What you need to know…
The S&P 500 Index ($SPX) (SPY) on Monday rose +1.43%, the Dow Jones Industrials Index ($DOWI) (DIA) rose +1.58%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose +1.24%.
Stock indexes Monday trended higher throughout the day and finished near their highs. Increased M&A activity Monday boosted stocks after Amgen agreed to buy Horizon Therapeutics for $27.8 billion. Also, Thoma Bravo agreed to buy Coupa Software for $6.2 billion. In addition, Microsoft agreed to buy a 4% stake in London Stock Exchange Group Plc as part of a $2.8 billion cloud-computing deal.
A rally in energy stocks Monday supported the overall market, with the price of WTI crude oil up more than +3%.
Speculation that U.S. consumer prices may have eased in November also sparked short covering in stocks on Monday. The consensus is that Tuesday’s Nov CPI will ease to +7.3% y/y from +7.7% y/y in Oct. Also, the markets are awaiting the outlook for the Fed’s rate-hike regime after the Tuesday/Wednesday FOMC meeting and Fed Chair Powell’s regular post-meeting press conference. Fed officials have recently signaled that the Fed will downshift to a +50 bp rate hike at this week’s FOMC meeting after four straight +75 bp increases.
An increase in T-note yields Monday was a negative factor for stocks after the 10-year T-note yield rose +3.7 bp to 3.615%.
A bearish factor for stocks was concern the reopening of China’s economy will be delayed due to the rapid spread of Covid after restrictions were eased last week, which would snarl supply chains and weigh on global growth.
Today’s stock movers…
A gain of more than +3% in WTI crude prices Monday boosted energy stocks and energy service providers. Valero Energy (VLO) closed up more than +5% to lead gainers in the S&P 500. Also, APA Corp (APA), Schlumberger (SLB), Haliburton (HAL), Marathon Oil (MRO), and Phillips 66 (PSX) closed up more than +4%. In addition, Hess Corp (HES), Devon Energy (DVN), Diamondback Energy (FANG), Baker Hughes (BKR), and Marathon Petroleum (MPC) closed up more than +3%.
Horizon Therapeutics (HZNP) closed up more than +15% after Amgen agreed to buy the company for $116.50 a share in a deal valued at $27.8 billion.
Coupa Software (COUP) closed up more than +26% after Thoma Bravo agreed to buy the company for $6.2 billion.
Boeing (BA) closed up more than +3% to lead gainers in the Dow Jones Industrials after NASA finalized a$3.2 billion contract with Boeing to continue manufacturing core and upper stages for future Space Launch System rockets.
Seagen (SGEN) closed up more than +6% after announcing results from a Phase 2 trial of its Adcetris drug in combination with the PD-1 inhibitor nivolumab and standard chemotherapy agents, demonstrated a complete response rate of 88% and an overall response rate of 93% in patients with early-stage Hodgkin’s Lymphoma.
Cybersecurity stocks rose Monday after Bloomberg Intelligence said that Thoma Bravo’s acquisition of Coupa software might keep the company aggressive in M&A in pursuing cybersecurity stocks. As a result, rapid7 (RPD) closed up more than +9%. Also, Okta (OKTA) closed up more than +6%. In addition, Splunk (SPLK) closed up more than +5%, and Zscaler (ZS) closed up more than +3%.
Tesla (TSLA) closed down more than -6% at a 2-year low and has been under pressure since last Friday when it announced it will suspend output in stages at its Shanghai electric car factory until early January. Also, Elon Musk’s bankers are considering replacing some of the high-interest debt he took on in acquiring Twitter with new margin loans backed by Tesla stock.
Charles River Laboratories International (CRL) closed down more than -3% after Inotiv said Cambodia had halted exports of non-human primates used in scientific research, which may force the company to delay or cancel several projects on drug discovery and development.
Laboratory Corp of America (LH) closed down more than -2% after Citigroup downgraded the stock to neutral from buy.
Rivian Automotive (RIVN) closed down more than -6% after it said it would walk away from plans to jointly build electric vans in Europe with Mercedes-Benz.
Leggett & Platt (LEG) closed down more than -4% after Piper Sandler downgraded the stock to underweight from neutral.
U.S.-listed Chinese stocks retreated Monday on concern about the rapid spread of Covid after the country’s pandemic restrictions were unexpectedly eased last week. Pinduoduo (PDD) closed down more than -4%. Also, Baidu (BIDU) and Alibaba Group Holding (BABA) closed down more than -2%. In addition, NetEase (NTES) closed down more than -1%.
Across the markets…
March 10-year T-notes (ZNH23) on Monday closed down -8.5 ticks, and the 10-year T-note yield rose +3.7 bp to 3.615%. T-notes Monday relinquished early gains and closed moderately lower. Mar T-notes fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 3.626%. Weak demand for the Treasury’s $32 billion auction of reopened 10-year T-notes Monday weighed on prices. The auction had a bid-to-cover ratio of 2.31, below the 10-auction average of 2.43.
Higher European government bond yields also weighed on T-note prices Monday after the 10-year UK gilt yield rose to a 2-1/2 week high of 3.227%, and the 10-year German bund yield rose to a 1-1/2 week high of 1.951%. T-notes Monday morning initially opened higher on a decline in inflation expectations after the 10-year breakeven inflation rate fell to a 1-week low of 2.249%.
More Stock Market News from Barchart
- Unusual Stock Options Volume Is Just What China’s Economy Needed
- Longer-Term Technical Indicators Remain Bearish on the Nasdaq
- Stocks Receive a Boost from M&A Activity
- Occidental Petroleum Stock and Options Look Interesting to Value Buyers
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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