The S&P 500 Index ($SPX) (SPY) Monday closed down -1.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.97%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.28%. March E-mini S&P futures (ESH25) are down -1.20%, and March E-mini Nasdaq futures (NQH25) are down -1.43%.
Stocks on Monday retreated, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting 1-week lows. The weakness in megacap technology stocks Monday weighed on the broader market. Also, Monday’s selloff in chip stocks pressured the technology sector. In addition, Boeing fell more than -2% after a 737-800 Boeing aircraft crashed at Muan International Airport in South Korea. Finally, year-end profit-taking in equity markets is weighing on stock prices, with Tuesday being the last trading day of 2024. On the positive side, energy stocks found support from Monday’s +16% surge in nat-gas prices to a 1-year high and the rally in WTI crude oil to a 2-week high.
Monday’s US economic news was mixed for stocks. On the negative side, the Dec MNI Chicago PMI unexpectedly fell -3.3 to a 7-month low of 36.9, weaker than expectations of an increase to 43.0. Conversely, Nov pending home sales rose +2.2% m/m, stronger than expectations of +0.8% m/m. Also, the Dec Dallas Fed manufacturing outlook survey unexpectedly rose +5.1 to a 2-3/4 year high of 3.4, stronger than expectations of a decline to -3.0.
Low volumes and thin trading conditions during this holiday week may lead to exaggerated stock moves, with most global equity markets closed Wednesday for the New Year’s holiday. The markets are awaiting Friday’s US Dec ISM manufacturing index for market direction and to gauge the health of the US manufacturing sector. Expectations are for the Dec ISM Manufacturing Index to slip -0.2 to 48.2.
The markets are discounting the chances at 11% for a -25 bp rate cut at the January 28-29 FOMC meeting.
Overseas stock markets on Monday settled mixed. The Euro Stoxx 50 fell from a 1-week high and closed down -0.60%. China’s Shanghai Composite Index closed up +0.21%. Japan’s Nikkei Stock 225 closed down -0.96%.
Interest Rates
March 10-year T-notes (ZNH25) Monday closed up +17 ticks. The 10-year T-note yield fell -7.8 bp to 4.547%. Mar T-notes on Monday climbed to a 1-week high and settled moderately higher as the slump in equity markets sparked some safe-haven demand for T-notes. T-notes extended their gains Monday after the Dec MNI Chicago PMI unexpectedly contracted by the most in 7 months, a dovish factor for Fed policy.
T-note prices are also seeing some support from month-end rebalancing as bond fund managers buy longer-term government debt to balance their portfolios, with Bloomberg estimating the duration of bond indexes will extend by an estimated 0.07 of a year this month.
European government bond yields Monday moved lower. The 10-year German bund yield fell from a 6-week high of 2.404% and finished down -2.9 bp to 2.367%. The 10-year UK gilt yield fell from a 1-week high of 4.646% and finished down -2.2 bp to 4.611%.
Spain’s Dec CPI (EU harmonized) rose +2.8% y/y, stronger than expectations of +2.6% y/y and the largest increase in 5 months. Also, Dec core CPI rose +2.6% y/y, stronger than expectations of +2.4% y/y.
ECB Governing Council member Holzmann said, “It could be the case that we take more time before lowering interest rates again” if inflation risks from energy prices or a stronger depreciation of the euro materialize.
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
Mega-cap technology stocks were under pressure Monday and weighed on the broader market. Tesla (TSLA) closed down more than -3%. Also, Meta Platforms (META), Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), and Alphabet (GOOGL) closed down more than -1%.
Weakness in chip stocks on Monday was a drag on the overall market. Micron Technology (MU) and ON Semiconductor (ON) closed down more than -3%. Also, NXP Semiconductors NV (NXPI), ASML Holding NV (ASML), Broadcom (AVGO), GlobalFoundries (GFS), Microchip Technology (MCHP), and Intel (INTC) closed down more than -2%. In addition, Lam Research (LRCX), Analog Devices (ADI), Advanced Micro Devices (AMD), KLA Corp (KLAC), Qualcomm (QCOM), Texas Instruments (TXN), Marvell Technology (MRVL), and Applied Materials (AMAT) closed down more than -1%.
Boeing (BA) closed down more than -2% after a 737-800 Boeing aircraft crashed at Muan International Airport in South Korea.
MicroStrategy (MSTR) closed down more than -8% to lead losers in the Nasdaq 100 after the price of Bitcoin fell to a 1-month low after the company said it bought $209 million of Bitcoin last week.
Axsome Therapeutics (AXSM) closed down more than -2% after announcing an advanced-2 Phase 3 trial for its AXS-05 Alzheimer’s disease treatment did not demonstrate statistical significance for the primary endpoint.
Energy stocks moved higher Monday after nat-gas prices rallied to a 1-year high and WTI crude oil rose to a 2-week high. EQT Corp (EQT) closed up more than +5% to lead gainers in the S&P 500, and Coterra Energy (CTRA) closed up more than +3%. Also, Devon Energy (DVN) closed up more than +2%, and Diamondback Energy (FANG) closed up more than +1% to lead gainers in the Nasdaq 100. In addition, APA Corp (APA) closed up more than +1%, and Halliburton (HAL) and Kinder Morgan (KMI) closed up more than +0.60%.
Vivid Seats (SEAT) closed up more than +19% after announcing that it is exploring a sale after receiving takeover interest.
V2X Inc (VVX) closed up more than +2% after being awarded a $170 million five-year contract to continue supporting the Drug Enforcement Administration’s (DEA) fleet of over 100 aircraft.
Earnings Reports (12/31/2024)
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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