Markets Surge to New Heights Following Trump’s Election Victory
Stocks Rise Significantly Amid Optimism for Economic Changes
The S&P 500 Index ($SPX) (SPY) closed up +2.53% on Wednesday, the Dow Jones Industrials Index ($DOWI) (DIA) increased by +3.57%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose by +2.74%.
On Wednesday, major stock indexes climbed sharply, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all reaching new all-time highs. This rally was largely attributed to Republican candidate Trump winning the presidential election. Republicans also gained control of the Senate, although the outcome for the House of Representatives remains uncertain with many races still too close to call. As a result, bank stocks surged on expectations of loosening regulations from the Trump administration. Additionally, health insurers focusing on the Medicare market saw gains, anticipating higher rates for insurers offering private versions of the U.S. health program for seniors.
The dollar soared to a 4-month high amid the election news. The yield on the 10-year Treasury note jumped to a 4-month high, driven by concerns over potential inflation stemming from Trump’s policies, including tax cuts and increased tariffs.
Bitcoin (^BTCUSD) surged more than +9%, reaching a new record high, with many speculating that cryptocurrencies could benefit from relaxed regulations and support from President-elect Trump.
In mortgage market news, US MBA mortgage applications fell -10.8% in the week ending November 1, marking the sixth straight week of decline. The purchase mortgage sub-index dropped -5.1%, while the refinancing sub-index fell -18.5%. The average rate for a 30-year fixed mortgage rose by +8 basis points to 6.81%, up from 6.73% the previous week.
Market participants are closely watching (1) the results of the FOMC meeting set for today and Thursday, where a -25 basis point rate cut is expected, and (2) Q3 corporate earnings results, with nearly 20% of S&P 500 companies scheduled to report this week.
So far, 78% of S&P 500 companies reporting Q3 earnings exceeded expectations. According to Bloomberg Intelligence, these companies are predicted to show an average +4.3% year-over-year increase in quarterly earnings for Q3, a decrease from the +7.9% year-over-year growth consensus recorded in July.
The markets have fully priced in a -25 basis point rate cut at Thursday’s FOMC meeting, while a larger -50 basis point reduction is currently considered unlikely.
Internationally, stock markets had mixed results on Wednesday. The Euro Stoxx 50 fell from a one-week high, closing down -1.43% and hitting a 1.75-month low. Meanwhile, China’s Shanghai Composite Index saw a slight decline of -0.09% after a four-week high, while Japan’s Nikkei Stock 225 rose +2.61%, reaching a three-week high.
Interest Rates
On Wednesday, December 10-year T-notes (ZNZ24) closed down -27.5 ticks, with the yield on the 10-year T-note climbing +15.5 basis points to 4.426%. The T-notes sank to a 4-month low as expectations of reduced taxes and higher tariffs from President-elect Trump’s policies are anticipated to drive growth and inflation, impacting Fed policy. An increase in inflation expectations pushed T-notes lower after the 10-year breakeven inflation rate rose +10 basis points, marking a 6.25-month high of 2.430%. Wednesday’s new record for the S&P 500 further diminished safe-haven demand for T-notes.
T-notes recovered from their lowest levels on strong demand for the Treasury’s $25 billion auction of 30-year T-bonds, which noted a bid-to-cover ratio of 2.64—well above the 10-auction average of 2.40, marking the highest ratio in over six years.
European government bond yields varied on Wednesday. The yield for the 10-year German bund dipped -2.0 basis points to 2.405%, whereas the 10-year UK gilt yield increased, closing at a one-year high of 4.563%, up +3.3 basis points.
In economic indicators, the Eurozone’s October composite PMI was revised upward by +0.3, bringing it to 50.0 from the previously reported 49.7. The September PPI for the Eurozone eased to -3.4% year-over-year, down from -2.3% year-over-year in August and aligning with expectations. Germany’s factory orders for September rose +4.2% month-over-month, exceeding expectations of +1.5% month-over-month.
ECB Vice President Guindos remarked that if President-elect Trump implements the import tariffs he proposed during his campaign, the global economic output could weaken, pricing pressures may increase, and established trade flows could be disrupted.
Swaps currently reflect a 100% chance of a -25 basis point rate cut by the ECB during its December 12 meeting, with a 22% chance of a -50 basis point cut being considered.
US Stock Movers
Bank stocks experienced significant gains due to expectations that the Trump administration will ease regulatory burdens on the sector. Discover Financial Services (DFS) jumped by +21%, Synchrony Financial (SYF) increased +19%, Capital One Financial (COF) rose +15%, and Wells Fargo (WFC) gained +14%. Goldman Sachs (GS) was one of the top gainers in the Dow Jones, rising more than +13%. Other notable financials like Morgan Stanley (MS) and JPMorgan Chase (JPM) both increased by +12%, while Bank of America (BAC) and Citigroup (C) saw rises of +9%.
Cryptocurrency stocks also saw a surge, driven by Bitcoin reaching a record high. Coinbase Global (COIN) soared by +32%, Riot Platforms (RIOT) increased +27%, Marathon Digital (MARA) rose +20%, and MicroStrategy (MSTR) climbed +14%.
The chip sector experienced gains as well, with GlobalFoundries (GFS) rallying +14%. Intel (INTC) increased by +8%, while Texas Instruments (TXN) and Micron Technology (MU) each rose +7%. ON Semiconductor (ON), Analog Devices (ADI), Nvidia (NVDA), Marvell Technology (MRVL), Qualcomm (QCOM), and NXP Semiconductors NV (NXPI) all posted gains of at least +3%.
Tesla (TSLA) increased by +14.8%, leading gains in the Nasdaq 100 amid speculation that the company would benefit significantly from Trump’s second term. US health insurers targeting the Medicare sector also rose, as expectations grew that the Trump administration would offer higher rates for private insurers. Humana (HUM) and CVS Health (CVS) saw increases of around +12%, while UnitedHealth Group (UNH) rose +6%.
Qualys Inc (QLYS) boosted its shares by +25% after reporting Q3 adjusted EPS of $1.56, surpassing the consensus estimate of $1.33, and raising its full-year EPS forecast to the range of $5.81-$5.91 from a previous $5.46-$5.62, exceeding expectations of $5.59.
Charles River Laboratories International (CRL) gained +14% after reporting Q3 revenue of $1.01 billion, above the consensus of $976.7 million.
Globus Medical (GMED) increased by +10% after reporting Q3 net sales of $625.7 million, exceeding the forecast of $603.9 million, while raising its full-year net sales outlook to $2.49 billion-$2.50 billion from a prior range of $2.47 billion-$2.49 billion, surpassing the consensus of $2.48 billion.
However, Super Micro Computer (SMCI) saw its stock fall -17%, leading losses in the S&P 500 and Nasdaq 100 following preliminary Q1 net sales of $5.9 billion-$6.0 billion, below the consensus estimate of $6.47 billion, and forecasting Q2 net sales of $5.5 billion-$6.1 billion, also below the expectations of $6.79 billion.
Home builders faced downward pressure as rising mortgage rates dampened demand, resulting in declines for Lennar (LEN) at -4.19%, DR Horton (DHI) at -3.13%, PulteGroup (PHM) at -2.40%, and Toll Brothers (TOL) at -0.78%.
Health insurers focusing on private Medicaid versions faced losses due to expectations of decreased funding from the Trump administration. Centene (CNC), HCA Healthcare (HCA), and Molina Healthcare (MOH) showed declines ranging from -1% to -4%.
Exact Sciences (EXAS) plummeted -23% following Q3 revenue of $708.1 million, which fell short of the consensus of $716.9 million. The company also lowered its full-year revenue forecast to $2.73 billion-$2.75 billion from a previous forecast of $2.81 billion-$2.85 billion, also weaker than the consensus of $2.83 billion.
Coupang (CPNG) slid -10% after reporting Q3 retail net sales of $6.14 billion, below the expected $6.24 billion.
Five Below (FIVE) dropped -9% after Bank of America Global Research downgraded the stock from neutral to underperform, with a price target cut to $75.
Cboe Global Markets (CBOE) declined -4% following a downgrade from Morgan Stanley, which changed its rating from equal weight to underweight, setting a new price target of $199.
Earnings Reports (11/7/2024)
Upcoming earnings include reports from Air Products and Chemicals Inc (APD), Airbnb Inc (ABNB), Akamai Technologies Inc (AKAM), Arista Networks Inc (ANET), Axon Enterprise Inc (AXON), Becton Dickinson & Co (BDX), Consolidated Edison Inc (ED), Corpay Inc (CPAY), Duke Energy Corp (DUK), EOG Resources Inc (EOG), EPAM Systems Inc (EPAM), Evergy Inc (EVRG), Expedia Group Inc (EXPE), Fortinet Inc (FTNT), Halliburton Co (HAL), Hershey Co/The (HSY), Insulet Corp (PODD), Kenvue Inc (KVUE), Mettler-Toledo International Inc (MTD), Moderna Inc (MRNA), Molson Coors Beverage Co (TAP), Monster Beverage Corp (MNST), Motorola Solutions Inc (MSI), News Corp (NWSA), PG&E Corp (PCG), Ralph Lauren Corp (RL), Rockwell Automation Inc (ROK), Solventum Corp (SOLV), Tapestry Inc (TPR), TransDigm Group Inc (TDG), Viatris Inc (VTRS), Vistra Corp (VST), and Warner Bros Discovery Inc (WBD).
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On the date of publication, Rich Asplund did not hold positions, either directly or indirectly, in any of the securities mentioned in this article. All information and data provided are for informational purposes. For more details, please see the Barchart Disclosure Policy here.
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