Stocks are Moderately Lower & Oil is Moving Higher

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.3%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.56%.  

Earlier this morning U.S. stocks were higher on the back of a rally of more than +2% in China’s Shanghai Composite Stock Index.  Chinese stocks jumped on signs that Chinese authorities may move faster in loosening the Covid restrictions that sparked protests in several cities.  China today pledged to boost vaccinations among its senior citizens, and its National Health Commission said local authorities must avoid using excessive pandemic restrictions. However, U.S. stocks have moderately sold off since then.

Strength in energy stocks is providing some support for the indexes, with WTI crude up more than +2% on concern about tighter global crude supplies.  OPEC+ delegates said yesterday they may consider additional oil production cuts at their Dec 4 meeting “to balance supply and demand.”

Bitcoin (^BTCUSD) is up +1.4% this morning and is another supportive factor for stocks.  However, worries linger about the fallout from the collapse of FTX.com after BlockFi on Monday became the latest crypto company to file for bankruptcy.

An increase in bond yields today is limiting the upside in stocks.  The 10-year T-note yield is up +6.9 bp at 3.750% as China Covid unrest eased, curbing safe-haven demand for T-notes.  Also, supply pressures are pushing yields higher after Amazon.com announced today an unexpected 5-part bond sale. 

Today’s U.S. economic news was mixed for stocks. The Sep S&P CoreLogic composite-20 home price index rose +10.43% y/y, slightly below expectations of +10.55% y/y and the slowest pace of increase in 1-3/4 years.  Also, the Conference Board U.S. Nov consumer confidence index fell -2.0 to a 4-month low of 100.2, slightly stronger than expectations of 100.0.

Today’s stock movers…

Consumer durable stocks are moving lower today.  Constellation Brands (STZ) is down more than -2%  to lead losers in the S&P 500.  Also, McCormick & Co (MKC), Hormel Foods (HRL), Clorox (CLX), Monster Beverage (MNST), and Newell Brands (NWL) are down more than -1%. 

Generac Holdings (GNRC) is down more than -2% today after Jeffries downgraded the stock to underperform from hold.

Visa (V) is down more than -1% to lead losers in the Dow Jones Industrials after Redburn initiated coverage of the stock with a sell recommendation.

Energy stocks and energy service providers are moving higher today, with the price of crude oil up more than +2% after OPEC+ delegates said they may consider additional oil production cuts at their Dec 4 meeting “to balance supply and demand.” APA Corp (APA) and Haliburton (HAL) are up more than +3%. Also, Marathon Oil (MRO), Diamondback Energy (FANG), Schlumberger (SLB), and ConocoPhillips (COP) are up more than +2%.

United Parcel Service (UPS) is up more than +2% after Deutsche Bank upgraded the stock to buy from hold. 

U.S.-listed Chinese stocks are climbing today after Chinese government officials vowed to speed up Covid vaccinations for the elderly and to avoid excessive Covid restrictions.  JD.com (JD) is up more than +8% to lead gainers in the Nasdaq 100.  Also, Pinduoduo (PDD) is up more than +7%, and Baidu (BIDU) is up more than +6%.  In addition, Alibaba Group Holding (BABA) is up more than +5%, and NetEase (NTES) is up more than +4%. 

U.S. casino stocks with exposure to Macau are higher today after Macau renewed the provisional 10-year licenses to the six existing casinos.  Wynn Resorts (WYNN) is up more than +2%.  Also, Las Vegas Sands (LVS) and MGM Resorts International (MGM) are up more than +1%. 

Across the markets…

Dec 10-year T-notes (ZNZ22) today are down -8 ticks, and the 10-year T-note yield is up +6.9 bp at 3.750%.  T-notes are under pressure today as an easing of Covid protests in China reduced the safe-haven demand for government debt. Also, corporate supply pressures are weighing on T-notes today after Amazon.com announced a 5-part bond deal with a target size of $7 billion. 

The dollar index (DXY00) this morning is little changed, down by -0.04%. An easing of Covid protests in China has reduced safe-haven demand for the dollar after the Chinese government pledged to boost vaccinations among its senior citizens, and its National Health Commission said local authorities must avoid using excessive pandemic restrictions. Losses in the dollar are contained by higher T-note yields. 

EUR/USD (^EURUSD) today is little changed and is well below Monday’s 5-month high.  The euro garnered support today on better-than-expected economic news after Eurozone Nov economic confidence rose +1.0 to 93.7, stronger than expectations of 93.2.  However, an easing of German consumer price pressures is dovish for ECB policy and bearish for the euro after German Nov CPI eased to +11.3% y/y from +11.6% y/y in Oct.

USD/JPY (^USDJPY) this morning is down by -0.28%.  The yen is moderately higher after a fall in Japan’s Nikkei Stock Index to a 1-week low today sparked some safe-haven demand for the yen. Gains in the yen are limited by higher T-note yields. 

December gold (GCZ2) this morning is up +10.1 (+0.58%), and December silver (SIZ22) is up +0.360 (+1.72%).  Precious metals prices this morning are moderately higher.  A weaker dollar today is bullish for metals prices.  Also, weakness in stocks has sparked some safe-haven buying of precious metals.  Gains in gold today are limited by higher T-note yields.  Also, an easing of Covid protests in China has curbed some safe-haven demand for gold.

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