Wall Street Reaches New Heights Amid Mixed Economic Signals

The S&P 500 Index ($SPX) (SPY) rose +0.57% on Tuesday, while the Dow Jones Industrials Index ($DOWI) (DIA) increased by +0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) also climbed +0.57%.

On Tuesday, stocks moved upward, with both the S&P 500 and Dow Jones reaching all-time highs. Positive news from companies boosted the overall market; JM Smucker saw its shares rise over +5% after the company reported better-than-expected Q2 adjusted earnings per share (EPS) and raised its full-year EPS forecast. Eli Lilly also gained more than +4% following a proposal from the Biden administration to require coverage of weight-loss drugs under Medicare and Medicaid. Additionally, the market received a late-afternoon boost due to easing tensions in the Middle East, with President Biden announcing a cease-fire agreement between Israel and Hezbollah.

However, stock gains were kept in check after former President Trump declared on his Truth Social network that he intends to impose an additional 10% tariff on Chinese goods and 25% tariffs on all imports from Mexico and Canada. This announcement drew criticism from Democrats, who labeled the tariffs as an inflationary tax impacting consumers.

Economic updates from the U.S. were mixed, which might affect stock performance and Federal Reserve (Fed) policy. Consumer confidence in November hit a 16-month high, while new home sales for October fell more than anticipated, reaching a nearly two-year low.

The S&P CoreLogic composite-20 home price index for September decreased to a yearly increase of 4.57%, down from 5.21% in August, falling short of the expected 4.70%. New home sales for October plummeted by -17.2% month-over-month to 610,000, considerably below the forecast of 725,000. Meanwhile, the Conference Board’s consumer confidence index for November climbed +2.1 points to 111.7, which was close to the expectation of 111.8.

The Richmond Fed manufacturing outlook for November remained unchanged at -14, not meeting expectations for a rise to -11. Minutes from the Fed’s recent meeting showed that policymakers preferred a gradual approach to interest rate cuts, contingent upon sustained economic conditions with inflation moving down towards the target rate of 2% and maximum employment being maintained.

Comments from San Francisco Fed President Daly contributed to negative sentiment for stocks as she stated, “Inflation is still printing above our 2% target, so we need to continue to work to bring that down.” Current market sentiment predicts a 67% chance of a -25 basis point interest rate cut at the upcoming FOMC meeting on December 17-18.

International stock markets faced declines on Tuesday. The Euro Stoxx 50 dropped -0.79%, China’s Shanghai Composite Index fell by -0.12%, and Japan’s Nikkei Stock 225 decreased -0.87%.

Interest Rates

The December 10-year T-notes (ZNZ24) closed down -6.5 ticks, with the 10-year T-note yield rising +3.1 basis points to 4.304%. These T-notes faced pressure following Trump’s announcement of new tariffs that could hike consumer costs and fuel inflation. Their losses were exacerbated by Daly’s comments regarding the need to address inflation. The minutes from the recent FOMC meeting hinted at a cautious approach to interest rate cuts.

Notably, T-notes managed to recover somewhat due to strong demand in a Treasury auction of $70 billion in 5-year notes, achieving a bid-to-cover ratio of 2.43, surpassing the average of 2.38 from the past ten auctions.

In Europe, government bond yields displayed mixed movements. The yield for the 10-year German bund dropped to a five-week low of 2.186%, while the 10-year UK gilt yield rose +0.9 basis points to 4.353%. ECB Vice President Guindos remarked that if the ECB’s projections hold, they would continue to adjust their monetary policy to be less restrictive. Swaps currently indicate a full probability for a -25 basis point cut by the ECB at its December 12 policy meeting and a 29% chance for a -50 basis point cut at that same meeting.

US Stock Movers

NRG Energy (NRG) led the S&P 500 with a rise of over +10% after Jefferies upgraded its rating to buy with a target price of $113.

JM Smucker (SJM) gained more than +5%, reporting Q2 adjusted EPS of $2.75, surpassing the consensus of $2.51, and increasing its full-year adjusted EPS forecast to between $9.70 and $10.10 from a previous range of $9.60 to $10.00.

Eli Lilly (LLY) also closed up over +4% due to the proposed coverage of weight-loss drugs.

Semtech (SMTC) experienced significant gains, soaring over +18% as it reported Q3 adjusted EPS of 26 cents, better than the consensus of 23 cents and provided an optimistic Q4 forecast.

Woodward (WWD) saw its shares rise more than +5% on the back of a Q4 net sales report of $854.5 million, exceeding expectations of $811.2 million, alongside a positive 2025 sales forecast.

Other notable movers included Allstate (ALL), up more than +3% following a price target increase; Charter Communications (CHTR), which closed up over +2%; and Chevron (CVX), gaining more than +1% due to a Citigroup upgrade.

Conversely, General Motors (GM) and Ford Motor (F) faced losses of over -8% and -2%, respectively, following Trump’s tariff announcements, as both companies import significant amounts from China and operate plants in Mexico and Canada. Amgen (AMGN) dropped more than -4% after its obesity treatment trial results disappointed investors.

Best Buy (BBY) fell more than -4% due to weaker-than-expected Q3 sales results and a lowered full-year forecast. Kohl’s (KSS) faced a steep decline of over -16%, reporting disappointing Q3 sales and cutting its sales outlook. Zoom Video Communications (ZM) decreased more than -5% despite better-than-expected quarterly results failing to impress, and Intel (INTC) fell more than -3% following a report of decreased acquisition interest from Qualcomm. Burlington Stores (BURL) slipped more than -1% after its Q3 sales grew at a slower pace than anticipated.

Earnings Reports (11/27/2024)

Anavex Life Sciences Corp (AVXL), Dakota Gold Corp (DC), Golden Ocean Group Ltd (GOGL), Immersion Corp (IMMR).

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.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.