U.S. Markets Rise Amid Declining Bond Yields
Chip Stocks Surge Following Reports on U.S.-China Sales Curbs
The S&P 500 Index ($SPX) (SPY) today is up +0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.32%.
Today, stocks are enjoying moderate gains, thanks in part to a drop in bond yields. The yield on 10-year Treasury notes fell to a one-month low, supported by lower European government bond yields and declining inflation expectations. Additionally, chip stocks are on the rise as Bloomberg reported that new U.S. restrictions on chip technology sales to China might not be as severe as earlier considered.
Major Stock Rally Driven by Unprecedented Inflows
This month’s stock market rally has been fueled by significant stock purchases. The S&P 500 achieved a new record high on Tuesday as investors injected $141 billion into U.S. equities, marking the largest inflows for a four-week period recorded by EPFR Global data.
Currently, the markets are pricing in a 66% chance of a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meeting set for December 17-18.
Internationally, stock markets are showing mixed results today. The Euro Stoxx 50 is down -0.06%. China’s Shanghai Composite Index closed up +0.93%, while Japan’s Nikkei Stock 225 decreased by -0.37%.
Bond Investment Insights
December 10-year T-notes (ZNZ24) increased by +10 ticks today, with the yield down -6.8 basis points to 4.196%. T-notes reached a one-month high, while the yield fell to a one-month low at 4.194%. The upward trend in T-notes coincides with a rally in European government bonds. Furthermore, the 10-year breakeven inflation rate dropped to a one-and-three-quarter month low of 2.247% today, supporting T-note values.
European government bond yields are also trending lower, with the 10-year German bund yield dropping to a one-and-three-quarter month low of 2.090%, down -2.5 basis points to 2.102%. Similarly, the UK gilt yield fell to a one-month low of 4.219%, decreasing by -2.3 basis points to 4.253%.
Inflation and Economic Data
Eurozone November Consumer Price Index (CPI) rose +2.3% year-over-year, matching expectations. The core CPI for November increased +2.7% year-over-year, slightly below the anticipated +2.8% year-over-year increase.
Interestingly, the European Central Bank’s (ECB) October one-year inflation expectations rose unexpectedly to +2.5% from +2.4% in September, contrary to expectations of a decrease to +2.3% year-over-year. The three-year inflation expectations remained steady at +2.1%, aligning with forecasts.
In Germany, October retail sales fell -1.5% month-over-month, disappointing expectations of a smaller drop of -0.5%. In contrast, the unemployment rate remained stable at 6.1%, with an increase of 7,000 unemployed in November, a better outcome than the 20,000 anticipated.
ECB Vice President Guindos noted, “Inflation in Europe is progressing well. The data are positive, although the Eurozone economy presents some challenges.”
Future Rate Cuts Expected
Further insights from ECB Governing Council member Stournaras suggest a likely shift toward a more aggressive interest-rate reduction strategy if U.S. tariffs drive Europe into recession. Swaps indicate a certainty of a 25 basis point rate cut at the ECB’s upcoming policy meeting on December 12, with a 15% chance of a 50 basis point cut.
Highlights from U.S. Stocks Today
Chip stocks are climbing today after Bloomberg reported that new U.S. restrictions on chip technology sales to China may ease. This development has led to Lam Research (LRCX) rising over +3%, leading gainers in both the S&P 500 and Nasdaq 100. Other significant players like Applied Materials (AMAT) and KLA Corp (KLAC) increased by more than +2%. Nvidia (NVDA), ARM Holdings (ARM), Analog Devices (ADI), Qualcomm (QCOM), ON Semiconductor (ON), and Marvell Technology (MRVL) are also up more than +1%.
Boeing (BA) gained over +1% after BOA Aviation announced a purchase agreement for 14 Boeing 737-8 aircraft.
Voyager Therapeutics (VYGR) saw a significant boost of over +14% following Wedbush’s initiation of coverage with an outperform recommendation and a target price of $11.
Declines in Other Stocks
Zscaler (ZS) climbed over +1% after JPMorgan Chase raised its price target to $240 from $220. Likewise, shares of SentinelOne (S) increased by over +1% with a revised price target to $33 from $30.
Conversely, MercadoLibre (MELI) fell by more than -4% after Brazil’s Finance Minister announced a plan to reduce public spending by 70 billion reals ($11.8 billion) through 2026. Corteva (CTVA) saw a decline of over -1%, with recent insider selling showing the General Counsel and Secretary sold $2.39 million worth of shares on Tuesday.
Workday (WDAY) decreased by more than -1% as it updated its 2025 subscription revenue forecast from $7.70 billion to $7.70 billion, slightly lower than market expectations.
Microsoft (MSFT) fell -0.73% amid news that the U.S. Federal Trade Commission has launched an antitrust investigation into the company.
Earnings Reports
Upcoming earnings reports include Cleanspark Inc (CLSK), iLearningEngines Holdings Inc (AILE), Ingles Markets Inc (IMKTA), Nordic American Tankers Ltd (NAT), Patterson Cos Inc (PDCO), Renovaro Inc (RENB), and Zuora Inc (ZUO).
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
