What you need to know…
The S&P 500 Index ($SPX) (SPY) is down -0.07% today, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.84%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down. -0.77%.
Stocks this morning are mixed, with the Dow Jones Industrials posting a 1-3/4-year high and the Nasdaq 100 falling to a 1-1/2-week low. Stocks found support in US economic reports showing that continuous jobless claims rose to a 2-year high and the Oct-core PCE rose less than expected, bolstering expectations that the Fed will raise interest rates. However, wild comments from New York Fed President Williams and San Francisco Fed President Daly pushed bond yields higher and weighed on technology stocks as they dampened speculation that the Fed will soon cut interest rates.
Stocks have carryover support today from a rally in the Euro Stoxx 50 to a 3-1/2 month high. European stocks rose after Eurozone New CPI rose less than expected, knocking the 10-year German bund yield down to a 4-1/2-month low and bolstering expectations that the ECB is done raising interest rates.
On the positive side for stocks, M&A activity is supportive for stocks after AbbVie agreed to acquire ImmunoGen for $10.1 billion. Also, Salesforce rose more than +6% after reporting Q3 adjusted EPS above consensus and raising its 2024 adjusted EPS forecast. In addition, Snowflake is up more than +7% after reporting Q3 earnings above consensus.
On the downside, Pure Storage is down more than -15% after forecasting 2024 earnings below consensus. Also, Albemarle is down more than -2% as the price of Chinese lithium carbonate has sunk to a 2-year low. In addition, Ford Motor declined more than -1% after cutting 2023 adjusted earnings guidance.
US weekly initial jobless claims rose +7,000 to 218,000, right in line with expectations. However, weekly continuous claims rose +86,000 to a 2-year high of 1.927 million, showing a weaker labor market than expectations of 1.865 million.
US personal spending rose +0.2% m/m, right in line with expectations. October personal income rose +0.2% m/m, right in line with expectations.
The US Oct core PCE deflator, the Fed’s preferred gauge of inflation, eased to +3.5% y/y from +3.7% y/y in September, right in line with expectations and the smallest increase in 2-1/ 2 years Oct’s headline deflator eased to +3.0% y/y from +3.4% in September, better than expectations of +3.1% y/y.
The US New MNI Chicago PMI rose +11.8 to a 1-1/2 year high of 55.8, stronger than expectations of 46.0.
US Oct pending home sales fell -1.5% m/m and -6.6% y/y, a smaller decline than expectations of -2.0% m/m and -8.8% y/y.
New York Fed President Williams said, “I expect it will be appropriate to maintain a restrictive stance for enough time to fully restore balance and return inflation to our 2% longer-term target on a sustained basis.”
San Francisco Fed President Daly said interest rates are in a “very good place” to control inflation and talk of rate cuts “isn’t particularly helpful right now.”
The markets are discounting a 4% chance for a +25 bp rate at the next FOMC meeting on December 12-13 FOMC and a 2% chance for that +25 bp rate at the next FOMC meeting on December 30 -January 31, 2024. The markets then discount a 42% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 100% chance for that same -25 bp -rate reduction at April 30-May 1, 2024. , FOMC meeting.
US and European government bond yields are higher today. The 10-year T-note yield is up +6.9 bp at 4.324%. The 10-year German bund yield rebounded from a 4-1/2-month low of 2.395% and is up +3.6 bp at 2.467%. The 10-year UK gilt yield is up +8.0 bp at 4.176%.
China’s New manufacturing PMI unexpectedly fell -0.1 to a 4-month low of 49.4, weaker than expectations of an increase to 49.8. Also, the New non-manufacturing PMI unexpectedly fell -0.4 to an 11-month low of 50.2, weaker than expectations of an increase to 50.9.
Foreign stock markets are higher. The Euro Stoxx 50 rises + 0.28%. China’s Shanghai Composite Index closed up +0.26%. Japan’s Nikkei Stock Index closed +0.50%.
Today’s stock movers…
Salesforce Inc (CRM) rose more than +6% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q3 adjusted EPS of $2.11, better than the consensus of $2.06, and raising its 2024 adjusted EPS forecast to $8.18-$8.19 from $8.18-$8.19. previous forecast of $8.04-$8.06, stronger than the consensus of $8.06.
HP Enterprise (HPE) rose more than +2%, adding to Wednesday’s +5% gain after Morgan Stanley upgraded the stock to equal weight from underweight.
Snowflake (SNOW) is up more than +7% after reporting Q3 revenue of $734.2 million, above consensus of $713.8 million.
Nutanix (NTNX) rose more than +8% after Barclays raised its price target on the stock to $49 from $43, and Morgan Stanley raised its price target to $50 from $38.
Immunogen (IMGN) is up more than +80% after AbbVie agreed to acquire the company for $10.1 billion or $31.26 per share.
Snap (SNAP) rose more than +7% after Jeffries upgraded the stock to buy from hold with a price target of $16.
Pinterest (PINS) rose more than +3% after Jeffries upgraded the stock to buy from hold with a price target of $41.
Albemarle (ALB) is down more than -2% to lead losers in the S&P 500, as the price of Chinese lithium carbonate sank to a 2-year low today.
Lowe’s (LOW) is down more than -2% after Bloomberg Intelligence said it expects the company’s same-store sales to fall -5% this year, a steeper decline than consensus of a decline as much as -4% due to depressed housing activity and a pullback in discretionary spending.
Pure Storage ( PSTG ) is down more than -15% after forecasting 2024 revenue of $2.82 billion, weaker than the consensus of $2.96 billion.
Okta (OKTA) is down more than -1%, adding to Wednesday’s -2% loss after Wells Fargo Securities and KeyBanc Capital Markets downgraded the stock to hold equivalent ratings of overweight.
Ford Motor ( F ) fell more than -1% after cutting guidance for 2023 adjusted earnings before interest and taxes to $10 billion – $10.5 billion from a July forecast of $11 billion – $12 billion as labor costs jumped from its new contract with UAW.
Higher bond yields are weighing on chip stocks today. As a result, Nvidia (NVDA), Advanced Micro Devices (AMD), Globalfoundries (GFS), Broadcom (AVGO) and ASML Holding NV (ASML) are down more than -1%.
Through the markets…
December 10-year T-notes (ZNZ23) are down -13 ticks this morning, and the 10-year T-note yield is up +6.9 bp at 4.324%. Dec T note prices this morning are under pressure from strong US economic news and dovish comments from the Fed. The New MNI Chicago PMI rose more than expected to its strongest level in 1-1/2 years. Also, New York Fed President Williams said he expects monetary policy to “remain restrictive for some time,” San Francisco Fed President Daly said she is “not thinking” about rates right now.
The dollar index (DXY00) is up +0.58% today. Hawkish Fed comments today pushed T-note yields higher and boost the dollar. Also, weaker than expected Eurozone consumer prices are appropriate for ECB policy and weigh on the euro to the advantage of the dollar.
EUR/USD (^EURUSD) is down -0.59% today. The euro is moving lower today as a weaker than expected Eurozone A new CPI report reinforced expectations that the ECB will raise interest rates. Also, the easing pressures show that the exchange markets have priced in 100% of a -25bp ECB rate from the April 11th ECB meeting, further weakening the euro.
The Eurozone New CPI decreased to + 2.4% y/y from + 2.9% y/y in October, better than expectations of + 2.7% y/y and the smallest increase in 2-1/3 years. Also, New-core CPI decreased to +3.6% y/y from +4.2% y/y in October, better than expectations of +3.9% y/y and the smallest increase in 1-1/2 years.
The German Nov unemployment change increased by +22,000, showing a weaker labor market than expectations of +20,000.
German Oct retail sales rose +1.1% m/m, stronger than expectations +0.4% m/m and the biggest increase in 13 months.
Italy’s Nov unemployment rate unexpectedly rose +0.2 to a 6-month high of 7.8%, pointing to a weaker labor market than expectations of no change at 7.4%.
USD/JPY (^USDJPY) is up +0.72% today. The yen today is under pressure from a stronger dollar and higher T-note yields. Also, dovish comments today from BOJ board member Nakamura sent the yen lower when he said the Japanese economy still needed the BOJ’s output control program and negative interest rates and “now is not the time” to adjust monetary policy.
Japanese economic news today was mixed for the yen. On the downside, Octo retail sales unexpectedly fell -1.6% m / m, weaker than expectations of a + 0.4% m / m increase and the biggest decline in 2-1 / 2 years. Conversely, the Nov consumer confidence index unexpectedly rose + 0.4 to 36.1, stronger than expectations of a decline to 35.6. October industrial production also rose +1.0% m/m, stronger than expectations of +0.8% m/m and the biggest increase in 4 months.
Dec gold (GCZ3) today is down -10.4 (-0.51%), and Dec silver (SIZ23) is up +0.053 (+0.21%). Precious metals prices today are mixed. A stronger dollar today is bearish for metal prices. Also, a jump in T-note yields today is negative for precious metals. Gold prices also retreated due to sharp comments from New York Fed President Williams Fed and San Francisco Fed President Daly. Silver prices found support today on stronger-than-expected global economic news that is bullish for industrial metals demand after the US New MNI Chicago PMI rose more than expected to a 1-1/2-year high, and Japan’s industrial production in October increased more than expected. expected
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As of 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 for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.