Stocks Settle Mostly Higher on President-Elect Trump’s Pro-Growth Promises

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.05%.

Stocks on Monday settled mixed, with the S&P 500 and the Dow Jones Industrials posting new all-time highs.  The broader market extended last week’s post-election gains on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.  Also, Tesla rallied more than +8%, adding to last week’s +26% surge on speculation that the company would benefit from a Trump presidency.  In addition, cryptocurrency-related stocks soared Monday on speculation digital assets will benefit from the Trump administration’s pro-crypto policies.  Trading activity in equities was below average on Monday, with the cash treasury market closed for the Veterans' Day holiday.

On the negative side, chipmakers retreated Monday 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) Monday surged by more than +14% 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 on Monday settled higher.  The Euro Stoxx 50 closed up +1.07%.  China's Shanghai Composite Index closed up +0.51%.  Japan's Nikkei Stock 225 closed up +0.08%.

Interest Rates

December 10-year T-notes (ZNZ24) Monday closed down by -12 ticks.  The 10-year T-note yield did not trade Monday 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, Monday’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 on Monday moved lower.  The 10-year German bund yield fell to a 1-1/2 week low of 2.311% and finished down -4.1 bp to 2.327%.  The 10-year UK gilt yield dropped to a 1-week low of 4.407% and finished down -1.0 bp to 4.425%.

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.

ECB Governing Council member Stournaras said, "Now that inflation is coming down, we've started to lower interest rates, which looks like we're going to continue lower and could end up close to 2% around next September."

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) closed up more than +10% 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) closed 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 rallied sharply Monday, with the price of Bitcoin surging more than +14% to a new record high.  As a result, Coinbase Global (COIN), Bit Digital (BTBT), MicroStrategy (MSTR), MARA Holdings (MARA), and Riot Platforms (RIOT) closed up more than +17%.    

Cigna Group (CI) closed 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) closed 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) closed 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) closed up more than +6% after Northcoast Research upgraded the stock to buy from neutral with a price target of $75. 

Fortinet (FTNT) closed up more than +5% after HSBC upgraded the stock to buy from hold with a price target of $111. 

Chip stocks retreated Monday to weigh on the Nasdaq 100.  Intel (INTC) and Microchip Technology (MCHP) closed down more than -4%.  Also, KLA Corp (KLAC), ARM Holdings Plc (ARM), and NXP Semiconductors NV (NXPI) closed down more than -3%.  In addition, Lam Research (LRCX), Micron Technology (MU), GlobalFoundries (GFS), Analog Devices (ADI), and Broadcom (AVGO) closed down more than -2%. 

Monolithic Power Systems (MPWR) closed down more than -14% to lead losers in the S&P 500 after Edgewater said the company’s Blackwell allocation is at risk. 

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

Celanese (CE) closed down more than -7% after BMO Capital Markets downgraded the stock to underperform from market perform with a price target of $76. 

Newmont Corp (NEM) closed down more than -6% to lead miners lower after the price of gold dropped more than -2% Monday to a 1-month low.

Monday.com (MNDY) closed 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) closed down more than -26% after reporting Q3 adjusted revenue of $137.0 million, weaker than the consensus of $140.2 million. 

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

Earnings Reports (11/12/2024)

Amdocs Ltd (DOX), Archer-Daniels-Midland Co (ADM), Azenta Inc (AZTA), Cava Group Inc (CAVA), GRAIL Inc (GRAL), Home Depot Inc/The (HD), Light & Wonder Inc (LNW), Maplebear Inc (CART), Mosaic Co/The (MOS), Natera Inc (NTRA), Occidental Petroleum Corp (OXY), Repligen Corp (RGEN), Rocket Cos Inc (RKT), Roivant Sciences Ltd (ROIV), Shift4 Payments Inc (FOUR), Skyworks Solutions Inc (SWKS), Spotify Technology SA (SPOT), Tyson Foods Inc (TSN), ZoomInfo Technologies Inc (ZI).

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