Stocks Climb and T-Note Yields Fall as US CPI Report Meets Expectations

The S&P 500 Index ($SPX) (SPY) today is up +0.08%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.08%.

Stock index futures recovered from overnight losses and are mixed. The broader market is climbing on a relief rally after US October consumer prices rose as expected.  Stocks also found support, and T-note yields fell further on dovish comments from Minneapolis Fed President Kashkari, who said inflation is headed in the right direction and he doesn't think inflation is stuck above the Fed's 2% target.  Weakness in chip stocks is weighing on the Nasdaq 100.

US Oct CPI rose +0.3% m/m and +2.6% y/y, right on expectations. Oct CPI ex-food and energy remained unchanged from Sep at +3.3% y/y, right on expectations.

US MBA mortgage applications rose +0.5% in the week ended November 8, with the purchase mortgage sub-index up +1.9% and the refinancing sub-index down -1.5%.  The average 30-year fixed rate mortgage rose +5 bp to 6.86% from 6.81% in the prior week.

Stocks have rallied sharply over the past week, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new record highs on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.  

The markets are looking ahead to Friday’s report on retail sales that 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.  Also, the Q3 earnings season is wrapping up, with more than 50 companies scheduled to report quarterly results this week.

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 82% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell to a 3-month low and is down -0.43%.  China's Shanghai Composite Index closed up +0.51%. Japan's Nikkei Stock 225 fell to a 1-week low and closed down -1.66%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up by +11 ticks.  The 10-year T-note yield is down -2.8 bp to 4.440%. T-notes are moving moderately higher after today’s US October consumer price report was right on expectations, easing inflation concerns.  The benign CPI report boosted the chances of a 25 bp rate cut by the Fed next month to 82% from 62% before the report.  Also, dovish comments from Minneapolis Fed President Kashkari gave T-note a boost when he said that inflation is headed in the right direction. 

European government bond yields today are mixed.  The 10-year German bund yield is up +0.3 bp to 2.365%. The 10-year UK gilt yield is down -2.7 bp to 4.472%.

ECB Governing Council member and Bundesbank President Nagel said core inflation is still quite high, and there are still noticeable price pressures, especially in services.  He added that President-elect Trump's tariff plans could cost Germany 1% of GDP and could cause economic contraction.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 23% for a -50 bp rate cut at the same meeting.

US Stock Movers

Albemarle (ALB) is up more than +7% after RBC Capital Markets raised its price target on the stock to$133 from $108.

Charter Communications (CHTR) is up more than +3% after agreeing to buy Liberty Broadband in an all-stock transaction.

Tesla (TSLA) is up more than +4% to lead gainers in the Nasdaq 100 on speculation the company will benefit from President-elect Trump’s policies and after Trump picked Tesla CEO Musk to lead the new Department of Government Efficiency.

Cava Group (CAVA) is up more than +15% after reporting Q3 restaurant comparable sales rose +18.1%, stronger than expectations of +12.4%, and raised its full-year restaurant comparable sales to +12%-13% from a previous forecast of +8.5%-9.5%, well above the consensus of +9.95%. 

Rivian Automotive (RIVN) is up more than +22% after Volkswagen AG raised its investment plans in the company by $800 million. 

Spotify Technology (SPOT) is up more than +9% after forecasting Q4 monthly active users of 665 million, stronger than the consensus of 660.73 million. 

Pure Storage (PSTG) is up more than +4% after Oppenheimer & Co initiated coverage on the stock with a recommendation of outperform with a price target of $70. 

Emerson Electric (EMR) is up more than +1% after BNP Paribas Exane initiated coverage on the stock with a recommendation of outperform with a price target of $155. 

Maplebear Inc (CART) is down more than -10% after forecasting Q4 adjusted Ebitda of $230 million-$240 million, below the consensus of $244.4 million.

Skyworks Solutions (SWKS) is down more than -4% to lead losers in the S&P 500 after forecasting Q1 revenue of $1.05 billion-$1.08 billion, weaker than the consensus of $1.09 billion. 

Chip stocks are under pressure today to weigh on the overall market. KLA Corp (KLAC) is down more than -2% to lead losers in the Nasdaq 100.  Also, ON Semiconductor (ON), Lam Research (LRCX), Texas Instruments (TXN), Micron Technology (MU), Applied Materials (AMAT), Analog Devices (ADI), and Qualcomm (QCOM) are down more than -1%.

Super Micro Computer (SMCI) is down more than -2% after saying it is unable to file its quarterly report on form 10-Q for the period ended September as it needs time to find a new auditor.

Groupon (GRPN) is down more than -28% after reporting Q3 revenue of $114.5 million, below the consensus of $118 million, and forecast full-year revenue of $486 million-$493 million, weaker than the consensus of $507.3 million.

Rocket Cos (RKT) is down more than -12% after forecasting Q4 adjusted net revenue of $1.05 billion-$1.20 billion, well below the consensus of $1.32 billion. 

Caterpillar (CAT) is down more than -1% to lead losers in the Dow Jones Industrials after Evercore ISI downgraded the stock to underperform from in line with a price target of $365. 

International Paper (IP) is down more than -1% after BNP Paribas Exane downgraded the stock to underperform from neutral with a price target of $48.20. 

Earnings Reports (11/13/2024)

Cisco Systems Inc (CSCO), Loar Holdings Inc (LOAR), NU Holdings Ltd/Cayman Islands (NU), Tetra Tech Inc (TTEK).

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