Tech Stocks See Support From Broadcom AI News but T-note Yields Rise

The S&P 500 Index ($SPX) (SPY) today is down -0.19%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.17%.

Stock indexes today are mixed, with the Nasdaq 100 posting a new all-time high and the Dow Jones Industrials posting a 3-week low.  The broader market is climbing today, led by strength in chip stocks, with Broadcom up more than +20% after predicting sales of its AI products will surge +65% in the fiscal first quarter.  Other positive corporate news today supported stock gains, with RH up more than +14% after raising its 2025 revenue forecast.

However, the S&P 500 gave up an early advance and turned lower after the 10-year T-note yield rose to a 2-1/2 week high.  T-note yields are climbing on negative carryover from higher European government bond yields.  Stocks are also being undercut by inflation news as the US Nov import price index ex-petroleum unexpectedly rose, and the 10-year breakeven inflation expectations rate rose to a 2-1/2 week high.  In addition, Nvidia erased early gains and dropped more than -3%, weighing on technology stocks.

The US Nov import price index ex-petroleum unexpectedly rose +0.2% m/m, stronger than expectations of no change.

The markets are discounting the chances at 97% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets today are lower.  The Euro Stoxx 50 is down -0.03%.  China's Shanghai Composite Index closed down -2.01%.  Japan's Nikkei Stock 225 closed down -0.95%.

Interest Rates

March 10-year T-notes (ZNH25) today are down -10 ticks.  The 10-year T-note yield is up +4.4 bp to 4.372%.  Mar T-notes today dropped to a 2-1/2 week low, and the 10-year T-note yield rose to a 2-1/2 week high of 4.373%.  Weakness in European government bond prices today is weighing on T-note prices, as 10-year German bunds and 10-year UK gilts fell to 2-1/2 week lows.  Also, an increase in inflation expectations is bearish for T-notes as the 10-year breakeven inflation expectations rate rose to a 2-1/2 week high today of 2.354%.  In addition, strength in stocks today has reduced some safe-haven demand for T-notes. 

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 2-1/2 week high of 2.246% and is up +3.5 bp to 2.239%.  The 10-year UK gilt yield climbed to a 2-1/2 week high of 4.392% and is up +2.7 bp to 4.390%.

Eurozone Oct industrial production was unchanged m/m, right on expectations, and Sep was revised upward to -1.5% m/m from the previously reported -2.0% m/m.

German trade news was weaker than expected as German Oct exports fell -2.8% m/m, weaker than expectations of -2.6% m/m and the biggest decline in 10 months.

The Bundesbank cut its German 2024 GDP estimate to -0.2% from a prior estimate of +0.3% and cut its 2024 inflation forecast to +2.5% from a prior estimate of +2.8%.

ECB Governing Council member Villeroy de Galhau said, "There will be more rate cuts next year," and I'm "rather comfortable with financial markets' forecasts" on more than 100 basis points of easing.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and a 53% chance for a 50 bp rate cut at the same meeting.

US Stock Movers

Broadcom (AVGO) is up more than +20% to lead chip makers higher and gainers in the S&P 500 and Nasdaq 100 after reporting Q4 adjusted EPS of $1.42, better than the consensus of $1.39 and forecast sales of its AI products will surge +65% in the fiscal first quarter.  Also, Marvell Technology (MRVL) is up more than +9%, and ARM Holdings (ARM) is up more than +3%.  In addition, ASML Holding NV (ASML) and Micron Technology (MU) are up more than +1%.

RH (RH) is up more than +14% after raising its 2025 revenue forecast to +6.8% to +7.2% from a previous estimate of +5% to +7%. 

Progressive (PGR) is up more than +4% after reporting a combined ratio of 85.6% for November, which Jeffries said was “solid.” 

Elf Beauty (ELF) is up more than +2% after Goldman Sahs initiate coverage on the stock with a recommendation of buy and a price target of $165. 

Sempra (SRE) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $98. 

General Mills (GIS) is up more than +1% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $80. 

PayPal Holdings (PYPL) is up more than +1% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $107.

Nvidia (NVDA) is down more than -3% to lead losers in the Dow Jones Industrials.

RingCentral (RNG) is down more than -5% after Mizuho Securities downgraded the stock to neutral from outperform. 

ZoomInfo Technologies (ZI) is down more than -2% after KeyBanc Capital Markets downgraded the stock to underweight from sector weight with a price target of $10.

Toll Brothers (TOL) is down more than -2% after JPMorgan Chase downgraded the stocks to neutral from overweight. 

Adobe (ADBE) is down more than -2%, adding to Thursday’s -13% plunge after forecasting weaker-than-expected 2025 revenue. 

Ryman Hospitality Properties (RHP) is down more than -1% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $100.

ServiceNow (NOW) is down more than -1% after KeyBanc Capital Markets downgraded the stock to sector weight from overweight. 

Earnings Reports (12/13/2024)

Gencor Industries Inc (GENC), iLearningEngines Holdings Inc (AILE), Ingles Markets Inc (IMKTA), Renovaro Inc (RENB).