Stocks Higher on Positive Corporate Earnings

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +1.11%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.98%.  

Stocks this morning are trading higher as positive corporate earnings news has boosted market sentiment.  Nike is up more than +13% after reporting stronger-than-expected Q2 revenue.  Also, FedEx rallied more than +2% after reporting better-than-expected Q2 EPS. In addition, chip stocks are moving higher today and are boosting technology stocks.

Energy stocks are climbing today, with the price of WTI crude oil up more than +2% at a 2-week high after the API reported late Tuesday that U.S. crude supplies fell -3.1 million bbl last week. 

A decline in T-note yields is supportive of equities.  The 10-year T-note yield fell back from a 3-week high of 3.716% and is down -3.7 bp at 3.645%.   Also, the 10-year German bund yield fell back from a 6-week high of 2.315% and is down -1.6 bp at 2.288%.  Conversely, the 10-year Japan JGB bond yield climbed to a new 7-year high of 0.487%. 

Today’s U.S. economic news was mixed for stocks.  On the positive side, the Conference Board's U.S. Dec consumer confidence index rose +6.9 to an 8-month high of 108.3, stronger than expectations of 101.0.  Conversely, Nov existing home sales fell -7.7% m/m to a 2-1/2 year low of 4.09 million, weaker than expectations of 4.20 million.

The U.S Mortgage Bankers Association reported that the 30-year fixed mortgage rate fell to 6.34% in the week ended December 16 from 6.42% the prior week.  That is down by -82 bp from the 20-year high of 7.16% posted in late October.

Overseas stocks are mixed.  The Euro Stoxx 50 index is up by +1.13%.  By contrast, China’s Shanghai Composite closed down -0.17% at a 3-week low, and Japan’s Nikkei Stock Market Index closed down by -0.68% at a 2-1/4 month low.

Today’s stock movers…

Nike (NKE) is up more than +13% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q2 revenue of $13.32 billion, well above the consensus of $12.57 billion.

Chip stocks are moving higher today to lift technology stocks.  Broadcom (AVGO) and Advanced Micro Devices (AMD) are up more than +2%. Also, Nvidia (NVDA), Qualcomm (QCOM), Intel (INTC), Applied Materials (AMAT), ASML Holding NV (ASML), and Lam Research (LRCX) are all up more than +1%.   

Cruise line stocks are climbing today after Carnival reported a Q4 adjusted loss of -85 cents per share, slightly smaller than expectations of an -87 cents per share loss.  As a result, Carnival (CCL) is up more than +5%.  Also, Royal Caribbean Cruises (RCL) is up more than +4%, and Norwegian Cruise Line Holdings (NCLH) is up more than +2%. 

Etsy (ETSY) is up more than +5% after Evercore ISI wrote that Etsy-specific datapoints on app downloads and engagement imply positive trends so far this quarter. 

Estee Lauder (EL) is up more than +4% after Morgan Stanley raised its price target on the stock to $271 from $245. 

FedEx (FDX) is up more than +2% after reporting Q2 adjusted EPS of $3.18, stronger than the consensus of $2.80.

Tesla (TSLA) is up more than +1% after Elon Musk said Tuesday he would resign as CEO of Twitter when a successor is found. 

Six Flags Entertainment (SIX) is up more than +12% after Land & Buildings said the stock is “significantly undervalued” and could unlock substantial value by monetizing its real estate while driving an operational turnaround. 

Hotel stocks are under pressure today after the Pebblebrook Hotel Trust Reit cut is yearly earnings forecast, citing the impact of Hurricane Nicole and weaker business and leisure demand.  As a result, Host Hotel & Resorts (HST) is down more than -5% to lead losers in the S&P 500.  Also, Hilton Worldwide Holdings (HLT) and Marriot International (MAR) are down more than -1%. 

Drug store chains are moving lower today after Rite Aid cut its full-year adjusted Ebitda estimate to $410.0 million-$440.0 million from a prior estimate of $450.0 million-$490.0 million.  As a result, Rite Aid (RAD) is down more than -16%.  Also, Walgreens Boots Alliance (WBA) is down more than -2% to lead losers in the Dow Jones Industrials, and CVS Health (CVS) is down more than -1%.

Red Robin Gourmet Burgers (RRGB) is down more than -9% after Jeffries downgraded the stock to hold from buy.

Brinker International (EAT) is down more than -2% after Jeffries downgraded the stock to hold from buy.

Across the markets…

March 10-year T-notes (ZNH23) today are up +9 ticks, and the 10-year T-note yield is down -3.7 bp at 3.645%.  March T-notes today recovered from a 3-week low posted in the overnight trade and are moderately higher, and the 10-year T-note yield fell back from a 3-week high of 3.716%.  Mild short-covering boosted T-notes.  Further gains may be limited by supply pressures ahead of the Treasury’s $12 billion auction of 20-year T-bonds later today.  Also, inflation expectations are rising and undercutting T-notes, as the 10-year breakeven inflation rate rose to a 1-week high today of 2.287%.

The dollar index (DXY00) today is up by +0.29%.  The dollar this morning is moderately higher as the yen gives up some of Tuesday’s sharp gains.  The dollar extended its gains after this morning’s news showed U.S. Dec consumer confidence rose more than expected to an 8-month high. 

EUR/USD (^EURUSD) today is down by -0.15%.  Strength in the dollar today is weighing on the euro. Losses in EUR/USD are limited as European energy crisis concerns eased after European nat-gas prices today dropped to a 1-3/4 month low.

USD/JPY (^USDJPY) this morning is up by +0.34%.  The yen today gave up some of Tuesday’s sharp gains and is moderately lower.  Higher JGB bond yields are a supportive factor for the yen after the 10-year Japan JGB bond yield climbed to a new 7-year high today at 0.487%, just below the BOJ’s new upper limit of its 10-year yield target range of 0.50%. 

February gold (GCG3) this morning is up +0.8 (+0.04%), and March silver (SIH23) is down -0.086 (-0.35%).  Precious metals prices this morning are mixed.  A stronger dollar today is negative for metals prices.  Gold is finding support today on lower T-note yields.  Also, rising inflation expectations support gold demand as an inflation hedge after the 10-year breakeven inflation rate rose to a 1-week high today.

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