Stocks Rally on Optimism in President-Elect Trump’s Policies

The S&P 500 Index ($SPX) (SPY) today is up +0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.94%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.07%.

Stocks today are moderately higher, with the S&P 500 and the Dow Jones Industrials posting new all-time highs.  Stocks are extending last week’s post-election gains on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.  Also, Tesla is up more than +8%, adding to last week’s +26% surge on speculation the company will benefit from a Trump presidency.  In addition, cryptocurrency-related stocks are soaring today on speculation digital assets will benefit from the Trump administration’s pro-crypto policies.  Trading activity in equities may be below average today, with the cash treasury market closed for the Veterans' Day holiday.

On the negative side, chipmakers are under pressure today to drag the Nasdaq 100 Stock Index lower. Also, Minneapolis Fed President Kashkari said a strong US economy and higher productivity growth could lead policymakers to reduce interest rates less than expected over the coming months.

The price of Bitcoin (^BTCUSD) today is surging by more than +9% and posted a new record high, boosted by President-elect Trump’s embrace of digital assets and the prospect of a Congress featuring pro-crypto lawmakers.

The markets are looking ahead to Wednesday’s US consumer price report for October, with Oct CPI expected to climb to +2.6% y/y, up from +2.4% y/y in Sep, and core Oct CPI expected to remain unchanged from Sep at +3.3% y/y.  Also, Friday’s report on retail sales will be looked at to see if consumer spending is holding up.  Oct retail sales are expected to be up +0.3% m/m, and Oct retail sales ex-autos are also expected to be up +0.3% m/m.

Of the 85% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average.  According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.4% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 65% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +1.15%.  China's Shanghai Composite Index fell closed up +0.51%.  Japan's Nikkei Stock 225 closed up +0.08%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down by -12 ticks.  The 10-year T-note yield is not trading today with the cash Treasury market closed for the Veteran’s Day holiday.  Hawkish comments from Minneapolis Fed President Kashkari weighed on T-notes when he said a strong US economy and higher productivity growth could lead policymakers to reduce interest rates less than expected over the coming months.  Also, today’s rally in the S&P 500 to a new record high reduces safe-haven demand for T-notes and is undercutting T-note prices.

European government bond yields today are mixed.  The 10-year German bund yield fell to a 1-1/2 week low of 2.311% and is down -3.5 bp to 2.332%.  The 10-year UK gilt yield rebounded from a 1-week low of 4.407% and is up +0.5 bp to 4.440%.

ECB Governing Council member Holzmann said he sees "no reason" for the ECB not to cut interest rates at its December policy meeting, but a cut is not guaranteed.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 18% for a -50 bp rate cut at the same meeting.

US Stock Movers

Bristol Myers Squibb (BMY) is up more than +11% to lead gainers in the S&P 500 after rival AbbVie sank when it said its two mid-stage trials of its investigative treatment for adults with schizophrenia missed their primary endpoints, which may boost demand for BMY’s Cobenfy drug for the mental disorder.

Tesla (TSLA) is up more than +8% at a 2-1/2 year high to lead gainers in the Nasdaq 100.  Tesla is adding to last week’s +26% surge on expectations that the incoming Trump administration will support the company.  Also, Wedbush raised its price target on the stock to $400 from $300 and said, “A Trump White House will be a game-changer for the autonomous and AI story for Tesla and Musk over the coming years.”

Cryptocurrency-linked stocks are rallying today, with the price of Bitcoin rising more than +9% to a new record high.  As a result, Coinbase Global (COIN), Bit Digital (BTBT), MicroStrategy (MSTR), MARA Holdings (MARA), and Riot Platforms (RIOT) are up more than +9%.    

Cigna Group (CI) is up more than +7% after confirming it is not pursuing a combination with Humana and is expecting to reaffirm projected 2024 adjusted income from operations of at least $28.40 a share and adjusted EPS growth of at least 10% in 2025. 

Salesforce (CRM) is up more than +6% to lead gainers in the Dow Jones Industrials after CEO Benioff said the company will hire 1,000 workers to capitalize on the “amazing momentum” for the company’s AI product.

RadNet (RDNT) is up more than +20% after reporting Q3 revenue of $461.1 million, better than the consensus of $441.5 million, and announced a collaboration with GE HealthCare on the adoption of AI imaging. 

Winnebago Industries (WGO) is up more than +4% after Northcoast Research upgraded the stock to buy from neutral with a price target of $75. 

Akamai Technologies (AKAM) is up more than +2% after HSBC upgraded the stock to buy from hold with a price target of $121. 

Chip stocks are retreating today to weigh on the Nasdaq 100. Micron Technology (MU), ARM Holdings Plc (ARM), Lam Research (LRCX), and NXP Semiconductors NV (NXPI) are down more than -3%.  Also, KLA Corp (KLAC), Broadcom (AVGO), Marvell Technology (MRVL), Microchip Technology (MCHP), Intel (INTC), and Qualcomm (QCOM) are down more than -2%.

Monolithic Power Systems (MPWR) is down more than -20% to lead losers in the S&P 500 after Edgewater said the company’s Blackwell allocation is at risk. 

Abbvie (ABBV) is down more than -12% after saying its two mid-stage trials of its investigative treatment for adults with schizophrenia missed their primary endpoints.

Newmont Corp (NEM) is down more than -5% to lead miners lower, with the price of gold down more than -2% today to a 1-month low.

Humana (HUM) is down more than -4% after Cigna Group confirmed that it isn’t pursuing a combination with the company. 

Monday.com (MNDY) is down more than -15% after reporting an unexpected Q3 EPS loss of -24 cents versus expectations of a +1-cent gain. 

Sapiens International NV (SPNS) is down more than -25% after reporting Q3 adjusted revenue of $137.0 million, weaker than the consensus of $140.2 million. 

Tempus AI (TEM) is down more than -2% after Stifel downgraded the stock to hold from buy, citing valuation. 

Revvity (RVTY) is down more than -1% after Nephron Research downgraded the stock to sell from hold with a price target of $105.  

Earnings Reports (11/11/2024)

Aramark (ARMK), Assured Guaranty Ltd (AGO), IAC Inc (IAC), Live Nation Entertainment Inc (LYV).

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