Markets Dip Ahead of Fed Chair’s Speech Amid Mixed Economic Signals
The S&P 500 Index ($SPX) (SPY) is down -0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) has decreased by -0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.19% today.
Stocks React to Economic Data and Fed Speculation
Today’s stock performance reflects a general decline, influenced by long liquidation ahead of Federal Reserve Chair Powell’s upcoming speech. Profit-taking is also a factor, as positive US economic indicators suggest the Fed may refrain from aggressive interest rate cuts. The yield on the 10-year Treasury note increased to a 4-1/2 month high before easing off after a significant drop in initial unemployment claims, which fell to 217,000—a 5-1/2 month low—and as October producer prices exceeded expectations.
Corporate Earnings Lift Investor Sentiment
Amidst this backdrop, some companies reported uplifting news. Walt Disney shares surged over +7% after it announced better-than-expected Q4 adjusted earnings per share (EPS) and raised its EPS growth outlook for fiscal 2025. Additionally, chip stocks saw gains following a reassuring forecast from ASML Holding NV. Likewise, airline stocks gained traction as a report from Barclays suggested strong fundamentals could lead to a significant rally next year.
Key Economic Indicators
Weekly initial unemployment claims fell by -4,000, indicating a stronger job market than the anticipated 220,000. The October PPI final demand rose +2.4% year-on-year, surpassing expectations of +2.3%. Excluding food and energy, the PPI rose +3.1%, also outpacing the forecast of +3.0%.
Market Reactions to Future Expectations
Markets are gearing up for comments from Fed Chair Powell regarding the economic outlook at an event in Dallas. Attention turns to Friday’s retail sales report, with October sales expected to increase by +0.3% month-over-month. Additionally, over 50 companies are scheduled to report Q3 earnings this week as the earnings season draws to a close.
Currently, 85% of S&P 500 companies that reported Q3 earnings have exceeded analysts’ forecasts, with an average earnings increase of +8.4%, significantly above preseason predictions.
Interest Rates and Global Markets
Markets are pricing in a 76% likelihood of a -25 basis point rate cut during the December 17-18 Federal Open Market Committee meeting. Internationally, market performance is varied; the Euro Stoxx 50 rose by +1.90%, while China’s Shanghai Composite fell -1.73% and Japan’s Nikkei 225 decreased by -0.48%.
Interest Rate Developments
The December 10-year T-notes (ZNZ24) gained +3 ticks, with the yield down by -2.0 basis points to 4.432%. Initially, T-notes declined on economic news that indicated higher-than-expected producer prices and lower jobless claims, both seen as hawkish signs for Fed policy. However, strength in German bunds reversed this trend, coaxing T-notes up from a low point.
European government bond yields are mixed today, with the 10-year German bund yield down -3.0 basis points to 2.360% and the 10-year UK gilt yield down -2.2 basis points to 4.498%. In the Eurozone, September’s industrial production fell -2.0% month-over-month, a decrease sharper than the -1.4% expected, marking the largest fall in 8 months. ECB Vice President Guindos noted that the anticipated economic recovery in the Eurozone is not unfolding as expected, spurring discussions around rate adjustments.
Notable Stock Movements
Super Micro Computer (SMCI) led market losers, falling over -8% after delays in filing its quarterly 10-Q due to ongoing searches for a new accounting firm. Stocks tied to government contracts are also under pressure after President-elect Trump announced his commission to cut government spending, resulting in losses for Leidos Holdings (LDOS), L3Harris Technologies (LHX), and others.
Cisco Systems (CSCO) dropped more than -2% after its 2025 revenue forecast fell short of expectations. In contrast, Walt Disney (DIS) stands out with gains exceeding +7%, bolstered by strong earnings results.
Tapestry (TPR) surged over +12% as it ended a planned merger due to regulatory issues. Additionally, airline stocks are improving as Barclays predicts favorable trends next year. Notably, Wynn Resorts Ltd (WYNN) rose over +7% after a investor disclosed a significant stake in the company.
Earnings Reports Scheduled for 11/14/2024
Upcoming reports include Advance Auto Parts Inc (AAP), Applied Materials Inc (AMAT), Globant SA (GLOB), Post Holdings Inc (POST), and Walt Disney Co/The (DIS).
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned. All data in this article is solely for informational purposes. Please see the Barchart Disclosure Policy for details.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
