Stocks Slip as Mixed Economic News Warrants a Cautious Fed

The S&P 500 Index ($SPX) (SPY) today is down -0.33%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.12%.

Stocks today are mixed, with the Dow Jones Industrials posting a new all-time high.  Some negative corporate news today is weighing on the broader market.  HP Inc. is down more than -13% after forecasting Q1 adjusted EPS below consensus.  Also, Dell Technologies is down more than -12% after reporting weaker-than-expected Q3 total net revenue.  In addition, Symbotic is down more than -38% after saying it is unable to file its annual Form 10-K for the fiscal year ended September 28, 2024, on time because it needs to assess the financial impacts of an error related to system revenue recognition.

However, stocks found support on mixed US economic news that knocked T-note yields lower, as the 10-year T-note yield fell to a 3-1/2 week low.  Oct capital goods orders nondefense ex-aircraft and parts, a proxy for capital spending, unexpectedly fell, and Q3 GDP personal consumption was revised lower. Weekly jobless claims news was mixed as initial unemployment claims unexpectedly fell to a 7-month low, but continuing claims unexpectedly rose to a 3-year high.

US MBA mortgage applications rose +6.3% in the week ended November 22, with the purchase mortgage sub-index up +12.4% and the refinancing sub-index down -2.6%.  The average 30-year fixed rate mortgage fell -4 bp to 6.86% from 6.90% in the prior week. 

US Q3 GDP was unrevised at 2.8% (q/q annualized), right on expectations, although Q3 personal consumption was revised downward by -0.2 to 3.5% from 3.7%.

US Oct capital goods orders nondefense ex-aircraft and parts, a proxy for capital spending, unexpectedly fell -0.2% m/m, weaker than expectations of a +0.1% m/m increase. 

US weekly initial unemployment claims unexpectedly fell -2,000 to a 7-month low of 213,000, showing a stronger labor market than expectations of 215,000.  However, weekly continuing claims unexpectedly rose +9,000 to a 3-year high of 1.907 million, showing a weaker labor market than expectations of a decline to 1.892 million.

The US Nov MNI Chicago PMI unexpectedly fell -1.4 to 40.2, weaker than expectations of an increase to 45.0 and the steepest pace of contraction in 6 months.

US Oct personal spending rose +0.4% m/m, right on expectations.  Oct personal income rose +0.6% m/m, stronger than expectations of +0.3% m/m.

The US Oct core PCE price index, the Fed's preferred inflation gauge, rose +0.3% m/m and +2.8% y/y, right on expectations.

US Oct pending home sales unexpectedly rose +2.0% m/m, stronger than expectations of a -2.0% m/m decline.

The markets are discounting the chances at 69% 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 -0.62%.  China's Shanghai Composite Index recovered from a 5-week low and closed up by +1.53%.  Japan's Nikkei Stock 225 closed down -0.80%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +9 ticks.  The 10-year T-note yield is down -4.5 bp to 4.262%.  Dec T-notes today rose to a 3-1/2 week high, and the 10-year T-note yield fell to a 3-1/2 week low of 4.238%.  T-notes are climbing today on carryover support from strength in European government bonds.  Also, a downward revision to the US Q3 core PCE price index supported T-notes. Supply pressures may limit further gains in T-notes as the Treasury will auction $44 billion of 7-year T-notes this afternoon. 

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-3/4 month low of 2.135% and is down -1.3 bp to 2.174%.  The 10-year UK gilt yield fell to a 4-week low of 4.288% and is down -4.0 bp to 4.312%.

The German Dec GfK consumer confidence index fell -4.9 to a 7-month low of -23.3, weaker than expectations of -18.8.

ECB Executive Board member Schnabel said the ECB needs to be wary of cutting interest rates too far as borrowing costs are already near the neutral threshold, and going lower could backfire.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 15% for a -50 bp rate cut at the same meeting.

US Stock Movers

HP Inc (HPQ) is down more than -13% to lead losers in the S&P 500 after forecasting Q1 adjusted EPS of 70 cents-76 cents, below the consensus of 86 cents. 

Dell Technologies (DELL) is down more than -12% after reporting Q3 total net revenue of $24.37 billion, weaker than the consensus of $24.59 billion. 

Autodesk (ADSK) is down more than -7% to lead losers in the Nasdaq 100 after reporting Q3 adjusted operating margin of 36.0%, below the consensus of 36.1%. 

Workday (WDAY) is down more than -7% after cutting its 2025 subscription revenue estimate to $7.70 billion from a previous estimate of $7.70 billion-$7.73 billion, weaker than the consensus of $7.72 billion. 

Symbotic (SYM) is down more than -38% after saying it is unable to file its annual Form 10-K for the fiscal year ended September 28, 2024, on time because it needs to assess the financial impacts of an error related to system revenue recognition. 

Guess?  (GES) is down more than -5% after reporting Q3 net revenue of $738.5 million, weaker than the consensus of $749.5 million, and cutting its 2024 revenue estimate in dollars to +7.1% to +8.1% from a previous estimate of +9.5% to +11%. 

Crowdstrike Holdings (CRWD) is down more than -5% after forecasting Q4 adjusted EPS of 84 cents-86 cents, weaker than the consensus of 87 cents. 

Ambarella (AMBA) is up more than +8% after reporting Q3 adjusted EPS of 11 cents, well above the consensus of 4 cents. 

Urban Outfitters (URBN) is up more than +15% after reporting Q3 net sales of $1.36 billion, above the consensus of $1.33 billion. 

Embecta (EMBC) is up more than +4% after BTIG LLC upgraded the stock to buy from neutral with a price target of $26.

Foot Locker (FL) is up more than +3% after Williams Trading upgraded the stock to hold from sell, citing its improved product lineup.

UnitedHealth Group (UNH) is up more than +1% after RBC Capital Markets raised its price target on the stock to $655 from $595.

Paramount Global (PARA) is up more than +1% after CFRA upgraded the stock to buy from hold with a price target of $13.

Earnings Reports (11/27/2024)

Anavex Life Sciences Corp (AVXL), Dakota Gold Corp (DC), Golden Ocean Group Ltd (GOGL), Immersion Corp (IMMR).