What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.22%.
Stocks this morning are posting modest gains, with the S&P 500 climbing to a 20-month high and the Dow Jones Industrials and Nasdaq 100 climbing to 1-3/4 year highs. Stocks are finding support from today’s U.S. Nov CPI report, which matched expectations and eased slightly, bolstering speculation the Fed will start cutting interest rates in the first half of 2024. The markets now await the outcome of the 2-day FOMC meeting that began today.
The U.S. Nov CPI eased to +3.1% y/y from +3.2% y/y in Oct, right on expectations and the smallest increase in 5 months. The Nov CPI ex-food and energy rose +4.0% y/y, unchanged from Oct and right on expectations.
On the positive side for stocks, Centene is up more than +4% after forecasting 2024 revenue above consensus and authorizing a $4 billion boost to its stock buyback program. Also, A O Smith, Zillow Group, and HubSpot are up more than +2% after being upgraded.
M&A activity is also supportive of stocks. Icosavax is up more than +48% after AstraZeneca Plc agreed to buy the company for about $1.1 billion. Also, Seagen is up more than +3% after Pfizer said it had received all required regulatory approvals to close its acquisition of the company on December 14.
On the negative side, Oracle is down more than -10% after reporting Q2 adjusted revenue below consensus. Also, Johnson Controls is down more than -5% after forecasting 2024 adjusted EPS below consensus. In addition, Hasbro is down more than -2% after it said it was cutting 1,100 positions, or 20% of its staff, following an additional strategic review as recent sales disappointed.
The markets are discounting a 1% chance for a +25 bp rate hike at the Tue/Wed FOMC meeting 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 43% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and have more than fully discounted (105%) that -25 bp rate cut at the April 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields today are lower. The 10-year T-note yield is down -1.4 bp at 4.220%. The 10-year German bund yield is down -4.9 bp at 2.222%. The 10-year UK gilt yield is down -12.4 bp at 3.954%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.09%. China’s Shanghai Composite Index closed up +0.40%. Japan’s Nikkei Stock Index closed up +0.16%.
Today’s stock movers…
Centene (CNC) is up more than +4% to lead gainers in the S&P 500 after forecasting 2024 revenue of $142.5 billion-$145.5 billion, stronger than the consensus of $141.77 billion and authorizing a $4 billion boost to its stock buyback program.
Seagen (SGEN) is up more than +3% to lead gainers in the Nasdaq 100 after Pfizer said it had received all required regulatory approvals to close its acquisition of the company on December 14.
Take-Two Interactive Software (TTWO) is up more than +2% after Wolfe Research initiated coverage of the stock with an outperform recommendation.
A O Smith (AOS) is up more than +2% after Northcoast Research upgraded the stock to buy from neutral with a price target of $90.
Icosavax (ICVX) is up more than +48% after AstraZeneca Plc agreed to buy the company for about $1.1 billion.
Zillow Group (ZG) is up more than +3% after JMP Securities upgraded the stock to market outperform from market perform with a price target of $60.
HubSpot (HUBS) is up more than +2% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $610.
Oracle (ORCL) is down more than -10% to lead losers in the S&P 500 after reporting Q2 adjusted revenue of $12.90 billion, weaker than the consensus of $13.05 billion.
Johnson Controls (JCI) is down more than -5% after forecasting 2024 adjusted EPS of $3.65-$3.80, weaker than the consensus of $3.96.
Moderna (MRNA) is down more than -5% after announcing that CEO Bancel will take over sales and marketing management responsibilities in 2024.
Lucid Group (LCID) is down more than -9% to lead losers in the Nasdaq 100 after CFO House resigned effective immediately.
Macy’s (M) is down more than -4% after Citigroup downgraded the stock to sell from neutral.
Illumina (ILMN) is down more than -2% after Bank of America downgraded the stock to underperform from neutral with a price target of $100.
Hasbro (HAS) is down more than -2% after it said it was cutting 1,100 positions, or 20% of its staff, following an additional strategic review as recent sales disappointed.
Airbnb (ABNB) is down more than -2% after Barclays downgraded the stock to underweight from equal weight with a price target of $100.
Across the markets…
March 10-year T-notes (ZNH24) this morning are up +3 ticks, and the 10-year T-note yield is down -1.4 bp at 4.220%. Mar T-note prices this morning are slightly higher on a friendly U.S. Nov CPI report. Gains in T-notes are limited by supply pressures as the Treasury will auction $21 billion of 30-year T-bonds later today to conclude this week’s $108 billion Treasury auction package of T-notes and T-bonds.
The dollar index (DXY00) today is down by -0.16%. The dollar today is slightly lower ahead of the results of the Tue/Wed FOMC meeting, where hopes have risen for the Fed to signal that it will start cutting interest rates next year, a bearish development for the dollar. The dollar recovered from its worst levels after the U.S. Nov CPI report was right on expectations.
EUR/USD (^EURUSD) today is up by +0.08%. The euro found support today on signs of confidence in the Eurozone economy after the German Dec ZEW survey expectations of economic growth unexpectedly rose to a 9-month high. Gains in the euro are limited ahead of Thursday’s ECB meeting results.
The German Dec ZEW survey expectations of economic growth unexpectedly rose +4.0 to a 9-month high of 12.8, stronger than expectations of -0.3 to 9.5.
Swaps tied to ECB meeting dates have now priced in a 56% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting, falling further back from last Friday’s 67%.
USD/JPY (^USDJPY) today is down by -0.35%. A weaker dollar today is supportive of the yen. The yen also found support on today’s as-expected U.S. Nov CPI report, which bolsters expectations for the Fed to cut interest rates next year. Gains in the yen are limited after Japan Nov PPI rose at the slowest pace in 2-3/4 years, a dovish factor for BOJ policy. Also, higher T-note yields today are bearish for the yen.
Japan Nov PPI eased to +0.3% y/y from +0.9% y/y in Oct, the slowest pace of increase in 2-3/4 years.
February gold (GCG4) this morning is up +3.9 (+0.20%), and Mar silver (SIH24) is up +0.052 (+0.23%). Gold and silver prices this morning are slightly higher due to weakness in the dollar. Also, today’s as-expected U.S. Nov CPI report bolstered expectations for the Fed to begin cutting interest rates next year, a bullish factor for gold prices. Silver prices garnered support from today’s news that showed the German Dec ZEW survey expectations of economic growth unexpectedly rose to a 9-month high, which is positive 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.
