Stocks Rally Ahead of the FOMC Meeting Minutes

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.9%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.5%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.74%.

Stock indexes are higher today despite today’s Nov JOLTS job openings showed a resilient labor market that may force the Fed to remain aggressive about raising interest rates.  Also, hawkish comments from Minneapolis Fed President Kashkari weighed on stocks when he said he favors raising interest rates to 5.4% and then pausing.

Microsoft is down -5% to lead losers in the S&P 500, Dow Jones Industrials, and the Nasdaq 100, after UBS downgraded it to neutral from buy.

U.S. stock indexes rallied in overnight trade following positive economic developments out of China and signs of easing European inflation. China’s Shanghai Composite climbed to a 2-week high today as technology stocks rallied on signs that China’s regulatory clampdown on its internet sector is easing.  Also, Chinese real estate stocks rallied today as Chinese authorities are planning measures to ease liquidity stress for some of China's large property developers.  European stocks rallied to a 3-week high today as price pressures in France and Germany eased.   

Stocks are also seeing support from lower bond yields as the 10-year T-note yield this morning dropped to a 1-1/2 week low of 3.670%. T-note yields are lower on carry-over after the 10-year German bund yield today fell to a 2-week low of 2.265% when France's Dec CPI and German Nov import prices rose less than expected. 

The U.S. Dec ISM manufacturing index fell -0.6 to a 2-1/2 year low of 48.4, close to expectations of 48.5.  The Dec ISM prices paid sub-index fell -3.6 to 39.4, weaker than expectations of 42.9 and the steepest pace of contraction in 2-1/2 years.

The U.S. Nov JOLTS job openings fell -54,000 to 10.458 million, showing a stronger labor market than expectations of 10.050 million.

Minneapolis Fed President Kashkari said he favors raising interest rates to 5.4% and then pausing.  He added that higher interest rates might be necessary if inflation remains elevated, and the Fed must learn the lessons of the 1970s and avoid premature interest rate cuts.

Overseas markets today are mixed.  The Euro Stoxx 50 index is up +1.97%.  The Shanghai Composite index closed up +0.22%, and Japan’s Nikkei Stock index closed down by -1.45%.

Today’s stock movers…

Chip makers are climbing today after a Bloomberg report said China is pausing massive investments aimed at building a chip industry to compete with the U.S.  Micron Technology (MU) is up more than +5%.  Also, ASML Holding NV (ASML) is up more than +3%.  In addition, Intel (INTC), Qualcomm (QCOM), Microchip Technology (MCHP), and Lam Research (LRCX) are up more than +2%.

GE Healthcare Technologies (GEHC) is up more than +7% to lead gainers in the S&P 500 as today marks the first day of trading for the company that spun off from General Electric. 

Boeing (BA) is up more than +3% at an 11-month high to lead gainers in the Dow Jones Industrials.  Boeing extended Tuesday’s +2% gain today on positive carry-over when JPMorgan Chase said the company likely delivered 49 of its 737 jetliners in December, bringing its yearly total to 382 deliveries, above its target of 375 planes delivered for 2022. 

Salesforce Inc (CRM) is up more than +3% after it said it would cut 10% of its workforce during its restructuring. 

U.S. casino operators with exposure to Macau are moving higher today after Wells Fargo Securities on Tuesday upgraded Wynn Resorts to overweight from equal weight on the outlook for a recovery in Macau.  Wynn Resorts (WYNN) is up more than +6%.  Also, Las Vegas Sands (LVS) is up more than +3%, and MGM Resorts International (MGM) is up more than +2%. 

U.S.-listed Chinese stocks are moving higher today amid signs that China is easing its regulatory clampdown on the internet sector after Chinese regulators approved a plan by Ant Group to raise 10.5 billion yuan ($1.5 billion) for its consumer unit.  Alibaba Group Holding (BABA) is up more than +7%.  Also, JD.com (JD) is up more than +9% to lead gainers in the Nasdaq 100. In addition, Pinduoduo (PDD) is up more than +7%, and Baidu (BIDU) and NetEase (NTES) are up more than +5%. 

Microsoft (MSFT) is down more than -5% today to lead losers in the S&P 500, Dow Jones Industrial, and the Nasdaq 100 after UBS downgraded the stock to neutral from buy.

Pfizer (PFE) is down more than -3% after Bank of America downgraded the stock to neutral from buy.

Honeywell International (HON) is down more than -2% today after UBS downgraded the stock by two notches to sell from buy on valuation. 

Across the markets…

March 10-year T-notes (ZNH23) today are up +14 ticks, and the 10-year T-note yield is down -3.2 bp at 3.707%.  Mar T-notes this morning climbed to a 1-1/2 week high, and the 10-year T-note yield fell to a 1-1/2 week low of 3.662%.  An easing of European price pressures sparked a rally in European government bonds today and provided carry-over support to T-note prices. The 10-year UK gilt yield fell to a 2-week low today at 3.527%, and the 10-year German bund yield fell to a 2-week low of 2.265%.  T-notes fell back from their best levels on the stronger-than-expected Nov JOLTS report, which was hawkish for Fed policy.

The dollar index (DXY00) today is down by -0.19%.  A decline in T-note yields today is weighing on the dollar.  Also, a rally in stocks today is curbing the liquidity demand for the dollar.  The dollar recovered from its worst levels on today’s better-than-expected U.S. economic report on Nov JOLTS job openings.

EUR/USD (^EURUSD) today is up by +0.62%.  Dollar weakness today has sparked short covering in the euro. Also, an easing of the energy crisis is bullish for the euro after European nat-gas prices today tumbled to an 11-month low.  In addition, an upward revision to the Eurozone Dec S&P Global composite PMI supported the euro.  Weak European inflation news today dovish for ECB policy and limited gains in EUR/USD.

The Eurozone Dec S&P Global composite PMI was revised upward by +0.5 to 49.3 from the initially reported 48.8.

The German Nov import price index rose 14.5% y/y, weaker than expectations of +18.0% y/y and the slowest pace of increase in 17 months.

France Dec CPI (EU harmonized) rose +6.7% y/y, weaker than expectations of +7.3% y/y.

USD/JPY (^USDJPY) today is up by +0.02%.  The yen today is slightly lower after the BOJ boosted QE and conducted unscheduled bond-buying for the fourth day.  Losses in the yen are limited due to lower T-note yields. The yes also has support on speculation that the BOJ will end its negative-rate policy and raise interest rates this year.

February gold (GCG3) this morning is up +18.2 (+0.99%), and March silver (SIH23) is up +0.224 (+0.92%).  Precious metals prices this morning are moderately higher, with gold climbing to a 6-1/2 month high.  A weaker dollar today is bullish for metals prices.  Lower global government bond yields today are also supportive of gold prices.  Silver also has support on plans by China to ease liquidity stress for some of China's large property developers, which may boost home buying and building and is supportive for industrial metals demand.

More Stock Market News from Barchart

• Markets Today: Stocks Climb on Positive China Developments and Lower Bond Yields
• Analyzing a February VIX Butterfly Spread
• Pre-Market Brief: Stocks Mostly Higher Ahead of FOMC Meeting Minutes
• Stocks Close Lower as Tesla and Apple Slide