What you need to know…
Stocks on Monday rallied, with the S&P 500 posting a 3-1/2 month high, the Dow Jones Industrials posting a 3-month high, and the Nasdaq 100 posting a 1-3/4 year high. Strength in technology stocks led the overall market higher, with Microsoft and Nvidia climbing to record highs on renewed artificial intelligence optimism. Stocks extended their gains Monday afternoon when T-note yields fell back from early highs and moved lower.
Strength in semiconductor stocks on Monday was another supportive factor for the overall market. Bearish factors included a hawkish comment from Richmond Fed President Barkin, who said he favored higher interest rate for longer due to stubborn inflation, and Monday’s news that Oct leading indicators fell more than expected.
An upbeat outlook for the holiday shopping season shows is supportive of stocks. A survey from Deloitte shows consumers plan to spend an average of $567 during Black Friday and Cyber Monday shopping events, up +13% from last year. Also, the National Retail Federation projects that 182 million people are planning to shop from Thanksgiving Day through Cyber Monday, the most since 2017.
U.S. Oct leading indicators fell -0.8% m/m, slightly weaker than expectations of -0.7% m/m and the biggest decline in 6 months.
Richmond Fed President Barkin said, "I see inflation being stubborn, and that makes the case for me being higher for longer" on interest rates.
The markets are discounting a 0% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +28% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 74% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields Monday were mixed. The 10-year T-note yield fell -1.9 bp to 4.416%. The 10-year German bund yield rose +2.3 bp to 2.611%. The 10-year UK gilt yield rose +2.1 bp to 4.125%.
ECB Governing Council member Wunsch said the ECB may have to raise interest rates again if investor bets on monetary easing undermine the central bank's policy stance as the markets are taking an "optimistic" view by discounting the possibility of further rate hikes and expecting a rate cut by the ECB as soon as April.
Overseas stock markets Monday settled mixed. The Euro Stoxx 50 closed up +0.04%. China’s Shanghai Composite Index closed up +0.46%. Japan’s Nikkei Stock Index closed down -0.59%.
Today’s stock movers…
Paramount Global (PARA) closed up more than +5% after it sold its Bellator MMA to the Professional Fighters League.
Palo Alto Networks (PANW) closed up more than +5% after it announced it would buy back up to an additional $316.7 million of its stock, an increase to the existing $3.3 billion repurchase plan.
Boeing (BA) closed up more than +4% to lead gainers in the Dow Jones Industrials after Deutsche Bank upgraded the stock to a buy with a price target of $270.
Semiconductor stocks rallied Monday and boosted the overall market. Globalfoundries (GFS) closed up more than +3%. Also, Nvidia (NVDA), Intel (INTC), Lam Research (LRCX), Applied Materials (AMAT), and KLA Corp (KLAC) closed up more than +2%.
Arm Holdings Plc (ARM) closed up more than +6% after Wells Fargo Securities initiated coverage on the stock with a recommendation of overweight and a price target of $70.
Palantir Technologies (PLTR) closed up more than +4% after Wilian O’Neill reinstated coverage of the stock with a buy recommendation.
Equifax (EFX) closed up more than +2% after Citigroup initiated coverage on the stock with a buy recommendation and a price target of $243.
Bristol-Meyers Squibb (BMY) closed down more than -2% to lead losers in the S&P 500 after rival Bayer AG stopped a Phase III trial of a competitor drug Asundexian for lack of efficacy, which could cause FDA scrutiny of Bristol’s rival drug Milvexian.
Packaging stocks retreated Monday after the industry benchmark price was cut for a sixth time this year in a $20-a-ton-reduction. As a result, International Paper (IP) closed down more than -2%, and Packaging Corp of America (PKG) closed down more than -1%.
United Rentals (URI) closed down more than -1% after peer Ashstead Plc cut its full-year group and U.S. rental revenue forecast to +11% to +13% from a previous forecast of +13% to +16%.
Expedia Group (EXPE) closed down more than -1% on signs of insider selling after an SEC filing showed CLO Dzielak sold $9.42 million of his company’s stock last Friday.
Chegg (CHGG) closed down more than -6% after Morgan Stanley downgraded the stock to underweight with a price target of $9.
Ryan Specialty Holdings (RYAN) closed down -0.91% after Goldman Sachs downgraded the stock to neutral from buy.
KB Home (KBH) closed down -0.82% after Wedbush downgraded the stock to neutral from outperform.
Across the markets…
December 10-year T-notes (ZNZ23) Monday closed up +3 ticks, and the 10-year T-note yield fell -1.9 bp to 4.416%. Dec T-notes Monday recovered from early losses and posted modest gains. Short-covering emerged in T-notes Mondy afternoon on relief the $16 billion Treasury auction of 20-year T-bonds was not a disaster, even though demand was tepid with a bid-to-cover ratio of 2.58, below the 10-auction average of 2.66. The market was concerned about demand for long-term Treasuries after the disastrous 30-year T-bond auction earlier this month.
T-notes Monday initially opened lower on negative carryover from a decline in 10-year German bunds after ECB Governing Council member Wunsch warned that the ECB may have to raise interest rates again if investor bets on monetary easing undermine the central bank's policy stance. Also, hawkish comments Monday from Richmond Fed President Barkin weighed on T-notes when he said he favored keeping interest rates higher for longer due to stubborn inflation.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.