Stocks Modestly Lower as Higher Bond Yields Weigh on Tech

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday fell -0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) rose +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) fell -0.73%.  

Stocks on Tuesday closed mostly lower.  Higher bond yields Tuesday weighed on mega-cap tech stocks and the overall market.  The 10-year T-note yield rose +6.7 bp to 3.748% as China Covid unrest eased, curbing safe-haven demand for T-notes.  Also, supply pressures are pushing yields higher after Amazon.com announced an unexpected $8.25 billion 5-part bond sale. 

U.S. stocks had carry-over support from 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 Tuesday pledged to boost vaccinations among its senior citizens, and its National Health Commission said local authorities must avoid using excessive pandemic restrictions.

Strength in energy stocks provided some support for the indexes, as WTI crude rose more than +1% on concern about tighter global crude supplies.  OPEC+ delegates said Monday they may consider additional oil production cuts at their Dec 4 meeting “to balance supply and demand.”

Bitcoin (^BTCUSD) rose +1.6% Tuesday and was 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.

Tuesday’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…

Higher bond yields Tuesday weighed on mega-cap technology stocks.  Apple (AAPL) closed down more than -2% to lead losers in the Dow Jones Industrials.  Also, Amazon.com (AMZN), Tesla (TSLA), and Nvidia (NVDA) closed down more than -1%.

Illumina (ILMN) closed down more than -3% Tuesday to lead losers in the S&P 500 after it sold $1 billion of debt in a 2-part offering of 3-year and 5-year fixed-rate securities.

Consumer durable stocks moved lower Tuesday. Monster Beverage (MNST) and Newell Brands (NWL) closed down more than -2%.  Also, Constellation Brands (STZ), Hershey Co (HSY), Hormel Foods (HRL), and Clorox (CLX) closed down more than -1%.

Visa (V) closed down more than -1% after Redburn initiated coverage of the stock with a sell recommendation.

Generac Holdings (GNRC) closed down more than -1% after Jeffries downgraded the stock to underperform from hold.

Cruise line operators rallied Tuesday after Carnival reported that Cyber Monday cruise bookings were 50% above volume for Cyber Monday 2019.  Carnival (CCL) and Norwegian Cruise Line Holdings (NCLH) closed up more than +4%.  Also, Royal Caribbean Cruises (RCL) closed up more than +3%.

Energy stocks and energy service providers moved higher Tuesday, with the price of crude oil up more than +1% 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) closed up more than +3%. Also, Kinder Morgan (KMI), Diamondback Energy (FANG), and Schlumberger (SLB) closed up more than +2%.

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

U.S.-listed Chinese stocks rallied Tuesday after Chinese government officials vowed to speed up Covid vaccinations for the elderly and to avoid excessive Covid restrictions.  JD.com (JD) closed up more than +6% to lead gainers in the Nasdaq 100.  Also, Pinduoduo (PDD), Alibaba Group Holding (BABA), and Baidu (BIDU) closed up more than +5%. In addition, NetEase (NTES) closed up more than +2%. 

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

Across the markets…

Dec 10-year T-notes (ZNZ22) on Tuesday closed down -6.5 ticks, and the 10-year T-note yield rose +6.7 bp to 3.748%.  T-note prices Tuesday were under pressure as an easing of Covid protests in China reduced the safe-haven demand for government debt.  Also, corporate supply pressures weighed on T-notes after Amazon.com announced an $8.25 billion 5-part bond deal.  A decline in inflation expectations limited losses in T-notes after the 10-year breakeven inflation rate Tuesday fell to a 1-week low of 2.249%.

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