What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.30%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.42%.
Stocks this morning are moderately higher in thin holiday trade, with markets in Europe and parts of Asia closed for Boxing Day. Stocks are supported by the seasonal Santa Claus rally, where equity prices tend to climb between Christmas and the first few days of the new year. Strength in chip stocks is boosting the overall market, and a more than +2% rally in WTI crude oil is lifting energy stocks.
Today’s U.S. economic news was better than expected, bolstering the outlook for an economic soft landing. The Nov Chicago Fed national activity index rose +0.69 to a 4-month high of 0.03. Also, the Oct S&P CoreLogic composite-20 home price index rose +4.87% y/y, the most in 11 months but below expectations of +4.99% y/y. In addition, the Dec Dallas Fed manufacturing outlook index rose +10.6 to an 11-month high of -9.3, stronger than expectations of -17.0.
An increase in holiday spending shows consumer confidence in the economic outlook, which supports stocks. According to Mastercard retail sales data, in-store and online sales (excluding automotive) rose +3.1% year-over-year from Nov 1 through Dec 24, with spending at restaurants jumping +7.8%.
An increase in M&A activity today is bullish for stocks. A group led by Dazheng Group made an improved offer to acquire Hollysys Automation Technologies for $1.8 billion. Also, Nano Dimensions offered to buy Stratasys for about $1.1 billion. In addition, Bristol Myers Squibb agreed to buy RazeBio for about $4.1 billion.
WTI crude prices jumped more than +2% on geopolitical risks after the U.S. military launched strikes on three installations in Iraq, targeting a terrorist group backed by Iran that was accused of a series of drone attacks on American troops. Also, the UK navy today reported attacks on two commercial vessels sailing in the Red Sea near Yemen.
The markets are discounting the chances for a -25 bp rate cut at 14% at the next FOMC meeting on Jan 30-31 and at 95% for the following meeting on March 19-20.
U.S. government bond yields today are higher. The 10-year T-note yield is up +0.4 bp at 3.899%.
Overseas stock markets are mixed. The Euro Stoxx 50 is closed for Boxing Day. China’s Shanghai Composite Index closed down -0.68%. Japan’s Nikkei Stock Index closed up +0.16%.
Overseas stock markets are mixed. The Euro Stoxx 50 is closed for the Boxing Day holiday. China’s Shanghai Composite Index closed down -0.68%. Japan’s Nikkei Stock Index closed up +0.16%.
Today’s stock movers…
Intel (INTC) is up more than +3% to lead gainers in the Dow Jones Industrials and Nasdaq 100 after it said it reached a pact with Israel on an incentive package to support the expansion of its Kiryat Gat wafer fabrication operations valued at $3.2 billion.
Energy stocks and energy service providers are climbing today, with the price of WTI crude oil up more than +2%. As a result, APA Corp (APA) is up more than +2%. Also, Baker Hughes (BKR), Marathon Oil (MRO), Hess Corp (HES), Devon Energy (DVN), Diamondback Energy (FANG), Haliburton (HAL), and Schlumberger (SLB) are up more than +1%.
The strength of chip makers today is supportive of the overall market. Advanced Micro Devices (AMD) and Lam Research (LRCX) are up more than +2%. Also, Nvidia (NVDA), Qualcomm (QCOM), Applied Materials (AMAT), KLA Corp (KLAC), Marvell Technology (MRVL), Micron Technology (MU), and Texas Instruments (TXN) are up more than +1%.
Dollar Tree (DLTR) is up more than +1% after sales transactions observed by Bloomberg Second Measure showed the company was the best performing in terms of average transaction growth. Five Below (FIVE) also rose more than +1% after it reported the biggest growth among mass merchant companies for the week ending Dec 17, with sales up +11% y/y.
RayzeBio (RYZB) soared more than +100% in pre-market trading after Bristol Myers Squibb agreed to buy the company for about $4.1 billion.
Stratasys (SSYS) jumped more than +12% in pre-market trading after it received an unsolicited takeover offer from Nano Dimensions for about $1.1 billion.
Hollysys Automation Technologies (HOLI) climbed over 6% in pre-market trading after a group led by Dazheng Group made an improved offer to acquire the company for $1.8 billion.
Bristol-Myers Squibb (BMY) is down more than -1% after acquiring RayzeBio for more than $4.1 billion.
Airbnb (ABNB) is down more than -1% to lead losers in the Nasdaq 100 on signs of insider selling after an SEC filing showed CSO Blecharczyk sold $8.6 million of shares last Wednesday.
Shipping stocks are retreating today after Maersk said it’s preparing to resume shipping through the Red Sea as a multinational task force begins protecting vessels from attacks by Houthi rebels from Yemen. The resumption of shipping through the Red Sea should reduce freight charges. As a result, ZIM Integrated Shipping (ZIM) is down more than -17%. Also, Teekay Tankers Ltd (TNK) is down more than -4%, and Ardmore Shipping (ASC) is down more than -3%. In addition, Scorpio Tankers (STNG) is down more than -2%.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -2 ticks, and the 10-year T-note yield is up +0.4 bp at 3.899%. Mar T-note prices today are under pressure from strength in stocks, which curbs safe-haven demand for government debt. Also, supply pressures are undercutting T-notes as the Treasury will auction $57 billion of 2-year T-notes as part of this week’s auction package of $181 billion in T-notes and floating-rate notes later today.
The dollar index (DXY00) today is down by -0.09%. The dollar today is modestly lower but is holding above last Friday’s 4-3/4 month low. Strength in equity markets today has reduced liquidity demand for the dollar. Losses in the dollar are muted as geopolitical risks boost safe-haven demand for the dollar after the U.S. launched military strikes in Iraq against terrorist groups accused of a series of drone attacks on American troops.
EUR/USD (^EURUSD) is up +0.16%. Dollar weakness today is the main supportive factor for the euro. Today's Forex trading activity in the euro is muted, with European markets closed for the Boxing Day holiday.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 3% for its next meeting on Jan 25 and at 60% for the following meeting on March 7.
USD/JPY (^USDJPY) is up +0.05%. The yen today is modestly lower. Dovish comments from BOJ Governor Ueda weighed on the yen when he said that he was in no hurry to end the BOJ’s ultra-easy monetary policy. Also, higher T-note yields today are bearish for the yen. Today’s Japanese economic news was mixed for the yen.
Japan Nov PPI services prices rose +2.3% y/y, unchanged from Oct and weaker than expectations of +2.4% y/y.
The Japan Nov jobless rate was unchanged at 2.5%, right on expectations. However, the Nov job-to-applicant ratio unexpectedly fell -0.2 to 1.28, weaker than expectations of no change at 1.30 and a sign of a softer labor market.
The Japan Oct leading index CI was revised upward by +0.2 to 108.9 from the previously reported 108.7.
February gold (GCG4) today is down -1.8 (-0.09%), and Mar silver (SIH24) is down -0.145 (-0.59%). Gold and silver prices this morning are modestly lower. Strength in equity markets today has reduced safe-haven demand for precious metals. Also, higher T-note yields today weigh the prices of precious metals. Losses in gold today are limited by expectations that the Federal Reserve will begin cutting interest rates next year. Silver is also seeing support from today’s U.S. economic news that showed home prices rose by the most in 11 months, and the Nov Chicago Fed national activity index rose to a 4-month high, bullish factors for industrial metals demand.
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.
