Stocks Tumble as Hawkish Fed and Strong US Economic News Boosts Bond Yields

The S&P 500 Index ($SPX) (SPY) today is down -1.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.72%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -2.03%.

Stocks today extended Thursday’s decline, with the S&P 500 and the Dow Jones Industrials falling to 1-week lows and the Nasdaq 100 falling to a 1-1/2 week low.  Signs of a hawkish Fed have pushed the 10-year T-note yield up to a 5-1/2 month high today, pressuring stocks.  On Thursday, Fed Chair Powell signaled the Fed was in no hurry to cut interest rates.  Also, Boston Fed President Collins shared that view when she said today that a December interest rate cut by the Fed isn't a "done deal."  The hawkish Fed comments reduced the chances of a Fed rate cut next month to 55% from 82% a day ago.  Stocks added to their losses as bond yields rose further after today’s US economic news showed that retail sales and the Nov Empire manufacturing survey rose more than expected, a hawkish factor for Fed policy.

Vaccine makers and pharmaceutical stocks are falling today after President-elect Trump tapped vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health and Human Services. Also, chip stocks are under pressure, with Applied Materials down more than -8% after forecasting weaker-than-expected Q1 net sales.

US Oct retail sales rose +0.4% m/m, stronger than expectations of +0.3% m/m, and Sep was revised higher to +0.8% m/m from the previously reported +0.4% m/m.

The US Nov Empire manufacturing survey of general business conditions rose +43.1 to a 2-3/4 year high of 31.2, stronger than expectations of 0.0.

The US Oct import price index ex-petroleum rose +0.2% m/m, stronger than expectations of +0.1% m/m.

US Oct manufacturing production fell -0.5% m/m, which was right on expectations.

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 55% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.55%.  China's Shanghai Composite Index fell to a 1-1/2 week low and closed down -1.45%.  Japan's Nikkei Stock 225 closed up +0.28%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -12 ticks.  The 10-year T-note yield is up +3.6 bp to 4.471%.  Dec T-notes today slid to a 5-month low, and the 10-year T-note yield rose to a 5-1/2 month high of 4.5017%.  Carryover pressure from Thursday weighed on T-notes when Fed Chair Powell said the FOMC is in no hurry to lower interest rates. T-notes were also undercut by today’s comments from Boston Fed President Collins, who said a December interest rate cut by the Fed isn't a "done deal."  T-notes extended their losses on stronger-than-expected US economic news on Oct retail sales, Nov Empire manufacturing survey of general business conditions, and the Oct import price index ex-petroleum, hawkish factors for Fed policy.

European government bond yields today are moving higher.  The 10-year German bund yield is up +1.3 bp to 2.354%.  The 10-year UK gilt yield is up +0.8 bp to 4.490%.

The European Commission today forecast 2024 Eurozone GDP of +0.8% and inflation of +2.4% and projects Eurozone inflation slowing to the ECB's 2% target in Q4 of 2025.

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

Vaccine makers and pharmaceutical stocks are falling today after President-elect Trump tapped vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health and Human Services.  Moderna (MRNA) is down more than -6%, and Vertex Pharmaceuticals Moderna (VRTX) is down more than -5%.  Also, Amgen (AMGN) is down more than -5% to lead losers in the Dow Jones Industrials.  In addition, Eli Lilly (LLY), Novavax (NVAX), and BioNTech (BNTX) are down more than -3%. 

Applied Materials (AMAT) is down more than -8% to lead losers in the S&P 500 and Nasdaq 100 and is dragging chip makers lower after forecasting Q1 net sales of $6.75 billion-$7.55 billion, the midpoint below the consensus of $7.25 billion.  Also, ARM Holdings Plc (ARM) is down more than -5%, and Lam Research (LRCX) and KLA Corp (KLAC) are down more than -4%.  In addition, GlobalFoundries (GFS) and ASML Holding NV (ASML) are down more than -3%, and Nvidia (NVDA), Intel (INTC), Advanced Micro Devices (AMD), ON Semiconductor (ON), Broadcom (AVGO), and Microchip Technology (MCHP) are down more than -2%.

Pfizer (PFE) is down more than -3% after Wolfe Research initiated coverage on the stock with a recommendation of underperform with a price target of $25.

Halozyme Therapeutics (HALO) is down more than -11% after Bloomberg News reported the company submitted a $2.1 billion bid to acquire Evotec SE.

Advanced Auto Parts (AAP) is down more than -8% after CFRA downgraded the stock to sell from hold after the company reported weaker-than-expected Q3 results. 

Ulta Beauty (ULTA) is down more than -2% after Berkshire Hathaway said it sold most of its share in the company it originally acquired in the previous quarter.

Palantir (PLTR) is up more than +9% to lead gainers in the S&P 500 after it said its NYSE listing will end at the close of trading on November 25, with Nasdaq trading starting the next day.

Walt Disney (DIS) is up more than +3% to lead gainers in the Dow Jones Industrials, adding to Thursday’s +6% surge after Bank of America Global Research raised its price target on the stock to $140 from $120.

Domino’s Pizza (DPZ) is up more than +2% after Berkshire Hathaway said in a regulatory filing that it acquired a 3.6% stake in the company.

Pool Corp (POOL) is up more than +2% after Berkshire Hathaway said in a regulatory filing that it acquired a 1.1% stake in the company.

Alcoa (AA) is up more than +8% after aluminum prices jumped when Chan canceled a tax rebate on aluminum exports.

Earnings Reports (11/15/2024)

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