The S&P 500 Index ($SPX) (SPY) today is down -0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.30%.
Stocks today are mostly lower on some profit-taking as today’s strength in US economic news may keep the Fed from aggressively cutting interest rates. Also, long liquidation ahead of this afternoon’s speech from Fed Chair Powell is weighing on stock prices. The 10-year T-note yield rose to a 4-1/2 month high today before turning lower after weekly initial unemployment claims fell more than expected to a 5-1/2 month low, and October producer prices rose more than expected, hawkish factors for Fed policy.
Some positive corporate news today is bullish for stocks. Walt Disney is up more than +10% after reporting better-than-expected Q4 adjusted EPS and raising its adjusted EPS growth forecast for fiscal 2025. Also, chip stocks are climbing today after ASML Holding NV affirmed its long-term guidance. In addition, airline stocks are moving higher today, as Barclays said a convergence in improving fundamentals and investor sentiment may drive a “powerful” rally for airline stocks next year.
US weekly initial unemployment claims fell -4,000 to a 5-1/2 month low of 217,000, showing a stronger labor market than expectations of 220,000.
US Oct PPI final demand rose +2.4% y/y, stronger than expectations of +2.3% y/y. Oct PPI ex-food and energy rose +3.1% y/y, stronger than expectations of +3.0% y/y.
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 today’s comments from Fed Chair Powell, who will speak on the economic outlook this afternoon at an event at the Dallas Fed. 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. In addition, 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 is up +1.88%. China's Shanghai Composite Index closed down -1.73%. Japan's Nikkei Stock 225 fell to a 1-week low and closed down -0.48%.
Interest Rates
December 10-year T-notes (ZNZ24) today are up +7 ticks. The 10-year T-note yield is down -2.6 bp to 4.426%. Dec T-notes today recovered from a 4-1/2 month low and moved higher, and the 10-year T-note yield fell back from a 4-1/2 month high of 4.481%. Short covering emerged in T-notes today on carryover strength in German bunds after the dovish account of the ECB’s Oct 16-17 policy meeting sparked a rally in 10-year German bunds.
T-notes today initially moved lower on US economic news that showed Oct producer prices rose more than expected, and after weekly jobless claims fell more than expected to a 5-1/2 month low, hawkish factors for Fed policy. Also, anticipation that President-elect Trump’s pro-growth policies could quicken inflation continues to weigh on T-note prices.
European government bond yields today are mixed. The 10-year German bund yield is down -3.5 bp to 2.355%. The 10-year UK gilt yield is down -2.5 bp to 4.495%.
Eurozone Sep industrial production fell -2.0% m/m, weaker than expectations of -1.4% m/m and the biggest decline in 8 months.
ECB Vice President Guindos said the economic "recovery we were anticipating in the Eurozone is not happening with the intensity we expected."
The account of the ECB's Oct 16-17 meeting was seen as dovish as policymakers see inflation continuing to decline, saying "there was wide agreement that the incoming data since the September meeting had increased confidence in an ongoing disinflation process and that inflation would converge to the medium-term target."
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 28% for a -50 bp rate cut at the same meeting.
US Stock Movers
Super Micro Computer (SMCI) is down more than -12% to lead losers in the S&P 500 and Nasdaq 100 after the company delayed another quarterly 10-Q filing as it continue to search for a new accounting firm.
Cisco Systems (CSCO) is down more than -1% after forecasting 2025 revenue of $55.3 billion-$56.3 billion, the midpoint below the consensus of $55.88 billion.
Capri Holdings (CPRI) is down more than -3% after announcing it mutually agreed to terminate its merger with Tapestry.
Ibotta (IBTA) is down more than -13% after forecasting Q4 revenue of $100 million-$106 million, below the consensus of $1110.38 million.
Tetra Tech (TTEK) is down more than -6% after forecasting 2025 net revenue of $4.57 billion-$4.77 billion, the midpoint below the consensus of $4.68 billion.
Kilroy Realty (KRC) is down more than -1% after Scotiabank downgraded the stock to underperform from sector perform with a price target of $38.
Walt Disney (DIS) is up more than +10% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q4 adjusted EPS of $1.14, above the consensus of $1.10, and said it sees high-single-digit adjusted EPS growth in fiscal 2025, above the consensus of +4%.
Tapestry (TPR) is up more than +10% after announcing it was ending a $8.5 billion planned merger with Capri Holdings Ltd due to US antitrust regulators’ objections.
Chip stocks are moving higher today after ASML Holding NV affirmed its long-term guidance and pledged “growing dividends and share buybacks.” As a result, ASML Holding NV (ASML) is up more than +4% to lead gainers in the Nasdaq 100, and GlobalFoundries (GFS) is up more than -2%. Also, Applied Materials (AMAT), Lam Research (LRCX), Qualcomm (QCOM), Micron Technology (MU), Marvell Technology (MRVL), and Intel (INTC) are up more than +1%.
Airline stocks are climbing today after Barclays said a convergence in improving fundamentals and investor sentiment may drive a “powerful” rally for airline stocks next year. As a result, American Airlines Group (AAL), Alaska Air Group (ALK), Delta Air Lines (DAL), and United Airlines Holdings (UAL) are up more than +1%.
Charles Schwab (SCHW) is up more than +3% after reporting core new net assets brought to the company by new and existing clients for October was $24.6 billion.
CNH Industrial NV (CNH) is up more than +6% after activist investor David Einhorn revealed a new position in the company.
Beazer Homes USA (BZH) is up more than +16% after reporting Q4 revenue of $806.2 million, stronger than the consensus of $777.8 million.
QXO Inc (QXO) is up more than +2% after Finepoint Capital reported a position in the company that amounts to 6.3% of QXO’s outstanding shares.
Earnings Reports (11/14/2024)
Advance Auto Parts Inc (AAP), Applied Materials Inc (AMAT), Globant SA (GLOB), Post Holdings Inc (POST), Walt Disney Co/The (DIS).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
