What you need to know…
The S&P 500 Index ($SPX) (SPY) on Friday closed +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) closed +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up. +0.03%
Stocks on Friday vacillated between modest gains and losses and finally settled slightly higher. The broader market initially moved lower as bond yields rose after Friday’s US economic news showed October housing starts and building permits unexpectedly rose, a welcome factor for Fed policy. However, bond yields fell back from early highs and ended little changed, allowing stocks to recover. Bond yields fell sharply this week after better-than-expected U.S. inflation news and weekly jobs data that pointed to a slowing labor market boosted expectations that the Fed is tightening monetary policy.
Stocks had support on some positive corporate news. The Gap increased more than +29% after reporting Q3 adjusted EPS well above consensus. Also, Ross Stores rose more than +7% after reporting stronger than expected Q3 sales. In addition, Hubbell rose more than +3% after JPMorgan Chase upgraded it to overweight.
US Oct housing starts unexpectedly rose + 1.9% m / m to 1.372 million, stronger than expectations for a decline to 1.350 million. Also, October building permits, a proxy for future construction, unexpectedly rose + 1.1% to 1.487 million, stronger than expectations of a decline to 1.450 million.
Fed comments on Friday were mixed for stocks. On the positive side, comments from San Francisco Fed President Daly suggest that she prefers to maintain a pause in Fed rate hikes when she said: “When uncertainty is high, and risk to our goals is more balanced, we have to exercise moderation. ” Conversely, Boston Fed President Collins said, “To get back to 2% inflation in a reasonable amount of time, we have to be patient and resolute, and I wouldn’t take further monetary tightening off the table.”
According to Bank of America, EPFR Global data showed that global equity funds attracted $23.5 billion in inflows in the week to November 15, the second largest inflows this year.
The markets are discounting a 0% chance for a +25 bp rate at the next FOMC meeting on December 12-13 FOMC and a 0% chance for that +25 bp rate at the next FOMC meeting on December 30-31 on January 2024. The markets then discount a 28% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 76% chance for that same -25 bp rate cut at April 30-May 1, 2024. , FOMC meeting.
US and European government bond yields were mixed on Friday. The 10-year T-note yield recovered from a 1-3/4-month low of 4.377% and rose +0.1 bp to 4.437%. The 10-year German bund yield fell to a 2-1/2-month low of 2.517% and fell -0.2 bp at 2.588%. The 10-year UK gilt yield fell to a 5-3/4-month low of 4.029% and fell -4.7bp to 4.104%.
ECB Governing Council member and Bundesbank President Nagel said that borrowing costs “must remain at a high level for a sufficient period”, and that an ECB rate hike in the near future is “highly unlikely”.
ECB Governing Council member Holzmann said it will be “too soon” for the ECB to start cutting interest rates in Q2 of next year, and market expectations for a rate cut are premature.
Foreign stock markets settled higher on Friday. The Euro Stoxx 50 closed up +0.89%. China’s Shanghai Composite Index closed up +0.11%. Japan’s Nikkei Stock Index closed +0.48%.
Today’s stock movers…
Ross Stores (ROST) closed up more than +7% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 sales of $4.92 billion, stronger than the consensus of $4.84 billion.
Expedia Group (EXPE) closed up more than +5% after Evercore ISI upgraded the stock to outperform from inline with a price target of $200.
Hubbell Inc (HUBB) closed up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $335.
Energy stocks rose on Friday after crude prices jumped more than +4%. As a result, Marathon Oil (MRO) closed up more than +3%. Also, APA Corp (APA), Exxon Mobil (XOM), Phillips 66 (PSX), Diamondback Energy (FANG), Devon Energy (DVN), ConocoPhillips (COP), and Haliburton (HAL), closed up more than +2%.
The Gap (GPS) closed up more than +29% after reporting Q3 adjusted EPS of 59 cents, well above the consensus of 19 cents.
Globant SA (GLOB) closed up +11% after forecasting Q3 non-IFRS adjusted EPS of at least $1.60, better than the consensus of $1.58.
Tenet Healthcare Corp (THC) closed up more than +9% after Novant Health bought three Tenet hospitals and affiliated operations in South Carolina.
Warner Music Group (WMG) closed up more than +1% after reporting Q4 revenue of $1.59 billion, above consensus of $1.57 billion.
Analog Devices (ADI) closed up more than +1% after Morgan Stanley upgraded the stock to an equal-weight overweight rating with a $225 price target.
Applied Materials (AMAT) closed down more than -4% to lead losers in the S&P 500 and Nasdaq 100 after Reuters reported that the company faces a US criminal investigation for allegedly violating export restrictions to China.
TransDigm (TDG) closed down more than -2% on signs of insider selling after an SEC filing showed Co-COO Reiss sold $2.98 million worth of stock on Wednesday.
Managed health services were under pressure on Friday. As a result, Molina Healthcare (MOH) closed up more than -3%. Also, Humana ( HUM ) closed up more -2%, and UnitedHealth Group ( UNH ) closed -0.65%.
Microsoft (MSFT) closed down more than -1% to lead losers in the Dow Jones Industrials after Open AI said CEO Murati was leaving.
Progressive Corp (PGR) closed up more than -1% after reporting a combined ratio for October of 91.7% versus 95.9% y/y.
Gitlab (GTLB) closed down more than -3% after Barclays downgraded the stock to match weight from overweight.
Alphabet (GOOGL) closed down more than -1% after the News reported that the company is delaying the release of its Gemini AI language model from this month to Q1 of next year.
Air Products & Chemicals (APD) closed down more than -1% after Redburn doubled the stock to sell from buy with a price target of $240.
Through the markets…
December 10-year T-notes (ZNZ23) closed down -3.5 ticks on Friday, and the 10-year T-note yield rose +0.1 bp to 4.437%. Dec T-notes on Friday fell back from a 1-3/4-month high and posted modest losses, and the 10-year T-note rose from a 1-3/4-month low of 4.377%. T-bills tanked Friday after economic news showed U.S. housing starts and building permits unexpectedly rose. T-note prices on Friday initially moved higher on a positive carryover from a rally in 10-year UK gilts to a 5-3/4-month high after UK Oct retail sales unexpectedly fell.
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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.