Stocks Close Lower Amid Economic Concerns But M&A Activity Shows Promise
The S&P 500 Index ($SPX) (SPY) closed down -0.61% on Monday, while the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.54%. The Nasdaq 100 Index ($IUXX) (QQQ) experienced a decline of -0.84%.
Market Pressures and Economic Outlook
On Monday, stock prices fell as the Dow Jones Industrials reached a 1.5-week low. Concerns over profit-taking and the upcoming US inflation report on Wednesday pressured the markets. Increased yields on Treasury notes also weighed down stock prices. Additionally, geopolitical tensions in the Middle East rose after rebels overthrew Bashar Al-Assad’s government in Syria, raising fears of instability in the region.
Merger and Acquisition Activity
Despite the overall market decline, there was positive news regarding mergers and acquisitions. Omnicom Group agreed to acquire Interpublic Group in a deal worth $13.3 billion, excluding debt. Furthermore, sources from Bloomberg reported that Mondelez International is considering buying Hershey Co.
US Economic News Impact
Economic indicators from the US painted a grim picture for stocks. Wholesale trade sales unexpectedly dropped -0.1% month-over-month in October, contrasting with expectations for a +0.2% increase, marking the first decline in four months.
Anticipation for Inflation Reports
Attention is now on Wednesday’s consumer price index report for November. Experts predict consumer prices will rise slightly to +2.7% year-over-year from +2.6% in October. The core CPI, which excludes food and energy costs, is expected to remain steady at +3.3% year-over-year.
Chinese Monetary Policy Shifts
Global markets received a boost from a change in China’s monetary policy. The Chinese Politburo announced plans for a “moderately loose” monetary strategy for the upcoming year and commitments to support the stability of property and stock markets. This news bodes well for potential economic growth.
Federal Reserve Rate Cut Speculations
Market expectations are high for a -25 basis point rate cut at the Federal Open Market Committee meeting scheduled for December 17-18, rated at 86% probability.
International Market Movements
International stock markets displayed mixed results on Monday. The Euro Stoxx 50 rose by +0.15%, reaching a nearly two-month high. However, the Shanghai Composite Index dipped slightly, down -0.05%, while Japan’s Nikkei Stock 225 gained +0.18%.
Interest Rates Update
March 10-year Treasury notes (ZNH25) closed down -9 ticks on Monday, with a yield increase of +4.0 basis points, reaching 4.193%. A rise in WTI crude oil prices, which jumped +1%, pushed inflation expectations higher, negatively impacting bond prices. The Treasury is set to auction $119 billion in T-notes and T-bonds this week, beginning with a $58 billion auction of 3-year T-notes on Tuesday.
In Europe, government bond yields showed mixed results, with the 10-year German bund yield rising +1.3 basis points to 2.121%, while the UK gilt yield fell -0.5 basis points to 4.270%. The Eurozone’s December Sentix investor confidence index surprisingly dropped -4.7, hitting a 13-month low of -17.5.
Individual Stock Movements
Shares of Nvidia (NVDA) fell over -2% after reports emerged that China’s State Administration for Market Regulation opened an investigation into the company for alleged anti-monopoly violations. Similarly, Omnicom Group (OMC) dropped more than -9% following its acquisition of Interpublic Group. Comcast (CMCSA) also slid over -9% after CEO Watson announced broadband subscriber losses exceeding 100,000 due to recent hurricanes.
Advanced Micro Devices (AMD) suffered a decline of more than -5% after Bank of America downgraded the stock, citing risks to its 2025 projections. BioAge Labs (BIOA) plummeted over -76% after ending a Phase 2 trial for its obesity treatment drug.
Several other companies faced downgrades, including Sofi Technologies (SOFI), down more than -2%; Houlihan Lokey (HLI), falling over -2%; and Bank of America (BAC), which dropped more than -1% after a downgrade from Morgan Stanley.
On a brighter note, Hershey (HSY) rose over +11% after news of potential acquisition interest from Mondelez International. Interpublic Group (IPG) gained more than +4% following its acquisition news as well.
Workday (WDAY) increased by more than +4% after being announced as a replacement in the S&P 500 before trades commence on December 23. US-listed Chinese stocks rallied due to indications of upcoming stimulus in China, with PDD Holdings (PDD) leading gains in the Nasdaq 100, increasing over +10%.
Other notable climbers included VeriSign (VRSN), up more than +4% following an upgrade from Baird, and Newell Brands (NWL), which closed up more than +11% after Truist Securities raised its target price.
Macy’s (M) gained over +1% after reports revealed that activist investor Barington Capital established a stake in the company, suggesting potential changes, including the formation of a separate real estate unit.
Earnings Reports (12/10/2024)
Companies set to report earnings include AutoZone Inc (AZO), Ferguson Enterprises Inc (FERG), GameStop Corp (GME), and Ollie’s Bargain Outlet Holdings (OLLI).
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
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
