Stocks Pressured by Higher Bond Yields and Tech Stock Weakness

The S&P 500 Index ($SPX) (SPY) today is down -0.73%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.22%.  March E-mini S&P futures (ESH25) are down -0.71%, and March E-mini Nasdaq futures (NQH25) are down -1.21%. 

Stocks today are moderately lower, weighed down by higher bond yields as the 10-year T-note yield is up +1.0 bp at 4.593%, modestly below Thursday’s 7-month high.  Weakness in megacap technology stocks today is also pressuring the overall market.  On the positive side, energy stocks are climbing today with the price of WTI crude oil up more than +1%.

The US Nov trade deficit widened to -$102.9 billion from -$98.3 billion in Oct, a larger deficit than expectations of -$101.2 billion, a negative development for Q4 GDP and bearish for stocks.

Strength in Asian equity markets is supportive of US stocks. China’s Shanghai Composite Stock Index rose to a 2-week high today on the prospects of additional stimulus to bolster its economy.  Japan’s Nikkei Stock index rallied to a 5-1/4 month high today, led by strength in exporters as the yen weakened to a 5-month low against the dollar.  Also, better-than-expected economic news on retail sales and industrial production boosted Japanese stocks.

The markets are discounting the chances at 11% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 rose to a 1-week high and is up +0.68%.  China’s Shanghai Composite Index climbed to a 2-week high and closed up +0.06%.  Japan’s Nikkei Stock 225 rallied to a 5-1/4 month high and closed up +1.80%.

Interest Rates

March 10-year T-notes (ZNH25) today are down -3 ticks.  The 10-year T-note yield is up +1.0 bp to 4.593%.  Mar T-notes today are moderately lower and are under pressure from carryover weakness in European and Japanese government bonds.  10-year German bunds fell to a 1-1/4 month low, 10-year UK Gilts fell to a 1-week low, and 10-year Japanese JGB bonds dropped to a 13-year low.  T-notes are also weighed down on the concern that President-elect Trump’s policy agenda may spark growth and inflation and potentially worsen the US fiscal backdrop. 

European government bond yields today are moving higher.  The 10-year German bund yield climbed to a 1-1/4 month high of 2.403% and is up +5.0 bp to 2.373%.  The 10-year UK gilt yield rose to a 1-week high of 4.645% and is up +3.8 bp to 4.614%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and at 12% for a -50 bp rate cut at that meeting.

US Stock Movers

Tesla (TSLA) is down more than -2% on reports that rental car company Hertz is so desperate to shed its inventory of Tesla cars that it is aggressively sending cheap buyout options to rental customers.

Netflix (NFLX) is down more than -2% on less-than-favorable reviews for the company’s new “Squid Game Season 2” season released Thursday. 

Mega-cap technology stocks are moving lower today and are weighing on the broader market.  Nvidia (NVDA) is down more than -2%.  Also, Amazon.com (AMZN), Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META) are down more than -1%.

Crowdstrike Holdings (CRWD) is down more than -1% on signs of insider selling after an SEC filing showed CEO Kurtz sold $6.5 million of shares on Monday.

Broadcom (AVGO) is down more than -1% on signs of insider selling after an SEC filing showed CFO Spears sold $2.89 million of shares last Friday.

KKR & Co (KKR) is down more than -1% after the Fly reported the company, along with Bain Capital, each offered over $5 billion for Japan’s Seven & I’s non-core assets. 

Fastenal (FAST) is down -0.9% after announcing that CFO Lweis will resign in April.

Lamb Weston Holdings (LW) is up more than +2% to lead gainers in the S&P 500 after an amended 13D regulatory filing showed Jana Partners LLC reported a holding in the company. 

Energy producers and energy service providers are moving higher today, with the price of WTI crude oil rising more than +1%.  Chevron (CVX) is up more than +1% to lead gainers in the Dow Jones Industrials.  Also, Occidental Petroleum (OXY), Haliburton (HAL), Exxon Mobil (XOM), Schlumberger (SLB), Devon Energy (DVN), and ConocoPhillips (COP) are up more than+1%.  In addition, Diamondback Energy (FANG) is up +0.87% to lead gainers in the Nasdaq 100. 

VeriSign (VRSN) is up more than +1% after Warren Buffet’s Berkshire Hathaway disclosed buying $28.5 million worth of the stock in 3 sessions to Tuesday.

Progyny (PGNY) is up more than +12% on signs of insider buying after an SEC filing showed Executive Chairman Schlanger bought $2.2 million of shares on Thursday. 

Amedisys (AMED) is up more than +4% after the company and UnitedHealth Group gave themselves more time for UnitedHealth Group to complete the $3.3 billion deal to purchase the company. 

Tencent Music Entertainment Group ADRs (TEM) are up more than +3% after 86Research upgraded their recommendation on the ADRs to buy from hold with a price target of $14. 

Earnings Reports (12/27/2024)

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