Stocks See Support After US Government Shutdown is Averted

The S&P 500 Index ($SPX) (SPY) is down -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.52%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.18%.  March E-mini S&P futures (ESH25) are up +0.03%, and March E-mini Nasdaq futures (NQH25) are up +0.44%.

Stocks today are narrowly mixed but are seeing some support as US government shutdown was averted when Congress passed a stop-gap funding bill before last Friday night's deadline, which was quickly signed by President Biden.  The stop-gap bill funded the government through mid-March 2025.

However, last Friday's stop-gap bill did not contain the debt ceiling suspension that President-Elect Trump wanted, meaning that Republicans in the first half of 2025 will have to increase, suspend, or abolish the debt ceiling.  The debt ceiling will now be reinstated at midnight on January 2, 2025 at the then-current level of debt.  The Treasury will be able to use extraordinary measures to stay under the debt ceiling until the so-called X-date in spring or summer 2025 when the Treasury will begin to default on its obligations unless Congress takes action on the debt ceiling.

Today's Nov US durable goods report was weaker than expected, although capital goods orders were a bit stronger than expected. Nov US durable goods orders fell -1.1% m/m, weaker than expectations of -0.3%, although Oct was revised higher to +0.8% from +0.3%.  Nov durable goods orders ex-transportation fell -0.1%, weaker than expectations of +0.3%. Nov capital goods orders ex defense and aircraft, a proxy for capital spending, rose +0.7% m/m, stronger than expectations of +0.1%.

Stocks today are seeing continued support from last Friday's slightly weaker-than-expected US PCE report, which was dovish for Fed policy.  Last Friday's Nov PCE price index report of +2.4% y/y (nominal) and +2.8% y/y (core) was slightly weaker than expectations of +2.5% y/y and +2.9% y/y, respectively. However, both measures remained above the Fed's +2.0% inflation target and their respective 3-3/4 year lows of +2.1% y/y (nominal) and +2.6% y/y (core) posted earlier this year.

The markets are discounting the chances at 9% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 today is down -0.32%, adding to the overall loss of -1.9% seen last Thursday and Friday.  China's Shanghai Composite Index today closed -0.50%, the third consecutive session loss.  Japan's Nikkei Stock 225 closed up +1.19%, snapping the string of six consecutive session losses.

Interest Rates

March 10-year T-notes (ZNH25) today are down -2 ticks, consolidating mildly above last Thursday's 6-1/2 month low.  The 10-year T-note yield is up +1.2 bp at 4.534%, consolidating mildly below last Thursday's 6-1/2 month high of 4.592%. T-note prices are trading lower after Congress last Friday averted a US government shutdown that would have been negative for the US economy.  T-note prices have support from today's weaker-than-expected US durable goods orders report. 

European government bond yields today are higher after ECB President Lagarde said that ECB members remain alert to lingering price pressures in the services sector, but remain confident that the ECB is nearing its CPI target.

The 10-year German bund yield is up +2.4 bp at 2.309%.  The 10-year UK gilt yield rose +3.5 bp to 4.545%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and a 9% chance for a -50 bp rate cut at the same meeting.

US Stock Movers

Qualcomm (QCOM) is up more than 3% and Arm Holdings Plc (ARM) is down -5% after Qualcomm won in court against Arm's claim of a chip technology license breach when Qualcomm bought a start-up in 2021. 

Chip stocks are leaders in the Nasdaq 100 index today, with AMD (AMD), Broadcom  (AVGO), and GLOBAFOUNDARIES (GFS) all up more than +3%. 

Xerox (XRX) is up 2% today after news that Xerox agreed to buy laser printer maker Lexmark International in a deal worth $1.5 billion.

Playa Hotels & Resorts (PLYA) is up +11% after news of an exclusivity agreement with Hyatt Hotels Corp. (H) to negotiate the possible acquisition of Playa, which owns or runs beachfront and all-inclusive resorts in Mexico, Jamaica, and the Dominican Republic. 

Crypto-stocks are trading lower, with bitcoin (^BTCUSD) down nearly -3% today. Bitcoin fell sharply by an overall -10% last Wednesday and Thursday due to the hawkish outcome of last week's FOMC meeting and showed only a modest recovery of +0.14% last Friday.  Riot Platform (RIOT) and Microstrategy (MSTR) are down more than -5%, while Coinbase (COIN) is down more than -3%.

Earnings Reports (12/23/2024)

Outlook Therapeutics Inc (OTLK), B Riley Financial Inc (RILY), Spire Global Inc (SPIR), Evolv Technologies Holdings In (EVLV), AMMO Inc (POWW), Anavex Life Sciences Corp (AVXL), Limoneira Co (LMNR).