Market Updates: S&P 500 Dips as Economic Data Surprises

The S&P 500 Index ($SPX) (SPY) closed down -0.09% on Thursday, while the Dow Jones Industrials Index ($DOWI) (DIA) rose +0.04%. The Nasdaq 100 Index ($IUXX) (QQQ) dropped -0.47%. Additionally, December E-mini S&P futures (ESZ24) and December E-mini Nasdaq futures (NQZ24) fell by -0.09% and -0.48%, respectively.

Stocks Slide Amid Rising Bond Yields

On Thursday, stock indexes reversed an early gain and ended lower. The S&P 500 slipped to a one-month low, and the Nasdaq 100 reached a two-week low. This is a continuation of the losses seen on Wednesday, primarily fueled by soaring bond yields after the Federal Open Market Committee (FOMC) indicated that it now expects only 50 basis points of rate cuts next year—down from the earlier projection of 100 basis points.

Further compounding the market’s troubles, US economic reports on Thursday mostly exceeded expectations, pushing bond yields even higher. The yield on the 10-year T-note climbed to a six-and-half month high. A sharp drop of -16% in shares of Micron Technology added to the pressure on technology stocks and the overall market sentiment.

Economic Data Shows Mixed Signals

In the latest economic updates, US Q3 GDP was unexpectedly revised upwards to 3.1% (quarter-over-quarter annualized), surpassing the anticipated no change at 2.8%. Meanwhile, weekly initial unemployment claims fell by -22,000 to 220,000, indicating a stronger labor market than the expected 230,000.

Conversely, the November Philadelphia Fed business outlook survey unexpectedly worsened by -10.9, reaching a 20-month low of -16.4, which was below the anticipated rise to 2.8. In a more positive note, US November leading indicators increased by +0.3% month-over-month, contrary to expectations for a decline of -0.1% and marking the largest increase in nearly three years.

Existing home sales for November rose by +4.8% month-over-month to an 8-month high of 4.15 million, better than the forecasted +3.2% to 4.09 million. Investors are now keenly awaiting inflation data on Friday, particularly the November core Personal Consumption Expenditures (PCE) price index, the Fed’s preferred gauge of inflation, which is projected to rise to +2.9% year-over-year from +2.8% in October.

Global Markets Experience Decline

Across the globe, stock markets ended Thursday in the negative. The Euro Stoxx 50 fell to a two-week low, closing down -1.58%. The Shanghai Composite Index in China dropped to a two-and-half-week low, closing down -0.36%. Japan’s Nikkei Stock 225 fell to a similar level, closing down -0.69%.

Bond Market Trends Upwards

In the bond market, March 10-year T-notes (ZNH25) lost -13 ticks on Thursday, pushing the 10-year T-note yield up by +6.0 basis points to 4.574%. The T-notes hit a six-and-a-half month low, with yields peaking at 4.592%. The retreat in T-note prices signaled a hawkish reaction to unexpectedly strong US economic data and was influenced by the FOMC’s more conservative stance on rate reductions for the year.

European government bond yields also rose on Thursday. The 10-year German bund yield increased to a three-and-a-half week high of 2.322%, finishing up +6.1 basis points to 2.306%. Meanwhile, the 10-year UK gilt yield climbed to a 13-3/4 month high of 4.651%, finishing up +2.1 basis points to 4.579%.

Eurozone new car registrations fell by -1.9% to 869,816 units. In Germany, the January GfK consumer confidence index rose by +1.8 to -21.3, better than expected. The Bank of England (BOE) maintained its benchmark rate at 4.75%, with Governor Bailey indicating a cautious approach to future rate cuts. Swaps predict a 100% chance of a -25 basis point rate cut by the European Central Bank (ECB) at its January 30 meeting, with a 12% chance for a -50 basis point cut.

Notable Stock Movements

Lamb Weston Holdings (LW) experienced a significant drop, closing down more than -20% after reporting a Q2 adjusted EPS of 66 cents, falling short of the consensus of $1.02. They also reduced their 2025 adjusted EPS forecast to $3.05-$3.20, down from $4.15-$4.35.

Shares of Micron Technology (MU) fell more than -16% after the company projected Q2 adjusted revenue between $7.7 billion and $8.1 billion, well below the $8.99 billion expected by analysts.

Homebuilder stocks faced challenges as well, particularly Lennar (LEN), which fell by -5% after reporting Q4 net new orders of 16,895—lower than the expected 19,174. Other notable declines included DR Horton (DHI) down more than -2%, while PulteGroup (PHM) and Toll Brothers (TOL) each dropped by more than -1%.

Vertex Pharmaceuticals (VRTX) closed down over -10% after a placebo arm in its mid-stage pain trial showed results similar to its pain relief drug. Cintas (CTAS) also slipped more than -10% following a revenue forecast of $10.26 billion to $10.32 billion, disappointing market expectations.

C3.ai (AI) fell more than -10% subsequent to a downgrade from KeyBanc Capital Markets, which lowered its target price to $29. Western Digital (WDC) faced a decline of more than -6% after Benchmark Company downgraded it to hold from buy. Worthington Steel (WS) reported a -9% year-over-year revenue decline, causing its shares to close down more than -13%.

In contrast, Darden Restaurants (DRI) rose more than +14% after reporting better-than-expected Q2 sales of $2.89 billion. They also raised their fiscal 2025 sales forecast to $12.1 billion, exceeding previous estimates. Accenture Plc (ACN) saw a +7% increase post a robust Q1 revenue of $17.69 billion, while Palantir Technologies (PLTR) gained more than +5% following a contract extension with the US Army worth up to $618.9 million.

CarMax (KMX) increased by more than +4% after reporting Q3 net sales of $6.22 billion, surpassing expectations. Boeing (BA) led the Dow gainers, closing up more than +3% after Turkey’s Pegasus Airline announced their intention to purchase up to 200 Boeing 737-10 aircraft valued at $36 billion. Fortinet (FTNT) climbed by over +2% after receiving an upgrade from KeyBanc Capital Markets, while American Express (AXP) saw a rise of +2% following an increased price target from Morgan Stanley.

Hewlett Packard Enterprise (HPE) closed up more than +1% after Deutsche Bank upgraded the stock to buy, raising its price target to $25.

Earnings Reports Scheduled for 12/20/2024

Carnival Corp (CCL), PACS Group Inc (PACS), and Winnebago Industries Inc (WGO) are set to report earnings.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information is for informational purposes only. For additional information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.