S&P 500 and Dow Jones Post Record Highs in Holiday-Shortened Trade

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.42%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.90%.

Stocks settled moderately higher on Friday, with the S&P 500 and the Dow Jones Industrials posting new all-time highs.  Friday’s decline in bond yields supported equities.  The 10-year T-note yield dropped to a 5-week low on carryover support from a decline in European government bond yields and a drop in US inflation expectations.  Also, chip stocks rallied Friday and boosted the overall market after Bloomberg reported that additional US curbs on sales of chip technology to China may stop short of some of the stricter measures previously considered.  The NYSE closed early Friday at 1300 EST in a shortened holiday session.

Heavy stock buying has supported this month’s rally to record highs in the S&P 500, Dow Jones Industrials, and Nasdaq 100.  Investors plowed $141 billion into US equities so far this month, the heaviest inflows for a four-week period on record, according to EPFR Global data.

The markets are discounting the chances at 66% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 closed up +0.96%.  China's Shanghai Composite Index closed up by +0.93%.  Japan's Nikkei Stock 225 closed down -0.37%.

Interest Rates

December 10-year T-notes (ZNZ24) Friday closed up +9 ticks.  The 10-year T-note yield fell -8.7 bp to 4.176%.  Dec T-notes on Friday climbed to a 1-month high, and the 10-year T-note yield fell to a 5-week low of 4.169%.  On Friday, T-notes moved higher on carryover support from a rally in European government bonds.  Also, a decline in inflation expectations supported T-notes as the 10-year breakeven inflation rate fell to a 1-3/4 month low Friday at 2.247%.  In addition, month-end buying of longer-term Treasuries by bond fund managers lifted T-note prices as index rebalancing was set to extend its duration by an estimate of 0.11 years for November, more than average.

European government bond yields Friday moved lower.  The 10-year German bund yield fell to a 1-3/4 month low of 2.082% and finished down -3.9 bp to 2.088%.  The 10-year UK gilt yield fell to a 1-month low of 4.219% and finished down -3.4 bp to 4.242%.

Eurozone Nov CPI rose +2.3% y/y, right on expectations.  Nov core CPI rose +2.7% y/y, weaker than expectations of +2.8% y/y.

The ECB's Oct 1-year inflation expectations unexpectedly increased to +2.5% from +2.4% in Sep, stronger than expectations of a decline to +2.3% y/y.  Oct 3-year inflation expectations were unchanged from Sep at +2.1%, right on expectations. 

German Oct retail sales fell -1.5% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 2 years.

German Nov unemployment rose by +7,000, showing a stronger labor market than expectations of +20,000.  The Nov unemployment rate was unchanged at 6.1%, right on expectations.

ECB Vice President Guindos said, "Inflation in Europe is going quite well.  The data are positive, although news on the Eurozone economy is less good."

ECB Governing Council member Stournaras said it's very likely that "the ECB will have a more aggressive interest-rate reduction policy" if there's evidence US tariffs will lead Europe into recession.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 27% for a -50 bp rate cut at the same meeting.

US Stock Movers

Chip stocks rallied Friday to support gains in the overall market after Bloomberg reported that additional US curbs on sales of chip technology to China may stop short of some of the stricter measures previously considered. As a result, Lam Research (LRCX) closed up more than +3%, and ASML Holding NV (ASML), KLA Corp (KLAC), and Marvell Technology (MRVL) closed up more than +2%.  Also, Nvidia (NVDA) closed up more than +2% to lead gainers in the Dow Jones Industrials.  In addition, Applied Materials (AMAT), Intel (INTC), NXP Semiconductors NV (NXPI), ON Semiconductor (ON), and Qualcomm (QCOM) closed up more than +2%. 

Casino stocks with operations in Macau moved higher Friday after China eased visa rules for residents of Shenzhen and Zhuhai.  As a result, Las Vegas Sands (LVS) closed up more than +3%, and Wynn Resorts (WYNN) and MGM Resorts International (MGM) closed up more than +2%

Boeing (BA) closed up nearly +2% after BOA Aviation agreed to buy 14 Boeing 737-8 aircraft. 

Voyager Therapeutics (VYGR) closed up more than +18% after Wedbush initiated coverage on the stock with a recommendation of outperform and a price target of $11. 

Ulta Beauty (ULTA) closed up more than +3% after Citigroup raised its price target on the stock to $390 from $345.

Zscaler (ZS) closed up +0.59% after JPMorgan Chase raised its price target on the stock to $240 from $220. 

MercadoLibre (MELI), which gets a majority of its revenue from Brazil, closed down more than -2% after Brazil’s Finance Minister unveiled a plan to cut 70 billion reals ($11.8 billion) from public spending through 2026.

Workday (WDAY) closed down more than -1%, adding to Wednesday’s -6% fall, after cutting its 2025 subscription revenue forecast to $7.70 billion from a previous forecast of $7.70 billion-$7.73 billion, weaker than the consensus of $7.72 billion.

Airbnb (ABNB) closed down more than -1% on signs of insider selling after an SEC filing showed CEO Chesky sold more than $15 million of shares on Monday. 

Corteva (CTVA) closed down -0.62% on signs of insider selling after an SEC filing showed General Counsel and Secretary Fuerer sold $2.39 million shares on Tuesday.

Fifth Third Bancorp (FITB) closed down -0.41% after a federal judge ruled that customers who claimed they were charged improper deposit account fees will be able to continue pursuing a proposed class action lawsuit against the bank.

Earnings Reports (12/2/2024)

Compass Minerals International (CMP), Credo Technology Group Holding (CRDO), Mondee Holdings Inc (MOND), NANO Nuclear Energy Inc (NNE), Zscaler Inc (ZS).