Markets Show Modest Gains as China Plans Large Bond Sale for Economic Stimulus
Stock Indices Rise Ahead of Holiday Closures
The S&P 500 Index ($SPX) (SPY) has increased by +0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.47%. March E-mini S&P futures (ESH25) have gained +0.17%, while March E-mini Nasdaq futures (NQH25) have risen by +0.36%. The NYSE and Nasdaq will close early today at 1 PM Eastern time for the Christmas Eve holiday.
Market Gains Supported by Tech and Chip Stocks
Today, stocks are slightly higher, building on Monday’s gains primarily led by strength in the chip and technology sectors. The rise in chip stocks follows the Biden administration’s announcement of a trade investigation targeting Chinese chips. This move could set the stage for tariffs from the incoming Trump administration, providing trade protection for U.S. chip manufacturers.
China’s Potential Bond Sale to Stimulate Economy
In other news, China may issue a record 3 trillion yuan ($411 billion) in special Treasury bonds in 2025 to bolster its economic stimulus efforts, as reported by Reuters. This figure is substantially higher when compared to the 1 trillion yuan of bonds sold this year. The anticipation of increased economic stimulus from China is boosting global stock markets.
Rising Yields Pressure Stocks
Despite the overall market gains, stocks are being affected by a +3.4 basis point rise in the 10-year T-note yield, which follows a sizable increase of +6.4 basis points yesterday.
The Philadelphia Fed’s December non-manufacturing activity index showed a drop of -0.1 points to -6.0, falling short of expectations that anticipated a rise to -2.4.
Current market expectations indicate a 9% chance of a -25 basis point rate cut at the upcoming January 28-29 FOMC meeting.
Mixed Overseas Markets
International markets are experiencing mixed results today. The Euro Stoxx 50 has gained +0.18%, ending a three-session losing streak, while China’s Shanghai Composite Index closed up +1.26%, also breaking a three-session decline. In contrast, Japan’s Nikkei Stock 225 fell by -0.32%, receding from Monday’s +1.19% rally.
Interest Rates on the Decline
March 10-year T-notes (ZNH25) are down by -3 ticks today and have reached a new seven-month low, with the yield up by +3.4 basis points at 4.621%, marking a new seven-month high. T-note prices remain weak following a deal last Friday that averted a U.S. government shutdown, which would have negatively impacted the economy. Concerns about an oversupply continue as the Treasury sold $69 billion of 2-year T-notes on Monday. The Treasury is set to sell $70 billion in 5-year T-notes today and $44 billion in 7-year T-notes on Thursday.
In Europe, markets are closed. However, the German bund yield rose by +3.8 basis points to 2.323% on Monday, while the UK gilt yield increased by +2.9 basis points to 4.575%.
The swaps market predicts a 100% probability of a -25 basis point rate cut by the ECB at its January 30 policy meeting, with an 8% chance of a more aggressive -50 basis point cut.
Key Stock Performance
The renowned “Magnificent 7” stocks are displaying strength today, with Tesla (TSLA) leading with a gain of over +3%. Amazon (AMZN) and Nvidia (NVDA) also increased by more than +1%.
Chip stocks continue to lead the Nasdaq 100 index. Broadcom (AVGO) and Arm Holdings (ARM) both climbed more than +1%.
Cryptocurrency Stocks Surge
Crypto-related stocks are on the rise today thanks to a more than +3% increase in bitcoin (^BTCUSD). Microstrategy (MSTR) is up over +5%, leading the Nasdaq 100. Riot Platforms (RIOT) increased by more than +3%, and Coinbase (COIN) rose by more than +2%.
American Airlines Faces Technical Issues
American Airlines (AAL) has seen a decline of over -1%, although it recovered from a pre-market drop of more than -5%. The airline temporarily grounded all flights nationwide for about an hour due to a software glitch, with services resuming around 7 AM Eastern Time.
Meanwhile, Starbucks (SBUX) gained +0.7% even as its worker union announced that a barista strike will extend to over 300 cafes.
Earnings Reports (12/24/2024)
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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 are 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.
