Stocks Gain Ground as Congress Avoids Government Shutdown
The S&P 500 Index ($SPX) (SPY) rose +0.67% on Monday, while the Dow Jones Industrials Index ($DOWI) (DIA) increased by +0.22%. The Nasdaq 100 Index ($IUXX) (QQQ) saw a rise of +0.93%. Additionally, March E-mini S&P futures (ESH25) climbed +0.62%, and March E-mini Nasdaq futures (NQH25) gained +0.84%.
Tech And Chip Stocks Drive Market Rally
On Monday, stocks benefitted from a surge in technology and semiconductor shares. The rally was further supported by Congress passing a short-term funding bill last Friday, which prevented a potential US government shutdown that would have negatively impacted the economy. This stop-gap measure funds the government until mid-March 2025.
Despite early dips attributable to higher Treasury note yields and weaker US economic data, stocks managed to rebound.
Economic Data Report Shows Mixed Results
In the November US durable goods report, orders decreased by -1.1% month-over-month (m/m), missing expectations of a -0.3% decline. However, the October figure was revised upwards to +0.8% from +0.3%. Orders for durable goods excluding transportation fell by -0.1%, which was below the anticipated +0.3%. Conversely, capital goods orders excluding defense and aircraft, often seen as an indicator of business investment, rose by +0.7% m/m, beating expectations of +0.1%.
Another report for November showed new home sales increased by +5.9% to 664,000, which fell short of the forecasted 669,000 units.
Meanwhile, the Conference Board’s December consumer confidence index dropped by -8.1 to 104.7, differing significantly from expectations of a rise to 113.2.
The market is currently pricing in a 9% chance of a -25 basis point rate cut at the Federal Open Market Committee meeting scheduled for January 28-29.
Debt Ceiling Challenge Ahead for 2025
The funding bill passed on Friday did not include a suspension of the debt ceiling sought by President-Elect Trump. As a result, Republicans will need to address the debt ceiling during the first half of 2025. The ceiling will be reinstated at midnight on January 2, 2025, at the current level of debt. The Treasury can implement extraordinary measures until the anticipated “X-date” in spring or summer 2025, at which point a default could occur if Congress takes no action.
International Markets Show Mixed Performance
Globally, stock markets had mixed results on Monday. The Euro Stoxx 50 closed down -0.19%, contributing to an overall decline of -1.9% over the previous Thursday and Friday. In China, the Shanghai Composite Index fell -0.50% for its third consecutive loss, while Japan’s Nikkei Stock 225 gained +1.19%, ending a six-session losing streak.
Interest Rates Update
March 10-year T-notes (ZNH25) decreased by -13 ticks on Monday, consolidating slightly above last Thursday’s 6-1/2 month low. The yield on 10-year T-notes rose by +6.4 basis points (bp) to 4.587%, marking a new 6-1/2 month high of 4.597%. The drop in T-note prices followed the avoidance of a US government shutdown, alongside concerns about an oversupply after the Treasury sold $69 billion in 2-year T-notes. Upcoming sales include $70 billion in 5-year T-notes on Tuesday and $44 billion in 7-year T-notes on Thursday.
In Europe, yields on government bonds increased following remarks from ECB President Lagarde, who noted vigilance regarding ongoing price pressures in the services sector while remaining optimistic that inflation is approaching the ECB’s target. The 10-year German bund yield rose +3.8 bp to 2.323%, and the 10-year UK gilt yield increased +3.6 bp to 4.546.
Swaps suggest a 100% probability of a -25 bp rate cut by the ECB during its January 30 policy meeting, with a 9% chance of a -50 bp cut at that time.
US Stock Highlights
Several prominent stocks from the Magnificent 7 performed well on Monday, helping to push the broader market upward. Tesla (TSLA) and Meta Platforms (META) both gained over +2%, while Alphabet (GOOG) climbed +1.54%.
Chip stocks were notable leaders in the Nasdaq 100 index. GLOBAFOUNDARIES (GFS) and Broadcom (AVGO) saw increases of over +5%, while AMD (AMD) and Microchip Technology (MCHP) rose more than +4%.
Qualcomm (QCOM) improved by +3.47% after winning a court case against Arm Holdings Plc (ARM), which fell by -3.85%. Qualcomm had been accused of breaching a chip technology license when they acquired a startup in 2021.
Xerox (XRX) surged more than +12% following news of its agreement to purchase Lexmark International for $1.5 billion.
In contrast, Playa Hotels & Resorts (PLYA) saw a remarkable gain of +28% after announcing an exclusivity agreement with Hyatt Hotels Corp (H) for potential acquisition negotiations. Hyatt (H) closed down by -1.13%.
Conversely, cryptocurrency-related stocks faced declines due to a -2.7% drop in bitcoin (^BTCUSD). Bitcoin experienced a steep fall of almost -10% last Wednesday and Thursday, with a minor rebound of just +0.14% last Friday. Microstrategy (MSTR) fell by -8.8%, Riot Platforms (RIOT) experienced a drop of more than -5%, and Coinbase (COIN) decreased by over -3%.
Earnings Reports (12/24/2024)
None reported.
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 those of the author and do not necessarily reflect those of Nasdaq, Inc.
