Stocks Push Higher on Lower Bond Yields and Mixed Economic News

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.46%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.229%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.88%.  

Stocks this morning on moderately higher, with the S&P 500 and Nasdaq 100 posting 1-week highs and the Dow Jones Industrials climbing to a 3-month high.  A gain of more than +6% in Deere & Co today leads the S&P 500 higher after reporting stronger-than-expected Q4 net income and raising its 2023 net income forecast.  Also, Tesla is up more than +5% to lead the Nasdaq 100 higher after Citigroup upgraded the stock to neutral from sell. 

Lower T-note yields today are supportive of stocks.  The 10-year T-note yield is down -4.3 bp at 3.713% after today’s economic news showed U.S. weekly jobless claims rose more than expected to a 3-1/4 month high.  Also, the S&P Global purchasing managers indexes for November unexpectedly weakened, which may prompt the Fed to slow the pace of interest rate hikes.

The markets are eagerly awaiting the minutes of the Nov 1-2 FOMC meeting later today for confirmation of market expectations that the FOMC at its next meeting on December 13-14 will dial back to a +50 bp rate hike from the +75 bp rate hike seen at the last four meetings. 

Bitcoin (^BTCUSD) is up more than +2% this morning as prices continue to recover from Monday’s 2-year low on modest short covering.  The crypto market is cautious about whether there will be more fall-out from the FTX debacle.

On the bearish side, Nordstrom is down more than -8% after it reported weaker-than-expected Q3 net sales.  Also, Autodesk is down more than -7% after reporting fewer-than-expected Q3 billings and cutting its full-year billings estimate.  In addition, energy producers are under pressure this morning, with crude prices down more than -3% as the EU discusses a price cap on Russian oil of between $65 and $70 a barrel.

U.S. economic news today is mixed for stocks.  On the positive side, Oct capital goods new orders nondefense ex-aircraft rose +0.7% m/m, stronger than expectations of unchanged.  Also, Oct new home sales unexpectedly rose +7.5% m/m to 632,000, stronger than expectations of a decline to 570,000.  In addition, the University of Michigan U.S. Nov consumer sentiment index rose +2.1 to 56.8, stronger than expectations of 55.0. 

On the bearish side, weekly initial unemployment claims rose +17,000 to a 3-1/4 month high of 240,000, showing a weaker labor market than expectations of 225,000. Also, the Nov S&P Global U.S. manufacturing PMI fell -2.8 to a 2-1/2 year low of 47.6, weaker than expectations of 50.0.  In addition, the Nov S&P Global U.S. services PMI unexpectedly fell -1.7 to 46.1, weaker than expectations fan increase to 48.0.

In a negative factor for global stocks, China reported 28,183 new Covid infections on Tuesday, the most in nearly seven 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.

Today’s stock movers…

Deere & Co (DE) is up more than +6% today to lead gainers in the S&P 500 after reporting Q4 net income of $2.25 billion, stronger than the consensus of $2.13 billion, and forecasting 2023 net income of $8.0 billion to $8.5 billion, higher than the consensus of $7.81 billion.

Tesla (TSLA) is up more than +4% to lead gainers in the Nasdaq 100 after Citigroup upgraded the stock to neutral from sell. 

Semiconductor chip stocks are climbing today to lead technology stocks higher.  Advanced Micro Devices (AMD), NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), Lam Research (LRCX), and Marvell Technology (MRVL) are up more than +2%.  Also, Nvidia (NVDA), Qualcomm (QCOM), Analog Devices (ADI), and Texas Instruments (TXN) are up more than +1%. 

U.S.-listed Chinese stocks are moving higher on signs the Chinese government will boost stimulus after China's State Council said tools such as cutting bank required reserve ratio would be used "in a timely and appropriate manner" to maintain reasonably ample liquidity.  Baidu (BIDU) is up more than +3%.  Also, NetEase (NTES) and Alibaba Group Holding (BABA) are up more than +2%.  In addition, JD.com (JD) is up more than +1%.

Autodesk (ADSK) is down more than -7% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q3 billings of $1.36 billion, below the consensus of $1.42 billion, and cutting its full-year billings forecast to $5.57 billion-$5.67 billion from a prior estimate of $5.71 billion-$5.81 billion, weaker than the consensus of $5.73 billion. 

Energy stocks and energy service providers are falling today, with the price of crude oil down more than -3% after the European Union said it is discussing a price cap on Russian oil of between $65 and $70 a barrel. Schlumberger (SLB) is down more than -3%.  Also, Occidental Petroleum (OXY), Marathon Oil (MRO), Haliburton (HAL), Diamondback Energy (FANG), and ConocoPhillips (COP) are down more than -2%.  In addition, Chevron (CVX) is down more than -1% to lead losers in the Dow Jones Industrials.

Nordstrom (JWN) is down more than -8% after reporting Q3 net sales of $3.43 billion, below the consensus of $3.47 billion.

Southern Copper (SCCO) is down more than -1% after Deutsche Bank downgraded the stock to sell from hold.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +7 ticks, and the 10-year T-note yield is down -4.3 bp at 3.713%.  T-note prices this morning recovered from early losses and moved higher on carry-over support from a rally in European government bonds.  The 10-year UK gilt yield fell to a 2-1/2 month low today of 3.035%, and the 10-year German bund yield fell to a 7-week low of 1.949%.  T-notes also found support on signs of a weakness in the U.S. labor market after weekly jobless claims rose more than expected to a 3-1/4 month high. 

The dollar index (DXY00) this morning is down by -0.36%.  A fall in T-note yields today has weakened the dollar’s interest rate differentials and is bearish for the dollar.  Also, the jump in U.S. weekly initial unemployment claims to a 3-1/4 month high shows weakness in the labor market that was dovish for Fed policy and bearish for the dollar.   

EUR/USD (^EURUSD) is up by +0.32%.  The euro today is moderately higher on better-than-expected Eurozone economic news.  The Eurozone Nov S&P Global manufacturing PMI and the Eurozone Nov S&P Global composite PMI rose unexpectedly.  Gains in EUR/USD were limited after ECB Vice President Guindos said the Eurozone economy would likely contract in Q4-2022 and Q1-2023. 

Today’s Eurozone economic news supported the euro after the Eurozone Nov S&P Global manufacturing PMI unexpectedly rose +0.9 to 47.3, stronger than expectations of a decline to 46.0. Also, the Eurozone Nov S&P Global composite PMI unexpectedly rose +0.5 to 47.8, stronger than expectations of a decline to 47.0.

ECB Vice President Guindos said the Eurozone economy is likely to contract in Q4 and Q1 of next year, and he favors a "passive" approach to QT.

USD/JPY (^USDJPY) this morning is down by -0.29%.  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.  Trading activity in the yen today is subdued, with Japanese markets closed for the Labor Thanksgiving holiday.

December gold (GCZ2) this morning is down -3.0 (-0.17%), and December silver (SIZ22) is up +0.171 (+0.81%).  Precious metals prices this morning are mixed.  A weaker dollar today is bullish for metals prices.  Gold is also finding support from lower global government bond yields.  However, strength in stocks is reducing the safe-haven demand for gold.  In addition, gold 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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