U.S. Stocks Slide Amid Hawkish Fed Signals
Markets React to Economic Data and Interest Rate Concerns
The S&P 500 Index ($SPX) (SPY) is currently down -0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) has declined -0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is off -1.36%.
Stock prices continued the downward trend seen on Thursday, with the S&P 500, the Dow Jones, and the Nasdaq dropping to their lowest levels in a week. Concerns about a hawkish Federal Reserve have pushed the yield on the 10-year Treasury note to a 4-1/2 month high. Recently, Fed Chair Jerome Powell indicated that the Fed is not in a rush to lower interest rates, while Boston Fed President Susan Collins echoed his sentiment, suggesting that a rate cut in December is not guaranteed. As a result, the odds of a rate cut next month have dropped from 82% to 55%. Further losses were observed after U.S. economic data showed that retail sales and the November Empire State manufacturing survey exceeded expectations, reinforcing the Fed’s cautious stance.
In October, U.S. retail sales rose by +0.4% month-over-month, surpassing the anticipated +0.3% increase. Furthermore, September’s figure was revised upward to +0.8% from +0.4%. The Empire manufacturing survey for November increased by +43.1, reaching a 2-3/4 year high of 31.2, well above expectations for no change. Additionally, the import price index excluding petroleum rose by +0.2% in October, again exceeding the forecast of +0.1%. Conversely, manufacturing production declined by -0.5%, aligning with expectations.
Of the 85% of S&P 500 companies that have reported Q3 earnings, 75% have beaten estimates, slightly below the three-year average. According to Bloomberg Intelligence, these companies have experienced an average year-over-year earnings increase of +8.4% in Q3, more than double what analysts had predicted before the season began.
Currently, markets estimate a 55% chance of a -25 basis point rate cut at the Federal Open Market Committee meeting scheduled for December 17-18.
International markets are showing mixed results today. The Euro Stoxx 50 is down -0.58%. In Asia, China’s Shanghai Composite Index has fallen to a 1-1/2 week low, closing down -1.45%, while Japan’s Nikkei Stock 225 closed up +0.28%.
Interest Rates Update
The December 10-year Treasury note (ZNZ24) has fallen -11 ticks, with the yield rising by +4.6 basis points to 4.481%. T-notes settled at a 4-1/2 month low, pushed down by Powell’s comments regarding interest rates and further compounded by Boston Fed President Collins’ statements. The rise in yields resulted from stronger-than-expected U.S. economic indicators, as noted earlier.
In Europe, government bond yields are increasing. The yield on the 10-year German bund has risen by +2.5 basis points to 2.366%, and the 10-year UK gilt yield has increased by +2.5 basis points to 4.508%.
The European Commission today forecasted a Eurozone GDP growth of +0.8% for 2024, with inflation projected at +2.4%. They anticipate that inflation will return to the European Central Bank’s target of 2% by the fourth quarter of 2025.
Swaps indicate a 100% probability of a -25 basis point rate cut by the ECB at its meeting on December 12, with a 23% chance of a -50 basis point cut at the same meeting.
U.S. Stock Movers
Applied Materials (AMAT) leads S&P 500 and Nasdaq losers, down over -7%, after forecasting Q1 net sales between $6.75 billion and $7.55 billion, below the consensus of $7.25 billion. Consequently, Lam Research (LRCX) and KLA Corp (KLAC) are both down more than -3%. Meanwhile, Advanced Micro Devices (AMD), ASML Holding NV (ASML), and Marvell Technology (MRVL) are down more than -2%.
The vaccine sector is also facing declines, as Moderna (MRNA), Novavax (NVAX), and BioNTech (BNTX) are all down more than -2% following President-elect Trump’s appointment of vaccine skeptic Robert F. Kennedy Jr. as head of the Department of Health and Human Services. Pfizer (PFE) has dropped -4%, with Wolfe Research initiating coverage with a recommendation to underperform, pegging the price target at $25.
Halozyme Therapeutics (HALO) is down more than -14% after Bloomberg News reported the company has made a $2.1 billion acquisition bid for Evotec SE.
Ulta Beauty (ULTA) sees a decline of over -2% following Berkshire Hathaway’s decision to sell most of its shares, which it had acquired in the previous quarter. Advanced Auto Parts (AAP) is down more than -4% following a downgrade from CFRA after the company reported disappointing Q3 results.
On a positive note, Palantir (PLTR) is up more than +6% as it prepares to transition from NYSE to Nasdaq. Walt Disney (DIS) has seen a rise of over +3% following a +6% jump earlier this week after Bank of America increased its price target for the stock from $120 to $140. Additionally, Domino’s Pizza (DPZ) is up more than +2%, bolstered by Berkshire acquiring a 3.6% stake in the company.
Pool Corp (POOL) has increased by over +3% as Berkshire Hathaway acquired a 1.1% stake. Alcoa (AA) experienced a significant rise, up more than +8%, after aluminum prices surged due to a tax rebate cancellation on aluminum exports.
Earnings Reports (11/15/2024)
Upcoming earnings reports include Actinium Pharmaceuticals Inc (ATNM), Airship AI Holdings Inc (AISP), Compass Minerals International (CMP), Greenwich Lifesciences Inc (GLSI), Haynes International Inc (HAYN), Inhibrx Biosciences Inc (INBX), Lifezone Metals Ltd (LZM), NANO Nuclear Energy Inc (NNE), Solidion Technology Inc (STI), and Spectrum Brands Holdings Inc (SPB).
On the date of publication, Rich Asplund did not hold any positions in the mentioned securities. All information in this article is for informational purposes only. For more information, view the Barchart Disclosure Policy here.
The views expressed in this article do not necessarily reflect those of Nasdaq, Inc.
