Stocks Finish Mixed in Thin Holiday Trade

The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.04%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.13%.  March E-mini S&P futures (ESH25) are down -0.09%, and March E-mini Nasdaq futures (NQH25) are down -0.16%. 

Stocks on Thursday recovered from early losses and settled mixed, with the Dow Jones Industrials posting a 1-week high.  Stocks rebounded from their worst levels Thursday after T-note yields fell from early highs and turned lower on strong demand for the Treasury’s $44 billion auction of 7-year T-notes.

Stocks initially moved lower on Thursday due to higher bond yields as the 10-year T-note yield climbed to a 7-month high of 4.639%.  Bond yields rose early Thursday due to supply pressures and increased inflation expectations after the 10-year US breakeven inflation rate climbed to a 1-month high.

Strength in Asian equity markets is supportive of US stocks. Chinese stocks closed slightly higher Thursday on the outlook for additional stimulus as China may sell a record 3 trillion yuan ($411 billion) of special Treasury bonds in 2025 to bolster economic stimulus for its economy.  Japan’s Nikkei Stock index climbed to a 1-week high Thursday as the yen weakened to a 5-month low against the dollar after BOJ Governor Ueda avoided giving any clues about a possible interest rate hike on Wednesday.

Weekly US labor market news was mixed.  US weekly initial unemployment claims unexpectedly fell -1,000 to a 1-month low of 219,000, showing a stronger labor market than expectations of an increase to 223,000.  However, weekly continuing unemployment claims rose +46,000 to a 3-year high of 1.91 million, above expectations of 1.881 million and a sign that it is taking longer for out-of-work people to find a job.

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

Overseas stock markets Thursday settled higher.  The Euro Stoxx 50 was closed for the Christmas holiday.  China’s Shanghai Composite Index closed up +0.14%.  Japan’s Nikkei Stock 225 rose to a one-week high and closed up +1.12%.

Interest Rates

March 10-year T-notes (ZNH25) Thursday closed up +3 ticks.  The 10-year T-note yield fell -1.2 bp to 4.577%.  Mar T-notes Thursday recovered from a 7-month low and moved higher, and the 10-year T-note yield fell from a 7-month high of 4.639%.  Short covering emerged in T-notes Thursday afternoon on strong demand for the Treasury’s $44 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.76, better than the 10-auction average of 2.60. 

T-notes Thursday initially opened lower due to concern that President-elect Trump’s policy agenda may spark growth and inflation as well as potentially worsen the US fiscal backdrop.  Losses in T-notes accelerated after inflation expectations rose when the 10-year breakeven inflation expectations rate climbed to a 1-month high Thursday of 2.369%.

European government bond markets were closed Thursday for the Christmas and Boxing Day holidays. 

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and at 8% for a -50 bp rate cut at that meeting.

US Stock Movers

Retailers moved higher Thursday on early reports of strong holiday sales.  Target (TGT) and Dollar Tree (DLTR) closed up more than +3%.  Also, Best Buy (BBY), Ross Stores (ROST), and Ulta Beaty (ULTA) closed up more than +2%.

Avita Medical (RCEL) closed up more than +2%, adding to Tuesday’s +9% surge after D. Boral Capital LLC initiated coverage on the stock with a buy recommendation and a price target of $25.

UnitedHealth Group (UNH) closed up more than +1% after Raymond James added the stock to its Favorites List, saying the stock is trading at “a historically attractive level” following year-to-date underperformance.

Apple (AAPL) closed up +0.32% after Wedbush raised its target price on the stock to $325 from $300. 

GameStop (GME) closed up more than +5% after the online persona known as Roaring Kitty posted an image of the company on the social media site X. 

Stocks with exposure to cryptocurrencies were under pressure Thursday due to a -3% fall in the price of Bitcoin (^BTCUSD).  As a result, Microstrategy (MSTR) closed down more than -4% to lead losers in the Nasdaq 100.  Also, Mara Holdings (MARA), Riot Platforms (RIOT), and Coinbase Global (COIN) closed down more than -1%.

Hagerty Inc (HGTY) closed down more than -1% after Raymond James downgraded the stock to underperform from market perform.

Earnings Reports (12/27/2024)

Daily Journal Corp (DJCO), Dakota Gold Corp (DC), Immersion Corp (IMMR).