Stocks and Bonds Rally as Trump Nominates Bessent for Treasury Secretary

The S&P 500 Index ($SPX) (SPY) today is up +0.77%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.94%.

Stocks are moving higher today, with the S&P 500 and Dow Jones Industrials posting new all-time highs and the Nasdaq 100 climbing to a 1-week high.  Stocks and government bonds are rallying today on optimism that President-elect Trump's pick of Scott Bessent, a former hedge fund manager, for US Treasury Secretary will bring a Wall Street mindset to the role and ease concerns over Trump's inflationary agenda of lower taxes and higher tariffs.  Bessent has indicated he'll back Trump's policies, but his background as a fiscal hawk signals that he will prioritize economic and market stability and lower deficits.

The US Oct Chicago Fed national activity index fell -0.13 to a 9-month low of -0.40, weaker than expectations of no change at -0.28.

Most of this week’s US economic news is front-loaded due to Thursday’s Thanksgiving Day holiday.  Tuesday will bring Oct new home sales (expected -1.8% m/m to 725,000) and the Conference Board’s Nov consumer confidence index (expected +3.1 to 111.8).  Also, the Nov-6-7 FOMC meeting minutes will be released on Tuesday afternoon.  Wednesday will bring revised Q3 GDP (expected no change at 2.8% y/y annualized), and the Oct core PCE price index, the Fed’s preferred inflation gauge (expected +0.3% m/m and +2.8% y/y). 

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 rose to a 1-week high and is up +0.30%.  China's Shanghai Composite Index dropped to a 5-week low and closed down by -0.11%.  Japan's Nikkei Stock 225 rose to a 1-week high and closed up +1.30%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +23 ticks.  The 10-year T-note yield is down -11.0 bp to 4.2912%. Dec T-notes today rallied to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 4.285%.  T-notes are climbing today after President-elect Trump nominated Scott Bessent as the next Treasury Secretary.  The bond market applauds the move as Bessent, a former hedge fund manager, is seen as a fiscal hawk who will prioritize economic and market stability and lower deficits.  T-notes are also supported due to a decline in inflation expectations after the 10-year T-note breakeven inflation rate fell to a 2-1/2 week low today at 2.310%.  T-notes added to their gains after today’s US economic news showed the Oct Chicago Fed national activity index fell more than expected to a 9-month low, a dovish factor for Fed policy.

European government bond yields today are moving lower.  The 10-year German bund yield dropped to a 5-week low of 2.207% and is down -3.2 bp to 2.210%.  The 10-year UK gilt yield fell to a 3-1/2 week low of 4.319% and is down -5.9 bp to 4.327%.

The German Nov IFO business climate fell -0.8 to 85.7, weaker than expectations of 86.0.

ECB Governing Council member Kazaks said, "My conviction is that looking at what's happening at the moment in the European economy, there has to follow another interest rate cut in December."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 35% for a -50 bp rate cut at the same meeting.

US Stock Movers

Homebuilding stocks are rallying today after the 10-year T-note yield dropped to a 2-week low, which will lower mortgage rates and support housing demand.  As a result, DR Horton (DHI), Toll Brothers (TOL), Builders FirstSource (BLDR) are up more than +3%.  Also, Lennar (LEN) and PulteGroup (PHM) are up more than +2%. 

Super Micro Computer (SMCI) is up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 and adding to the 25% jump over the past two sessions after it said it believes it can file its delayed 10-K and 10-Q reports in the period available under Nasdaq rules.

Moderna (MRNA) is up more than +9% after Jeffries said Robert F. Kennedey’s nomination to the Department of Health and Human Services is unlikely to mean the removal of vaccines.

Healthcare stocks are climbing today after a federal judge late last Friday ruled the Biden administration wrongly downgraded UnitedHealth Group’s 2025 star ratings and must re-calculate them.  As a result,  UnitedHealth Group (UNH), Humana (HUM), Centene (CNC), and Elevance Health (ELV) are up more than +1%.   

Bath & Body Works (BBWI) is up more than +21% after reporting Q3 net sales of $1.61 billion, better than the consensus of $1.58 billion, and raising its 2025 sales forecast to down -1.7% to -2.5% from a previous forecast of -2% to -4%.

Rocket Lab USA (RKLB) is up more than +1% after announcing it successfully launched its 56th Electron missile. 

EQT Corp (EQT) is up more than +4% after the Financial Times reported that Blackston agreed to buy a $3.5 billion JV stake in interstate pipelines from EQT. 

US Bancorp (USB) is up more than +1% after Citigroup upgraded the stock to buy from neutral with a price target of $65. 

Nvidia (NVDA) is down more than -3% to lead losers in the S&P 500, the Dow Jones Industrials, and Nasdaq 100 after Amazon.com said it was developing its own AI chips.

Macy’s (M) is down more than -3% after saying it would delay the release of its Q3 earnings after an investigation revealed an employee hid tens of millions of dollars of expenses. 

Newmont (NEM) is down more than -2%, with the prices of gold today down sharply by more than -2%.

Despegar.com (DESP) is down more than -3% after TD Cowen double-downgraded the stock to sell from buy with a price target of $14. 

Tenet Healthcare (THC) is down more than -1% after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Earnings Reports (11/25/2024)

Agilent Technologies Inc (A), Bath & Body Works Inc (BBWI), Blue Bird Corp (BLBD), Central Garden & Pet Co (CENT), Enanta Pharmaceuticals Inc (ENTA), Fluence Energy Inc (FLNC), Leslie's Inc (LESL), New Jersey Resources Corp (NJR), Semtech Corp (SMTC), Woodward Inc (WWD), Zoom Video Communications Inc (ZM).