Stock Rally Stalls on Anxiety Ahead of Friday’s US Jobs Report

The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.19%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.55%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.31%.

Stocks on Thursday settled moderately lower, with the S&P 500 and Nasdaq 100 falling back from record highs.  Long liquidation and profit-taking ahead of Friday’s monthly payroll report weighed on stocks.  Also, hawkish comments Wednesday night from San Francisco Fed President Daly undercut stocks when she said there's "no sense of urgency" for the Fed to lower interest rates.  Thursday’s US economic news was mixed for stocks, with weekly initial unemployment claims climbing more than expected while the Oct trade deficit narrowed more than expected.

US weekly initial unemployment claims rose +9,000 to a 6-week high of 224,000, showing a weaker labor market than expectations of 215,000.

The US Oct trade deficit narrowed to -$73.8 billion from -$83.8 billion in Sep, better than expectations of -$75.0 billion and a positive factor for Q4 GDP.

San Francisco Fed President Daly said there's "no sense of urgency" to lower interest rates, and policymakers can "carefully calibrate policy and make sure it's in line with the economy we have today and one we expect to have going forward."

The price of Bitcoin (^BTCUSD) rose more than +1% to a record high above $103,000 after President-elect Trump selected Pual Atkins, a cryptocurrency proponent, to replace outgoing Securities & Exchange Commission Chair Gensler.

The markets are awaiting Friday’s Nov nonfarm payrolls (expected +220,000) 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 70% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets on Thursday settled higher.  The Euro Stoxx 50 rose to a 5-week high and closed up +0.66%. China's Shanghai Composite Index closed up +0.12%.  Japan's Nikkei Stock 225 climbed to a 3-week high and closed up +0.30%.

Interest Rates

March 10-year T-notes (ZNH25) Thursday closed down -1.5 ticks.  The 10-year T-note yield rose +0.2 bp to 4.182%.  Mar T-notes Thursday were under pressure due to comments made Wednesday night by San Francisco Fed President Daly, who said there's "no sense of urgency" for the Fed to lower interest rates.  T-notes were also being undercut by negative carryover from a decline in European government bonds.  T-notes recovered most of their losses after US weekly jobless claims rose more than expected to a 6-week high, a dovish factor for Fed policy.

European government bond yields Thursday moved higher.  The 10-year German bund yield rose +5.0 bp to 2.111%.  The 10-year UK gilt yield rose +3.2 bp to 4.281%.

Eurozone Oct retail sales fell -0.5% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 4 months.

The German Nov S&P construction PMI fell -2.2 to 38.0, the steepest pace of contraction in 7 months.

German Oct factory orders fell -1.5% m/m, a smaller decline than expectations of -2.0% m/m.

ECB Governing Council member and Bundesbank President Nagel said the ECB shouldn't cut interest rates below neutral as “I do not see a significant risk of inflation undershooting that would warrant the Eurosystem becoming expansionary in the near future."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 9% for a -50 bp rate cut at the same meeting.

US Stock Movers

Synopsys (SNPS) closed down more than -12% to lead losers in the S&P 500 and Nasdaq 100 after forecasting 2025 revenue of $6.75 billion-$681 billion, below the consensus of $6.87 billion. 

Uber Technologies (UBER) closed down more than -9% after Google’s Waymo said it’s expanding its ride-hailing service to Miami. 

AeroVironment (AVAV) closed down more than -16% after reporting Q2 adjusted EOS of 47 cents, well below the consensus of 67 cents and forecast 2025 adjusted EOS of $3.18-$3.49, the midpoint weaker than the consensus of $3.49. 

American Eagle Outfitters (AEO) closed down more than -15% after lowering its full-year comparable sales forecast to about +3% from a prior estimate of +4%, below the consensus of +4.05%. 

SentinelOne (S) closed down more than -13% after reporting Q3 adjusted EPS of $0, weaker than expectations of +1 cent, and forecast 2025 adjusted operating margin of -4%, below the consensus of -3.61%.

Applied Materials (AMAT) closed down more than -5% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $164.

Fiserv (FI) closed down more than -5% after President-elect Trump tapped CEO Bisignani to serve as the Commissioner of the Social Security Administration.   

Principal Financial Group (PFG) closed down more than -1% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $80.

Brown-Forman (BF/B) closed up more than +10% to lead gainers in the S&P 500 after reporting Q2 net sales of $1.095 billion, better than the consensus of $1.07 billion. 

Tesla (TSLA) closed up more than +3% to lead gainers in the Nasdaq 100 after Bank of America Global Research raised its price target on the stock to $400 from $350. 

American Airlines Group (AAL) closed up more than +17% after raising its Q4 adjusted EPS estimate to 55 cents-75 cents from a previous estimate of 25 cents-50 cents., stronger than the consensus of 40 cents.

Five Below (FIVE) closed up more than +10% after reporting Q3 net sales of $843.7 million, stronger than the consensus of $800.9 million, and raised its 2025 net sales forecast to $3.84 billion-$3.87 billion from a previous estimate of $3.73 billion-$3.80 billion, better than the consensus of $3.80 billion.   

Southwest Airlines (LUV) closed up more than +2% after it raised its Q4 unit revenue estimate to 5.5% to 7% from a previous forecast of 5.5%.

AppLovin (APP) closed up more than +2% after Stifel raised its price target on the stock to $435 from $250.

GE Vernova (GEV) closed up more than +1% after TD Cown initiated coverage on the stock with a recommendation of buy and a price target of $400.

Brinker International (EAT) closed up more than +1% after Goldman Sachs reinstated coverage on the stock with a buy recommendation and a price target of $150.

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