Stocks Climb on Strength in Chip Stocks and Energy Producers

The S&P 500 Index ($SPX) (SPY) today is up +0.72%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.81%.  March E-mini S&P futures (ESH25) are up +0.37%, and March E-mini Nasdaq futures (NQH25) are up +0.40%. 

Stocks today are moderately higher, led by strength in chip stocks, which rebounded from Tuesday’s losses.  Also, energy stocks are moving higher after the price of WTI crude oil rallied more than +1% to a 2-1/2 month high. 

Stock indexes fell back from their best levels after weekly US initial unemployment claims unexpectedly fell to an 8-month low, a hawkish factor for Fed policy.  Also, a -4% fall in Tesla weighs on technology stocks after it reported fewer than-expected Q4 auto deliveries.

Signs of weakness in Chinese manufacturing activity hammered Chinese stocks and are negative for global growth prospects.  The Shanghai Composite Stock Index tumbled more than -2% today to a 5-week low after the China Dec Caixin manufacturing PMI unexpectedly fell -1.0 to 50.5, weaker than expectations of an increase to 51.7. 

Low volumes and thin trading conditions during this holiday week may lead to exaggerated stock moves.  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.   

US MBA mortgage applications fell -12.6% in the week ended December 27, with the purchase mortgage sub-index down -6.8% and the refinancing sub-index down -23.4%.  The average 30-year fixed mortgage rate rose +8 bp to a 5-1/2 month high of 6.97% from 6.89% in the prior week.

US weekly initial unemployment claims unexpectedly fell -9,000 to an 8-month low of 211,000, showing a stronger labor market than expectations of an increase to 221,000.

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 lower.  The Euro Stoxx 50 retreated from a 2-week high and is down -0.22%.  China’s Shanghai Composite Index dropped to a 5-week low and closed down -2.66%.  Japan’s Nikkei Stock 225 was closed for the New Year’s Day holiday.

Interest Rates

March 10-year T-notes (ZNH25) today are up +6 ticks.  The 10-year T-note yield is down -2.6 bp to 4.543%.  Mar T-notes today are moving higher on positive carryover from strength in European government bonds as 10-year German bunds and 10-year UK gilts rose to 1-week highs.  T-notes fell back from their best levels after weekly US jobless claims unexpectedly fell to an 8-month low, a sign of labor market strength that is hawkish for Fed policy.

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-week low of 2.309% and is down -4.0 bp to 2.327%.  The 10-year UK gilt yield slid to a 1-week low of 4.520% and is down -3.4 bp to 4.533%.

The Eurozone Dec S&P manufacturing PMI was revised downward by -0.1 to 45.1 from the previously reported 45.2.

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

Chip stocks are moving higher today and supporting the overall market. Nvidia (NVDA) is up more than +2% to lead gainers in the Dow Jones Industrials.  Also, ARM Holdings Plc (ARM) is up more than +2%.  In addition, ASML Holding NV (ASML), Analog Devices (ADI), Intel (INTC), KLA Corp (KLAC), Broadcom (AVGO), Marvell Technology (MRVL), Micron Technology (MU)  and Microchip Technology (MCHP) are up more than +1%.

Energy stocks are climbing today with the price of WTI crude oil up by more than +1% to a 2-1/2 month high.  As a result, APA Corp (APA), Devon Energy (DVN), and Haliburton (HAL) are up more than +2%.  Also, Diamondback Energy (FANG), Exxon Mobil (XOM), Schlumberger (SLB), Occidental Petroleum (OXY), Chevron (CVX), Marathon Petroleum (MPC), and Valero Energy (VLO) are up more than +1%. 

Cloudflare (NET) is up more than +4% after Goldman Sachs double-upgraded the stock to buy from sell with a price target of $140.

Cryptocurrency-exposed stocks are rising, with the price of Bitcoin (^BTCUSD) up more than +1%.  As a result, Coinbase Global (COIN), Bit Digital (BTBT), MARA Holdings (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are up more than +3%.   

US Bancorp (USB) is up more than +1% after D.A. Davidson upgraded the stock to buy from neutral with a price target of $60. 

RTX Corp (RTX) is up more than +1% after Deutsche Bank upgraded the stock to buy from hold with a price target of $140. 

Tesla (TSLA) is down more than -4% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q4 auto deliveries of 495,570, below the consensus of 512,277.

Apple (AAPL) is down more than -2% to lead losers in the Dow Jones Industrials after agreeing to pay $95 million to resolve a class-action lawsuit that the privacy of Siri users was violated when human reviewers listened to customer recordings.

Neumora Therapeutics (NMRA) is down more than -80% after saying a Phase 3 study of its navacaprant for the treatment of depression didn’t show statistically significant improvement or key secondary endpoint. 

SoFi Technologies (SOFI) is down more than -5% after Keefe, Bruyette & Woods downgraded the stock to underperform from market perform with a price target of $8. 

CareTrust REIT (CTRE) is down more than -1% after Wedbush downgraded the stock to underperform from neutral with a price target of $26. 

Healthcare Realty Trust (HR) is down more than -1% after Wedbush downgraded the stock to underperform from neutral with a price target of $16. 

Earnings Reports (1/2/2025)

Critical Metals Corp (CRML), Lifecore Biomedical Inc (LFCR), Resources Connection Inc (RGP).