What you need to know…
Stocks on Monday settled mixed, with the Dow Jones Industrials posting a 1-3/4 month high. The broader market recovered from early losses Monday after T-note yields gave up an early advance and turned lower, prompting short covering in equities. Also, optimism that Tuesday’s U.S. Oct consumer price report will show an easing of price pressures gave stocks a boost.
Stocks on Monday initially moved lower on higher T-note yields and after Moody’s Investors Service late Friday cut its outlook on the U.S. credit rating to negative from stable, citing wider budget deficits and political polarization. U.S. lawmakers have until Friday night to pass a stopgap spending bill before funding runs out and the government shuts down.
The consensus is for Tuesday’s U.S. consumer price report to show Oct CPI to ease to 3.3% y/y from +3.7% y/y in Sep. However, core Oct CPI (ex-food and energy) is expected to remain unchanged from Sep at 4.1% y/y.
On the positive side for stocks, Dexcom and Insulet closed up more than +4% after Bloomberg Intelligence said pharmacy channel sales data for October show the companies are still seeing solid sales growth for devices that treat and monitor diabetes despite competition from new obesity drugs. Also, Monday.com closed up more than +10% after reporting Q3 adjusted EPS above consensus. In addition, Boeing closed up more than +4% after China said it was considering ending a freeze on its purchases of Boeing’s airliners.
On the negative side, Illumina closed down more than -5% after it said it expects to incur losses in connection with exiting a portion of its Foster City, California campus. Also, Verve Therapeutics plunged more than -40% after it said two patients experienced serious heart-related adverse effects during a trial of its gene-editing therapy. In addition, Tyson Foods closed down more than -2% after reporting Q4 sales below consensus.
The markets are discounting a 14% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 28% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European government bond yields Monday ended lower. The 10-year T-note yield fell back from a 1-week high of 4.696% and finished down -1.4 bp at 4.638%. The 10-year German bund yield fell -0.4 bp to 2.713%. The 10-year UK gilt yield fell -2.2 bp to 4.314%.
ECB Governing Council member Kazaks said he "could share the view that further tightening from the ECB seems to have become less necessary."
ECB Vice President Guindos said it is "premature" to discuss interest rate cuts as "we expect a temporary rebound in inflation in the coming months as the base effects from the sharp increase in energy and food prices in autumn 2022 drop out."
China Oct new yuan loans rose 738.4 billion yuan, stronger than expectations of 655.0 billion yuan. Oct aggregate financing, the broadest measure of credit growth, rose +1.85 trillion yuan, weaker than expectations of 1.95 trillion yuan.
Japan Oct machine tool orders fell -20.6% y/y, the biggest decline in 4 months, and the tenth consecutive month orders have declined.
Japan's Oct PPI fell -0.4% m/m and rose +0.8% y/y, weaker than expectations of unch m/m and +0.9% y/y, with the +08% y/y increase the smallest year-on-year increase in 2-1/2 years.
Overseas stock markets on Monday settled higher. The Euro Stoxx 50 closed up +0.83%. China’s Shanghai Composite Index closed up +0.25%. Japan’s Nikkei Stock Index closed up +0.05%.
Today’s stock movers…
DaVita (DVA) closed up more than +6% to lead gainers in the S&P 500 after Bloomberg Intelligence said the easing of the pandemic-driven overhang on patient census and the healthcare labor market may remain a tailwind for the company into the first half of 2024.
Boeing (BA) closed up more than +4% to lead gainers in the Dow Jones Industrials after China said it was considering ending a freeze on its purchases of Boeing’s airliners.
Henry Schein (HSIC) erased an early loss and closed up more than +5% after reporting Q2 adjusted EPS of $1.32, right on expectations.
Dexcom (DXCM) and Insulet (PODD) closed up more than +4% after Bloomberg Intelligence said pharmacy channel sales data for October show the companies are still seeing solid sales growth for devices that treat and monitor diabetes despite competition from new obesity drugs.
Tesla (TSLA) closed up more than +4% after Guotai Junan Securities initiated coverage on the stock with a recommendation of overweight with a price target of $248
Monday.com (MNDY) closed up more than +10% after reporting Q3 adjusted EPS of 64 cents, well above the consensus of 19 cents.
StoneCo (STNE) closed up more than +12% after reporting 3.33 million active clients in Q3 revenue, above the consensus of 3.17 million.
CrowdStrike Holdings (CRWD) closed up more than +2% after Stifel upgraded the stock to buy from hold with a price target of $225.
Illumina (ILMN) closed down more than -5% after it said it expects to incur losses in connection with exiting a portion of its Foster City, California campus.
Warner Bros Discovery (WBD) closed down more than -2% after Macquarie cut its price target on the stock to $16 from $20.
Tyson Foods (TSN) closed down more than -2% after reporting Q4 sales of $13.35 billion, weaker than the consensus of $13.71 billion.
Verve Therapeutics (VERV) closed down more than -40% after it said two patients experienced serious heart-related adverse effects during a trial of its gene-editing therapy.
Healthpeak Properties (PEAK)closed down more than -2% after Bank of America downgraded the stock to underperform from neutral.
Mettler-Toledo International (MTD)closed down more than -2% after Stifel cut its price target on the stock to $1,270 from $1,425.
Across the markets…
December 10-year T-notes (ZNZ23) Monday up +0.5 of a tick, and the 10-year T-note yield fell by -1.4 bp to 4.638%. Dec T-notes Monday recovered from a 1-week low, and the 10-year T-note yield fell back from a 1-week high and moved lower. T-notes recovered from early losses as short covering emerged ahead of Tuesday’s U.S. Oct CPI report, which is expected to show that price pressures eased. T-notes on Monday initially moved lower after Moody Investors Service late last Friday downgraded its U.S. credit-rating outlook to negative from stable.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.