Market Update: Stocks Dip as Economic Data Sparks Interest Rate Concerns
The S&P 500 Index ($SPX) (SPY) is down -0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.30%.
Today, stocks are generally declining as investors take profits and economic data hints at the Federal Reserve maintaining its interest rates. Anticipation of remarks from Fed Chair Powell later today is also affecting stock prices. Notably, the 10-year Treasury note yield rose to a 4-1/2 month high but has since fallen as initial weekly unemployment claims dropped more than anticipated, hitting a 5-1/2 month low. Meanwhile, October’s producer prices exceeded expectations, adding pressure on Fed policy.
Corporate News Boosts Stocks
In the corporate realm, some positive news is boosting market sentiment. Walt Disney shares have surged over +10% following the release of better-than-expected Q4 adjusted EPS and an elevated EPS growth forecast for fiscal 2025. Additionally, semiconductor stocks are climbing after ASML Holding NV reaffirmed its long-term guidance. Airline stocks are also on the rise, with Barclays projecting a strong rally in the sector as fundamentals and investor sentiment align.
New Economic Data Highlights Strong Labor Market
Weekly initial unemployment claims fell by -4,000 to a 5-1/2 month low of 217,000, surpassing expectations of 220,000. Furthermore, the October Producer Price Index (PPI) revealed a year-over-year rise of +2.4%, outpacing the +2.3% estimate. Excluding food and energy, the PPI climbed +3.1%, also exceeding expectations of +3.0%.
Market Trends and Speculations
Over the last week, stock prices jumped, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 reaching new record highs. This rally was largely fueled by speculation that President-elect Trump would enhance corporate profits via tax cuts and reduced regulations. Investors are now anticipating Powell’s statements regarding the economic outlook later today. Additionally, upcoming retail sales data is expected to show a +0.3% month-over-month increase, confirming consumer spending stability.
Q3 Earnings Season Wraps Up
As Q3 earnings season approaches its end, about 85% of S&P 500 companies that reported have beaten estimates, though this is slightly below the three-year average. Bloomberg Intelligence noted an average earnings increase of +8.4% year-over-year, significantly higher than pre-season forecasts.
Interest Rate Expectations
The market is currently pricing in an 82% likelihood of a -25 basis point rate cut at the Federal Open Market Committee’s December meeting.
Global Market Overview
Internationally, stock markets are showing mixed results. The Euro Stoxx 50 is up +1.88%, while China’s Shanghai Composite Index closed down -1.73%. Japan’s Nikkei 225 also fell to a one-week low, dropping -0.48%.
Interest Rate Movements
The December 10-year T-notes (ZNZ24) are up +7 ticks today. The yield on the 10-year T-note has decreased by -2.6 basis points to 4.426%. After an initial drop, T-note prices rebounded. The yield previously reached a 4-1/2 month high of 4.481% before declining due to negative economic signals.
European Bond Markets Mixed
European government bonds have seen mixed yields today. The yield on the 10-year German bund has declined by -3.5 basis points to 2.355%, while the UK gilt yield has decreased by -2.5 basis points to 4.495%. In the Eurozone, September’s industrial production fell -2.0% month-over-month, marking the steepest decline in eight months and underperforming expectations.
US Corporate Movers
In the US stock market, Super Micro Computer (SMCI) leads losses, down over -12% after delaying another quarterly 10-Q filing while searching for a new accounting firm. Cisco Systems (CSCO) saw a drop of more than -1% as its revenue forecast fell short of expectations. Meanwhile, Walt Disney (DIS) gained more than +10% following a positive earnings report, while airline stocks saw an uptick after favorable analysis by Barclays.
As the markets navigate through these dynamics, attention will remain focused on upcoming economic reports and corporate earnings to guide investment decisions.
Earnings Reports (11/14/2024)
Advance Auto Parts Inc (AAP), Applied Materials Inc (AMAT), Globant SA (GLOB), Post Holdings Inc (POST), Walt Disney Co/The (DIS).
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 is for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views expressed here are those of the author and do not necessarily reflect Nasdaq, Inc.
