Stocks Mixed as Alphabet Falls and Nvidia’s Earnings Fail to Impress

The S&P 500 Index ($SPX) (SPY) today is up +0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.15%.

Stocks today are mixed.  The strength of software stocks is positive for the overall market.  Snowflake rallied sharply by more than +29% after it reported stronger-than-expected Q3 revenue and raised its full-year product revenue estimate.  Also, cryptocurrency-related stocks are rallying today after the price of Bitcoin climbed to a new record high.  Today's US economic news was mixed for stocks, with Oct existing home sales climbing more than -expected but Oct leading indicators and the Nov Philadelphia Fed business outlook survey falling more than expected.

On the negative side, Alphabet is down more than -6% after antitrust enforcers said in a court filing Wednesday that Google must divest Chrome, citing the browser “fortified” the company’s dominance.  Also, Nvidia is down more than -1% despite reporting better-than-expected Q3 earnings after CEO Huang said the production and engineering costs of its new Blackwell AI chips will weigh on profit margins.  In addition, fresh signs of escalation in the Ukraine-Russia conflict are weighing on stocks after Ukraine said Russia launched an intercontinental ballistic missile at the city of Dnipro.

US weekly initial unemployment claims unexpectedly fell -6,000 to a 6-1/2 month low of 213,000, showing a stronger labor market than expectations of an increase to 220,000.  However, continuing claims rose +26,000 to a 3-year high of 1.908 million, higher than expectations of 1.880 million, signaling a cooling labor market.

The US Nov Philadelphia Fed business outlook survey fell -15.8 to -5.5, weaker than expectations of 8.0.

US Oct leading indicators fell -0,4% m/m, weaker than expectations of -0.3% m/m.

US Oct existing home sales rose +3.4% m/m to 3.96 million, stronger than expectations of 3.95 million.

Comments today from New York Fed President Williams were supportive of stocks when he said US economic growth has been "very good" and "the disinflationary process will continue."  He added that the cooling labor market and lower inflation show that monetary policy is restrictive today, and he expects "it will be appropriate over time to bring the fed-funds rate down closer to more normal or neutral levels."

The price of Bitcoin (^BTCUSD) is up more than +2% today at a new record high above $98,000 on optimism that President-elect Trump’s support for crypto will boost the industry as the US pivots to friendly regulations for cryptocurrencies. Trump’s transition team has begun to hold discussions over whether to create a White House post dedicated to digital-asset policy.

Of the 90% 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 +8.5% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 56% 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 +0.20%.  China's Shanghai Composite Index closed up +0.07%.  Japan's Nikkei Stock 225 Index fell to a 3-week low and closed down -0.85%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +3 ticks.  The 10-year T-note yield is down -1.6 bp to 4.394%.  Dec T-notes today are slightly higher on positive carryover from strength in European government bonds.  Also, the escalation of the Ukraine-Russia conflict has boosted safe-haven demand for T-notes after Ukraine said Russia launched an intercontinental ballistic missile against the city of Dnipro.  In addition, dovish comments from New York Fed President Williams gave T-notes a boost when he said it would be appropriate for the fed-funds rate to come down to a neutral level over time.  Gains in T-notes were limited after weekly US jobless claims unexpectedly fell to a 6-1/2 month low, a sign of labor market strength that is hawkish for Fed policy.

European government bond yields today are moving lower.  The 10-year German bund yield is down -4.6 bp to 2.305%.  The 10-year UK gilt yield is down -4.2 bp to 4.428%.

Eurozone Oct new car registrations rose +1.1% y/y to 866,000 units, the biggest increase in 4 months.

The Eurozone Nov consumer confidence index unexpectedly fell -1.2 to a 5-month low of -13.7, weaker than expectations of an increase to -12.4.

ECB Governing Council member Stournaras said, "As inflation develops now and as the real economy develops now, I think the ECB should cut rates at each meeting until we get to what we call the neutral rate, which is about 2% according to estimates."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 19% for a -50 bp rate cut at the same meeting.

US Stock Movers

Software stocks are climbing today, led by a +29% surge in Snowflake (SNOW) after it reported Q3 revenue of $942.1 million, stronger than the consensus of $898.6 million, and raised its full-year product revenue estimate to $3.43 billion from a prior estimate of $3.36 billion.  Also, MongoDB (MDB) is up more than +11% to lead gainers in the Nasdaq 100.  In addition, Datadog (DDOG) and Cloudflare (NET) are up more than +4%. 

Salesforce (CRM) is up by more than +4% to lead gainers in the Dow Joen Industrials after Stifel raised its price target on the stock to $390 from $350.

Dream Finders Homes (DFH) is up more than +11% after S&P Dow Jones Indices said the company will replace Haynes International in the SmallCap 600 before trading on Monday, November 25. 

Amentum Holdings (AMTM) is up more than +9% to lead gainers in the S&P 500 after Raymond James initiated coverage on the stock with a recommendation of outperform and a price target of $30.

Deere & Co (DE) is up more than +7% after reporting Q4 net income of $1.25 billion, better than the consensus of $1.06 billion.

ON Holding AG (ONON) is up more than +3% after Raymond James upgraded the stock to strong buy from outperform with a price target of $63. 

GE Vernova (GEV) is up more than +2% after Wells Fargo Securities initiated coverage on the stock with a recommendation of overweight and a price target of $385. 

Alphabet (GOOGL) is down more than -6% to lead losers in the S&P 500 after antitrust enforcers said in a court filing Wednesday that Google must divest Chrome, citing the browser “fortified” the company’s dominance. 

PDD Holdings (PDD) is down more than -9% to lead losers in the Nasdaq 100 after reporting Q3 revenue of 99.35 billion yuan, weaker than the consensus of 102.83 billion yuan.

Nvidia (NVDA) is down more than -1% despite reporting better-than-expected Q3 earnings after CEO Huang said the production and engineering costs of its new Blackwell AI chips will weigh on profit margins. 

Warner Music Group (WMG) is down more than -9% after reporting a Q4 operating margin of 8.8%, well below the consensus of 14.3%.

Ulta Beauty (ULTA) is down more than -2% after Wiliam Blair & Co downgraded the stock to market perform from outperform.

ZIM Integrated Shipping Services Ltd (ZIM) is down more than -12% after Fearnley Securities downgraded the stock to sell from hold with a price target of $20. 

Earnings Reports (11/21/2024)

BJ's Wholesale Club Holdings Inc (BJ), Copart Inc (CPRT), Deere & Co (DE), Elastic NV (ESTC), Gap Inc/The (GAP), Intuit Inc (INTU), NetApp Inc (NTAP), Ross Stores Inc (ROST), UGI Corp (UGI), Vestis Corp (VSTS).