Stocks Settle Mixed as Nasdaq 100 Posts New Record High

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.31%.

Stocks on Tuesday settled mixed, with the Nasdaq 100 posting a new all-time high.  Some positive corporate news underpinned Tuesday's broader market as Palantir Technologies closed up more than +6% after saying it was granted US government authorization for two of its cloud services.  Also, AT&T closed up more than +4% after predicting sustained profit growth over the next three years and authorizing a $20 billion share repurchase program.  In addition, Sysco closed up more than +4% after CFO Cheung said the market is getting better across all of its customer types, and he is confident in the outlook for Q2 and the full year. 

Fed comments on Tuesday mainly supported stocks.  Fed Governor Kugler said, "The labor market remains solid, and inflation appears to be on a sustainable path to our 2% goal, even if there have been some bumps along the way."  Also, San Francisco Fed President Daly said a December interest rate cut by the Fed is still on the table, and even with another cut, monetary policy will remain restrictive.

On the negative side, Microchip Technology closed down -7% after saying it would shut down a plant in Arizona and forecasted Q3 revenue would be close to the low end of its original guidance. Also, Procter & Gamble closed down more than -2% after CFO Schulten said foreign exchange rates and a logistics issue may affect Q2 results.  In addition, higher T-note yields weighed on stocks after the US Oct JOLTS job openings rose more than expected, a sign of labor market strength that is hawkish for Fed policy.

US Oct JOLTS job openings rose +372,000 to 7.744 million, showing a stronger labor market than expectations of 7.519 million.

The markets are looking ahead to Wednesday’s Nov ISM services index (expected -0.5 to 55.5).  Also, on Wednesday, Fed Chair Powell will speak at a moderated discussion event in New York.  Finally, the markets are awaiting Friday’s Nov nonfarm payrolls (expected +200,000) and Nov average hourly earnings (expected to ease to +3.9% y/y from +4.0% y/y in Oct). 

The markets are discounting the chances at 72% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Tuesday settled higher.  The Euro Stoxx 50 rose to a 3-1/2 week high and closed up +0.66%.  China's Shanghai Composite Index climbed to a 2-week high and closed up +0.44%.  Japan's Nikkei Stock 225 rallied to a 3-week high and closed up +1.91%.

Interest Rates

March 10-year T-notes (ZNH25) Tuesday closed down -4.5 ticks.  The 10-year T-note yield rose +3.1 bp to 4.211%.  Mar T-notes Tuesday gave up an early advance and posted moderate losses.  T-notes turned lower Tuesday after a larger-than-expected increase in US Oct JOLTS job openings signals strength in the labor market, which is hawkish for Fed policy and bearish for T-notes.  Also, supply pressures are weighing on T-notes, with as much as $25 billion in corporate debt offerings expected this week, which prompts bond dealers to short T-notes as a hedge against the incoming new supply. 

T-notes today initially opened higher on expectations that the FOMC will cut interest rates at the December 17-18 FOMC meeting are boosting T-note prices after Fed Governor Waller said late Monday he’s leaning toward a Fed rate cut at the December FOMC meeting.  Waller’s comments pushed the chances of a 25 bp rate cut at the December 17-18 FOMC meeting up to 72% from 55% on Monday. 

European government bond yields Tuesday moved higher.  The 10-year German bund yield rose +2.0 bp to 2.054%.  The 10-year UK gilt yield rose +3.1 bp to 4.243%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 14% for a -50 bp rate cut at the same meeting.

US Stock Movers

Palantir Technologies (PLTR) closed up more than +6% to lead gainers in the S&P 500 after saying it was granted US government authorization for two of its cloud services.

AT&T (T) closed up more than +4% after predicting sustained profit growth over the next three years and authorizing a $20 billion share repurchase program. 

Sysco (SYY) closed up more than +4% after CFO Cheung said the market is getting better across all of its customer types, and he is confident in the outlook for Q2 and the full year. 

Axon Enterprise (AXON) closed up more than +5% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $700. 

Janux Therapeutics (JANX) closed up more than +49% after announcing positive clinical data for its JANX007 cancer drug in 5L metastatic castration-resistant prostate cancer patients. 

CME Group (CME) closed up more than +2% after reporting November average daily volume rose +7% y/y to 30.2 million contracts.

Upstart Holdings (UPST) closed up more than +9% after Redburn upgraded the stock to buy from neutral with a price target of $95.

Birkenstock Holding Plc (BIRK) closed up more than +1% after HSBC upgraded the stock to buy from hold with a price target of $60.

Microchip Technology (MCHP) closed down -7% to lead losers in the S&P 500 and Nasdaq 100 after saying it will shut down a plant in Arizona and forecast Q3 revenue will be close to the low end of its original guidance. 

Zscaler (ZS) closed down more than -4% after forecasting Q2 adjusted EPS of 68 cents-69 cents, below the consensus of 70 cents. 

Seagate Technology Holdings (STX) closed down more than -4% after it said it saw Q3 production output lower than previously seen.

FedEx (FDX) closed down more than -4% after Bernstein downgraded the stock to market perform from outperform, citing risk to the company’s outlook.

Procter & Gamble (PG) closed down more than -2% to lead losers in the Dow Jones Industrials after CFO Schulten said foreign exchange rates and a logistics issue may affect Q2 results.

TransMedics Group (TMDX) closed down more than -16% after forecasting 2024 revenue of $428 million-$432 million, the midpoint below the consensus of $431.9 million. 

US Steel (X) closed down more than -8% after President-elect Trump said he would block US Steel from being bought by Nippon Steel when he becomes president. 

Honeywell International (HON) closed down more than -1% after cutting its full-year adjusted EPS forecast to $9.68-$9.78 from a previous forecast of $10.15-$10.25, weaker than the consensus of $10.17. 

Earnings Reports (12/4/2024)

Dollar Tree Inc (DLTR), Five Below Inc (FIVE), Hormel Foods Corp (HRL), nCino Inc (NCNO), PVH Corp (PVH), SentinelOne Inc (S), Synopsys Inc (SNPS), The Campbell's Company (CPB), Thor Industries Inc (THO).