Stocks Climb on Signs the U.S. Labor Market May be Cooling

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.92%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.83%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.25%.  

Stocks this morning are moderately higher on some short covering after the losses seen in past four sessions.  The markets are awaiting fresh news on inflation, with the U.S. PPI report due this Friday and U.S. CPI report due next Tuesday. 

Stock indexes extended their gains this morning on news that U.S. weekly continuing unemployment claims jumped to a 9-1/2 month high.  That suggests that workers who are losing their jobs are having more trouble finding new ones, which shows labor market weakness that may prompt the Fed to slow its pace of interest rate hikes. 

Dexcom is up more than +5% to lead gainers in the S&P 500 after the FDA cleared its G7 Continuous Glucose Monitoring System for people with all types of diabetes ages two years and older.  Also, Boeing is up more than +4% after Wells Fargo Securities raised its price target on the stock.  In addition, Datadog is up more than +8% to lead gainers in the Nasdaq 100 on signs of insider buying.

Higher bond yields are bearish for stocks as the 10-year T-note yield today is up +5.8 bp at 3.478%.  Higher European government bond yields are weighing on T-note prices this morning. Fed officials have recently signaled that the Fed will downshift to a +50 bp rate hike at next week’s FOMC meeting after four straight +75 bp increases. 

Today’s U.S. economic news was mixed for stocks.  Weekly initial unemployment claims rose +4,000 to 230,000, right on expectations.  However, weekly continuing claims rose +62,000 to a 9-1/2 month high of 1.671 million, showing a weaker labor market than expectations of 1.618 million.

Today’s stock movers…

DexCom (DXCM) is up more than +5% today to lead gainers in the S&P 500 after the company said the U.S. FDA cleared its G7 Continuous Glucose Monitoring System for people with all types of diabetes ages two years and older. 

Boeing (BA) is up more than +4% to lead gainers in the Dow Jones Industrials after Wells Fargo Securities raised its price target on the stock to $218 from $185.

U.S. casino stocks with exposure to Macau are moving higher today after Macau relaxed Covid rules for visitors from China, Hong Kong, and overseas.  Las Vegas Sands (LVS) is up more than +4%.  Also, Wynn Resorts (WYNN) is up more than +3%, and MGM Resorts International (MGM) is up more than +2%. 

Datadog (DDOG) is up more than +5% today to lead gainers in the Nasdaq 100 on signs of insider buying after an SEC filing showed board member Matthew Jacobsen bought $13.3 million of shares starting on Dec 5. 

Exxon Mobil (XOM) is up more than +2% after it expanded its share-buyback program to $50 billion through 2024. 

Ciena (CIEN) is up more than +17% after reporting Q4 revenue of $971.0 million, well above the consensus of $849.3 million.

Chinese stocks listed in the U.S. are moving higher today on more signs of reopening in China after Hong Kong eased pandemic restrictions and China stopped forcing infected Covid patients into centralized quarantine camps.  Alibaba Group Holding (BABA) and Pinduoduo (PDD) are up more than +5%.  Baidu (BIDU) and JD.com (JD) are up more than +4%. 

Lincoln National (LNC) is down more than -7% to lead losers in the S&P 500 after analysts were unimpressed with the company’s 2023 earnings update and ISI Evercore cut its price target on the stock to $33 from $41.

Alphabet (GOOGL) is down more than -1% after a Supreme Court filing by the Justice Department late Wednesday said that social media websites should be held responsible for some of the ways their algorithms decide what content to out in front of users.  The case involves a lawsuit against YouTube, which Alphabet owns, from a family of a U.S. citizen killed by ISIS in Paris in 2015, saying YouTube violated the Anti-Terrorism Act because its algorithms recommended ISIS-related content.

Polaris (PII) is down more than -1% after BMO Capital Markets downgraded the stock to market perform from outperform. 

Kinder Morgan (KMI) is down more than -1% after it said it expects to generate $1.12 of net income per share next year, in line with its current 2022 forecast, but that higher interest expenses will eat into distributable cash flows. 

Across the markets…

March 10-year T-notes (ZNH23) today are down -16 ticks, and the 10-year T-note yield is up +4.5 bp at 3.462%.  Higher European government bond yields today are undercutting T-note prices.  The 10-year German bund yield is up +4.8 bp to 1.830%, and the 10-year UK gilt yield is up +6.4 bp to 3.108%.  Also, a surge of more than +4% in crude prices today is raising inflation expectations and weighing on T-notes. 

The dollar index (DXY00) this morning is little changed, down by -0.01%. The dollar is under pressure from today’s news that U.S. weekly continuing jobless claims rose more than expected to a 9-1/2 month high, which is dovish for Fed policy.  However, higher T-note yields today are limiting the downside in the dollar.  

EUR/USD (^EURUSD) today is up by +0.32%.  A weaker dollar today has sparked short covering in the euro.  The euro is also seeing support from expectations that the ECB will raise its main refinancing rate by +50 bp at next Thursday’s policy meeting. 

USD/JPY (^USDJPY) this morning is down by -0.03%.  The yen is slightly higher today after news that Japan's Q3 GDP contracted less than expected.  However, gains in the yen are limited by higher T-note yields.   

Today’s Japanese economic news was mixed for the yen.  On the positive side, Japan's Q3 GDP was revised upward to -0.8% (q/q annualized) from the initially reported -1.2%, stronger than expectations of -1.0%. Conversely, the Japan Nov eco watchers expectations outlook survey unexpectedly fell -1.3 to a 4-month low of 45.1, weaker than expectations of an increase to 46.8. 

February gold (GCG3) this morning is up +4.2 (+0.23%), and March silver (SIH23) is up +0.428 (+1.87%).  Precious metals prices this morning are moderately higher.  A weaker dollar today is bullish for metals prices.  A rally in copper prices to a 3-week high today is providing carry-over support to silver prices on a possible increase in industrial metals demand in China after Bloomberg reported that Chinese authorities might further soften their stance on property policies.  Higher global government bond yields today are limiting the upside in gold prices.  Also, gold continues to be undercut by fund liquidation as long positions in gold ETFs dropped to a new 2-1/2 year low Monday.

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