Stocks Mixed Ahead of Key US Inflation News

The S&P 500 Index ($SPX) (SPY) today is up +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.49%.

Stocks today are mixed, with the Dow Jones Industrials falling to a 2-week low.  The markets are marking time ahead of Wednesday’s US Nov consumer price report. Some negative corporate news is weighing on stocks with Oracle down more than -8% after reporting Q2 adjusted revenue below consensus.  Also, Toll Brothers is down more than -6% after forecasting weaker than expected Q1 adjusted home sales gross margin.  In addition, higher T-note yields are undercutting stocks. 

On the positive side, Alphabet is up more than +4% after it discussed breakthroughs in quantum computing through the use of its new Willow quantum chip. Also, Alaska Air Group is up more than +15% after forecasting 2025 adjusted EPS above consensus.

On the negative side for stocks, T-note yields are higher. 

Today’s US economic news showed Q3 nonfarm productivity was unrevised at +2.2%.  However, Q3 unit labor costs were revised downward to +0.8% from the previously reported +1.9%, a smaller increase than expectations of +1.3%.

Trade news from China was weaker than expected, a negative factor for global growth prospects. China Nov exports rose +6.7% y/y, weaker than expectations of +8.7% y/y.  Also, Nov imports unexpectedly fell -3.9% y/y, weaker than expectations of +0.9% y/y and the largest decline in 9 months.

The markets are looking toward Wednesday’s US consumer price report for November to see if the pace of consumer prices can allow the Fed to keep easing monetary policy.  Nov CPI is expected to tick up slightly to +2.7% y/y from +2.6% y/y in Oct.  Meanwhile, Nov CPI ex-food and energy is expected to remain unchanged from Oct at +3.3% y/y.

The markets are discounting the chances at 86% 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 -0.23%.  China's Shanghai Composite Index rallied toa 1-month high and closed up +0.59%. Japan's Nikkei Stock 225 closed up +0.53%.

Interest Rates

March 10-year T-notes (ZNH25) today are down -6 ticks.  The 10-year T-note yield is up +2.7 bp to 4.228%.  T-note prices are under pressure today on negative carryover from weakness in 10-year UK gilt prices, which fell to a 1-1/2 week low.  Also, supply pressures are weighing on T-note prices as the Treasury will auction $58 billion auction of 3-year T-notes later today as part of this week’s $119 billion package of reopened T-note and T-bond auctions. 

European government bond yields today are mixed.  The 10-year German bund yield fell back from a 1-1/2 week high of 2.143% and is down -0.3 bp to 2.118%.  The 10-year UK gilt yield climbed to a 1-1/2 week high of 4.329% and is up +3.9 bp to 4.309%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 6% for a -50 bp rate cut at the same meeting.

US Stock Movers

Alphabet (GOOGL) is up more than +4% to lead gainers in the S&P 500 and Nasdaq 100 after it discussed breakthroughs in quantum computing through the use  of its new Willow quantum chip.

Cruise line operators are climbing today, led by a +3% gain in Norwegian Cruise Line Holdings Ltd (NCLH) after Goldman Sachs upgraded the stock to buy from neutral with a price target of $35.  Also, Royal Caribbean Cruises Ltd (RCL) and Carnival (CCL) are up more than +2%. 

Boeing (BA) is up more than +3% to lead gainers in the Dow Jones Industrials after Reuters reported the company has restarted production of the 737 Max Jet.

Alaska Air Group (ALK) is up more than +15% after forecasting 2025 adjusted EPS of at least $5.75, better than the consensus of $5.58.

American Airlines Group (AAL) is up more than +4% after Bernstein upgraded the stock to outperform from market perform with a price target of $24. 

Warner Bros Discovery (WBD) is up more than +2% after KeyBanc Capital Markets raised its price target on the stock to $14 from $11. 

Ball Corp (BALL) is up more than +1% after Mizuho Securities upgraded the stock to outperform from neutral with a price target of $67. 

Oracle (ORCL) is down more than -8% to lead losers in the S&P 500 after reporting Q2 adjusted revenue of $14.06 billion, below the consensus of $14.12 billion. 

MongoDB (MDB) is down more than -8% to lead losers in the Nasdaq 100 after CFO and COO Gordon announced he was leaving the company, a move that Guggenheim Securities said was not a positive.

Moderna (MRNA) is down more than -5% after Bank of America Global Research reinstated coverage on the stock with a recommendation of underperform and Bloomberg Intelligence predicted the stock will be removed from the Nasdaq 100 when the index is rebalanced at the end of the month.

Centene (CNC) is down more than -4% after Jeffries downgraded the stock to underperform from hold with a price target of $52. 

Ferguson Enterprises (FERG) is down more than -10% after reporting Q1 revenue of $7.77 billon, weaker than the consensus of $7.81 billion. 

Home builders are under pressure today after Toll Brothers forecasted a Q1 adjusted home sales gross margin of 26.3%, below the consensus of 27.3%. As a result, Toll Brothers (TOL) is down more than -6%.  PulteGroup (PHM), DR Horton (DHI), and Lennar (LEN) are down more than -3%. 

EBay (EBAY) is down more than -3% after Jeffries downgraded the stock to underperform from hold with a price target of $52. 

Earnings Reports (12/10/2024)

AutoZone Inc (AZO), Ferguson Enterprises Inc (FERG), GameStop Corp (GME), and Ollie's Bargain Outlet Holdings (OLLI).