Stock Indexes Rally on Strength in Technology Stocks

The S&P 500 Index ($SPX) (SPY) today is up +0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.89%.

Stocks today are moderately higher, with the S&P 500 and Nasdaq 100 posting new all-time highs.  Strength in technology stocks is lifting the overall market as positive earnings news buoys the sector.  Marvell Technology is up more than +21% after reporting better-than-expected Q3 adjusted EPS and forecasting Q4 adjusted EPS above consensus.  Also, Salesforce is up more than +9% after reporting stronger-than-expected Q3 revenue and forecasting 2025 revenue above consensus.  Stocks remained higher after the Nov ADP employment change came in close to expectations.

On the negative side, T-note yields rose today on hawkish comments from St. Louis Fed President Musalem, who said, "The time may be approaching to consider slowing the pace of interest rate reductions, or pausing, to carefully assess the current economic environment, incoming information, and evolving outlook." However, T-note yields fell back from early highs and turned lower after the Nov ISM services index fell more than expected, a dovish factor for Fed policy.

US MBA mortgage applications rose +2.8% in the week ended November 29, with the purchase mortgage sub-index up +5.6% and the refinancing mortgage sub-index down -0.6%.  The average 30-year fixed rate mortgage fell -17 bp to 6.69% from 6.86% in the prior week.

The US Nov ADP employment change rose +146,000, slightly weaker than expectations of +150,000, and Oct was revised lower to +184,000 from the previously reported +233,000.

The US Nov ISM services index fell -3.9 to 52.1, weaker than expectations of 55.3.

US Oct factory orders rose +0.2% m/m, which is right on expectations.

The markets are looking ahead to this afternoon when Fed Chair Powell will speak at a moderated discussion event in New York.  Also, 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 76% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 climbed to a 4-week high and is up +0.75%.  China's Shanghai Composite Index fell back from a 2-1/2 week high and closed down -0.42%.  Japan's Nikkei Stock 225 closed up +0.09%.

Interest Rates

March 10-year T-notes (ZNH25) today are up +2 ticks.  The 10-year T-note yield is down -1.2 bp to 4.213%.  Mar T-notes today recovered from early losses and are slightly higher as short covering emerged on weaker-than-expected US economic news on Nov ADP employment and the Nov ISM services index.

Today, T-notes initially moved lower after the S&P 500 rose to a new record high and curbed safe-haven demand for T-notes.  Also, an increase in inflation expectations is bearish for T-notes as the 10-year breakeven inflation rate rose to a 1-week high today of 2.330%.  T-notes fell to their lows on hawkish comments from St. Louis Fed President Musalem, who said the time may be near for the Fed to slow or pause rate cuts. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +1.4 bp to 2.067%.  The 10-year UK gilt yield is up +0.4 bp to 4.248%.

The Eurozone Nov S&P composite PMI was revised upward by +0.2 to 48.3 from the previously reported 48.1.

ECB Governing Council member Rehn said inflation has slowed to the targeted 2%, and Eurozone economic growth is fragile.  "These factors have added to the grounds for cutting the benchmark rate in December, and this direction in monetary policy is set to continue into the coming months."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 8% for a -50 bp rate cut at the same meeting.

US Stock Movers

Marvell Technology (MRVL) is up more than +21% to lead gainers in the Nasdaq 100 after reporting Q3 adjusted EPS of 43 cents, better than the consensus of 41 cents, and forecasting Q4 adjusted EPS of 54 cents-64 cents, stronger than the consensus of 52 cents. 

Salesforce (CRM) is up more than +9% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q3 revenue of $9.44 billion, above the consensus of $9.35 billion, and forecast 2025 revenue of $37.8 billion-$38.0 billion, the midpoint above the consensus of $37.86 billion. 

Pure Storage (PSTG) is up more than +25% after reporting Q3 revenue of $831.1 million, above the consensus of $814.8 million, and raising its 2025 revenue forecast to $3.15 billion from a previous forecast of $3.10 billion, better than the consensus of $3.13 billion. 

Okta (OKTA) is up more than +6% after reporting Q3 adjusted EPS of 67 cents, stronger than the consensus of 59 cents, and raising its 2025 adjusted EPS forecast to $2.75-$2.76 from a prior forecast of $2.58-$2.63, better than the consensus of $2.61. 

Roku (ROKU) is up more than +10% after Needham & Co. said it sees the company as a potential takeover target. 

Amazon.com (AMZN) is up more than +2% in the wake of its re: Invent Cloud Conference, which analysts said underscored the company’s potential with artificial intelligence in its Amazon Web Services, the company’s cloud service division. 

Veeva Systems (VEEV) is up more than +3% after Mizuho Securities initiated coverage on the stock with a recommendation of outperform and a price target of $275. 

GE Vernova (GEV) is up more than +2% after Wolfe Research initiated coverage on the stock with a recommendation of outperform and a price target of $403. 

The Campbell’s Company (CPB) is down more than -5% after reporting Q1 net sales of $2.77 billion, weaker than the consensus of $2.80 billion. 

Foot Locker (FL) is down more than -10% after reporting Q3 adjusted EPS of 33 cents, weaker than the consensus of 41 cents, and cut its full-year adjusted EPS forecast to $1.20-$1.30 from a previous forecast of $1.50-$1.70.  Also, Nike (NKE) is down more than -1% on the news to lead losers in the Dow Jones Industrials.

Thor Industries (THO) is down more than -3% after reporting Q1 net sales of $2.14 billion, below the consensus of $2.24 billion. 

Hormel Foods (HRL) is down more than -1% after reporting Q4 net sales of $3.14 billion, below the consensus of $3.15 billion, and forecasting 2025 net sales of $11.9 billion-$12.2 billion, weaker than the consensus of $12.23 billion. 

Chewy (CHWY) is down more than -7% after reporting Q3 net margin of 0.10%, weaker than the consensus of 0.75%.

Intuitive Machines (LUNR) is down more than -10% after offering 9.52 million shares priced at $10.50 per share, below Tuesday’s closing price of $14.15.

Bristol-Myers Squibb (BMY) is down more than -1% after CFRA downgraded the stock to hold from buy.

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).