Markets Advance Ahead of Anticipated Fed Rate Cut

The S&P 500 Index ($SPX) (SPY) is up +0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) has risen +0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) is reporting a gain of +0.07%. December E-mini S&P futures (ESZ24) are up +0.30%, while December E-mini Nasdaq futures (NQZ24) are up +0.07%.

Market Movements Driven by Chip Stocks

Currently, stock indexes are showing slight increases as investors await a projected -25 basis point interest rate cut from the Federal Open Market Committee (FOMC) this afternoon. Gains across the broader market are being boosted by the performance of chip stocks. Jabil Inc. saw a notable rise of over +8% after announcing Q1 net revenue that exceeded expectations, while General Mills’ shares fell more than -2% on news of a conservative growth outlook for 2025.

US Housing Data Reveals Mixed Signals

Housing data released today offered a conflicting picture. November housing starts dropped unexpectedly by -1.8% month-over-month to 1.289 million, falling short of the anticipated increase to 1.345 million. In a positive turn, November building permits surged by +6.1% month-over-month to a nine-month high of 1.505 million, surpassing the expected figure of 1.430 million.

The current account deficit for Q3 reached a record -$310.9 billion, exceeding the anticipated -$287.1 billion.

Mortgage Applications and Interest Rate Trends

According to the Mortgage Bankers Association (MBA), US mortgage applications fell -0.7% during the week ending December 13. The purchase mortgage index saw a rise of +1.4%, though the refinancing index dropped by -2.6%. The average rate for a 30-year fixed mortgage increased by +8 basis points to 6.75%, up from 6.67% the previous week.

With the FOMC’s anticipated rate cut, markets are pricing in a 99% probability of the -25 basis point move today. Investors will also be closely watching the Fed’s dot plot for indications about future rate adjustments and Fed Chair Powell’s comments for any insights on monetary policy direction.

Global Market Outlook Mixed

Globally, stock markets reflect mixed signals. The Euro Stoxx 50 rose by +0.50%, while China’s Shanghai Composite Index was up +0.62%. In contrast, Japan’s Nikkei Stock 225 index fell to a one-week low, closing down -0.72%.

Interest Rate Developments

March 10-year T-notes (ZNH25) are down -3 ticks today, and the yield on 10-year T-notes is up +0.2 basis points to 4.401%. European government bond yields are rising, with the 10-year German bund yield increasing by +1.9 basis points to 2.250%. The 10-year UK gilt yield also saw a rise, reaching a five-week high of 4.577%, up +2.9 basis points.

In the Eurozone, November Consumer Price Index (CPI) was revised lower to +2.2% year-over-year from an earlier report of +2.3%, while core CPI remained stable at +2.7% year-over-year. Meanwhile, construction output in the Eurozone for October saw its largest increase in 21 months, rising by +1.0% month-over-month.

Key Stock Performers in the US

Jabil Inc (JBL) led gains in the S&P 500, rising over +8% after posting Q1 net revenue of $6.99 billion, which surpassed expectations of $6.59 billion. The forecast for Q2 revenue also appears positive, indicating growth beyond consensus estimates.

Chip stocks remain a key support, with Nvidia (NVDA) and ASML Holding NV (ASML) both experiencing gains of over +4% and +2%, respectively. Other notable performers in this sector include ARM Holdings Plc, GlobalFoundries, Micron Technology, and Texas Instruments, all up by more than +1%.

Health insurance stocks are staging a recovery. Cigna Group (CI) and CVS Health (CVS) saw increases of more than +5%, while UnitedHealth Group (UNH) and Humana (HUM) rose over +3%.

Target (TGT) and Best Buy (BBY) are up more than +2% after being added to Evercore ISI’s Tactical Outperform list. Additionally, Expedia Group (EXPE) gained more than +2% following an upgrade from Bank of America Global Research.

Notable Declines

Heico (HEI) experienced a sharp decline of more than -8% after reporting Q4 net sales of $1.01 billion, missing expectations. Meanwhile, General Mills (GIS) saw its shares drop over -2% after offering a conservative sales growth forecast for 2025.

Other companies facing setbacks include Rivian Automotive (RIVN), which is down over -4% following a downgrade from Baird. Lamb Weston Holdings (LW) fell by more than -2% after Post Holdings opted to acquire a different company.

Fluor Inc (FLR) and Eastman Chemical (EMN) also saw declines, each down more than -1% after receiving downgrades from Baird and Citigroup, respectively.

Earnings Reports (12/18/2024)

Upcoming earnings reports will include those from Birkenstock Holding Plc (BIRK), General Mills Inc (GIS), Jabil Inc (JBL), Lennar Corp (LEN), Micron Technology Inc (MU), and Toro Co/The (TTC).

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.
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