’s new 2-year low on modest short covering, which has encouraged risk-on sentiment in stocks. 

In a negative factor for global stocks, China reported 27,307 new Covid infections on Monday, the most in more than 6-3/4 months and just below April’s record of 28,793. Covid control restrictions now cover 20% of China's economy, up from 15.6% last Monday, according to Nomura.

The Organization for Economic Co-operation and Development (OECD) predicts global economic growth will slow to +2.2% in 2023 from +3.1% in 2022.

Today’s stock movers…

Best Buy (BBY) is up more than +9% today to lead gainers in the S&P 500 after raising its adjusted operating income forecast for the year to “slightly higher than 4%” of sales, up from a previous forecast of 4%.

Agilent Technologies (A) is up more than +6% after reporting Q4 adjusted EPS of $1.53, stronger than the consensus of $1.39, and forecasting its 2023 adjusted EPS estimate to $5.61-$5.69, above the consensus of $5.47.

Energy stocks and energy service providers are climbing in pre-market trading, with the price of crude oil up more than +1.5% after Saudi Arabia Energy Minister Prince Abdulaziz bin Salman said Monday, “the current cut of 2 million bpd by OPEC+ will continue until the end of 2023.” As a result, APA Corp (APA), Devon Energy (DVN), Hess Corp (HES), and Marathon Petroleum (MPC) are up more than +3%.  Also, Marathon Oil (MRO), Haliburton (HAL), Phillips 66 (PSX), Occidental Petroleum (OXY), Chevron (CVX), Schlumberger (SLB), and ConocoPhillips (COP) are up more than +2%.

Analog Devices (ADI) is up more than +4% to lead gainers in the Nasdaq 100 after reporting Q4 adjusted EPS of $2.73, better than the consensus of $2.59, and forecasting Q1 adjusted EPS of $2.50-$2.70, well above the consensus of $2.39.

Walgreens Boots Alliance (WBA) is up more than +1% after Cowen upgraded the stock to outperform from market perform.

Dollar Tree (DLTR) is down more than -10% today to lead losers in the S&P 500 and Nasdaq 100 after it said it expects 2023 diluted earnings per share to be in the lower half of the previously provided outlook range of $7.10-$7.40, below the consensus of $7.28.

Zoom Video Communications (ZM) is down more than -7% today after reporting Q3 revenue of $1.10 billion, slightly below the consensus of $1.11 billion, and forecasting Q4 revenue of $1.10 billion-$1.11 billion, weaker than the consensus of $1.12 billion.

Medtronic (MDT) is down more than -5% after reporting Q2 revenue of $7.59 billion, weaker than the consensus of $7.72 billion, and cutting its full-year adjusted EPS forecast to $5.25-$5.30 from a prior forecast of $5.53-$5.65, below the consensus of $5.55.

U.S.-listed Chinese stocks are trading lower as increased Covid restrictions reduce optimism about a rapid economic reopening. JD.com (JD), Pinduoduo (PDD), NetEase (NTES), and Baidu (BIDU) are down more than -1%.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +7 ticks, and the 10-year T-note yield is down -5.4 bp at 3.773%.  A decline in European government bond yields today is providing carry-over support to T-note prices.  Also, Chinese Covid concerns are giving T-notes a boost after China reported 27,307 new Covid infections on Monday, the most in more than 6-3/4 months and just below April’s record of 28,793. 

Supply pressures today are bearish for T-note prices as the Treasury will auction $22 billion of 2-year floating-rate notes and $35 billion of 7-year T-notes later this afternoon.

The dollar index (DXY00) this morning is down by -0.28%.   A decline in T-note yields today is undercutting the dollar. Also there is reduced liquidity demand for the dollar due to strength in stocks and a modest recovery in crypto.

EUR/USD (^EURUSD) is up by +0.23%.  A weaker dollar today is supporting moderate gains in the euro. Also, hawkish comments today from ECB Governing Council member and Bundesbank President Nagel were bullish for the euro when he said the ECB will deliver another "robust" interest-rate increase in December and begin quantitative tightening (QT) in early 2023.

Today’s Eurozone economic news supported EUR/USD after the Eurozone Nov consumer confidence indicator rose +3.6 to a 5-month high of -23.9, stronger than expectations of -26.0.

USD/JPY (^USDJPY) this morning is down by -0.56%.  Lower T-note yields today are boosting the yen. The yen also has support from recent Fed comments that solidified expectations for smaller Fed rate hikes.

December gold (GCZ2) this morning is up +7.0 (+0.40%), and December silver (SIZ22) is up +0.348 (+1.67%).  Precious metals prices this morning are moderately higher.  A weaker dollar today is bullish for metals prices.  Gold is also climbing today on lower global government bond yields. Gains prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/2 year low last Friday.

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