Stocks Climb Ahead of Dec ISM Manufacturing Report

The S&P 500 Index ($SPX) (SPY) today is up +0.51%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.80%.  March E-mini S&P futures (ESH25) are up +0.64%, and March E-mini Nasdaq futures (NQH25) are up +0.92%. 

Stocks today are moderately higher on some short covering ahead of this morning’s report on US manufacturing activity with the release of the Dec ISM manufacturing index.  Also, the strength in megacap technology stocks is lifting the broader market. 

Stocks also found support on comments today from President-elect Trump, who said Louisiana Republican Mike Johnson is “very close” to 100% backing in today’s vote for Speaker of the House of Representatives. The election of Johnson as speaker could allow for easier passage of President-elect Trump’s market-friendly legislation. 

Concerns about China’s economic growth outlook are weighing on Chinese stocks and are bearish for global growth prospects.  The Shanghai Composite Stock Index fell more than -1% today to a 1-1/2 month low, and the yuan sank to a 14-month low against the dollar. 

Low volumes and thin trading conditions during this holiday week may lead to exaggerated stock moves.  The markets are awaiting today’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 today are lower.  The Euro Stoxx 50 is down -0.63%.  China’s Shanghai Composite Index fell to a 1-1/2 month low and closed down -1.57%.  Japan’s Nikkei Stock 225 was closed for a bank holiday.

Interest Rates

March 10-year T-notes (ZNH25) today are up +2 ticks.  The 10-year T-note yield is down -0.4 bp to 4.555%.  Mar T-notes today are modestly higher on some mild short covering ahead of today’s US Dec ISM manufacturing index report.  Supply pressures limit gains in T-notes as the Treasury will auction $119 billion of T-notes and T-bonds next week. 

European government bond yields today are mixed.  The 10-year German bund yield is up +1.2 bp to 2.391%. The 10-year UK gilt yield is down -3.0 bp to 4.565%.

The German Dec unemployment change rose by +10,000, showing a stronger labor market than expectations of +15,000.  The Dec unemployment rate held steady at 6.1%, better than expectations of an increase to 6.2%.

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

US Stock Movers

The strength of megacap technology stocks is lifting the broader market.  Nvidia (NVDA) is up more than +3% to lead gainers in the Dow Jones Industrials.  Also, Amazon.com (AMZN), Alphabet (GOOGL), Meta Platforms (META), and Tesla (TSLA) are up more than +1%.

Block (SQ) is up more than +3% after Raymond James upgraded the stock to outperform from market perform with a price target of $115. 

Chewy (CHWY) is up more than +2% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $42.

PulteGroup (PHM) is up more than +2% after Wedbush upgraded the stock to outperform from neutral with a price target of $135. 

Carlyle Group (CG) is up more than +1% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $60.

J.B. Hunt Transport Services (JBHT) is up nearly +1% after Susquehanna Financial upgraded the stock to positive from neutral with a price target of $200. 

US Steel (X) is down more than -5% on reports that President Biden will block the sale of the company to Japan’s Nippon Steel.

Brown-Forman Corp (BF/B) is down more than -3% to lead losers in the S&P 500 after the US Surgeon General said labels on alcohol products like beer and wine should warn of their cancer links.  Molson Coors Beverage (TAP) is down more than -3%, and Constellation Brands (STZ) is also down more than -1% on the news.

Stellantis NV (STLA) is down more than -2% after some of the company’s electric vehicle models that had previously received up to $3,750 in US tax credits are now ineligible under stricter new rules. 

Carvana (CVNA) is down more than -6% after Hindenburg Research said it took a short position in the stock as Carvana’s subprime loan portfolio carries a substantial risk and its growth is unsustainable.

Adobe (ADBE) is down more than -2% to lead losers in the Nasdaq 100 after UBS cut its price target on the stock to $475 from $525.

ACADIA Pharmaceuticals (ACAD) is down more than -1% after Guggenheim Securities downgraded the stock to neutral from buy, citing a lack of catalysts.   

Red Rock Resorts (RRR) is down more than -1% after Jeffries downgraded the stock to hold from buy. 

Earnings Reports (1/3/2025)

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