Mixed Market Performance Amid Economic Updates
The S&P 500 Index ($SPX) (SPY) is up +0.08%, while the Dow Jones Industrials Index ($DOWI) (DIA) has gained +0.18%. In contrast, the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.08%.
Markets React to CPI Report and Fed Comments
Stock index futures bounced back from overnight losses, showing mixed results. The broader market is enjoying a relief rally following the US October consumer prices, which rose as expected. Support for stocks was found as Treasury note yields decreased, following dovish remarks from Minneapolis Fed President Kashkari. He noted that inflation is moving in a positive direction, indicating it may not stay above the Fed’s 2% target. A decline in chip stocks has negatively impacted the Nasdaq 100.
Consumer Price Index Reports and Mortgage Applications
The US October Consumer Price Index (CPI) increased by +0.3% month-over-month (m/m) and +2.6% year-over-year (y/y), aligning with expectations. The CPI excluding food and energy remained stable from September at +3.3% y/y, also meeting forecasts.
In mortgage news, US MBA mortgage applications rose +0.5% for the week ending November 8. The purchase mortgage sub-index climbed +1.9%, while the refinancing sub-index decreased by -1.5%. The average rate for a 30-year fixed mortgage rose to 6.86%, compared to 6.81% the previous week.
Recent Stock Performance
This past week, stocks surged significantly, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 reaching new record highs. This rise is attributed to speculation that President-elect Trump will enhance corporate profits through tax cuts and deregulation.
Looking forward, the markets are preparing for Friday’s retail sales report, critical for assessing consumer spending trends. Analysts expect an increase of +0.3% m/m in October retail sales, including the same forecast for sales excluding automobiles. Furthermore, the Q3 earnings season is concluding, with over 50 companies set to release quarterly results this week.
Out of the 85% of S&P 500 companies that have reported Q3 earnings thus far, 75% exceeded expectations, although this is slightly below the three-year average. Reported quarterly earnings for S&P 500 companies showed an average increase of +8.4% y/y, significantly above initial predictions.
Market Outlook and Interest Rate Speculations
Currently, the markets are pricing in an 82% chance of a -25 basis point rate cut during the Federal Open Market Committee meeting on December 17-18.
International Market Highlights
Overseas, stock markets display mixed performance today. The Euro Stoxx 50 dropped to a three-month low, falling -0.43%. In contrast, China’s Shanghai Composite Index rose by +0.51%, while Japan’s Nikkei Stock 225 declined by -1.66% to reach a one-week low.
Interest Rates and Bond Markets
December 10-year Treasury notes (ZNZ24) rose by +11 ticks, with the 10-year Treasury note yield decreasing by -2.8 basis points to 4.440%. Gains in Treasury notes followed the release of the US October CPI report, which eased inflation concerns. This prompted a rise in expectations for a rate cut by the Fed next month, increasing probabilities from 62% to 82% after the announcement. Furthermore, dovish comments from Kashkari supported the positive momentum in Treasury notes.
In Europe, government bond yields displayed a mixed trend. The 10-year German bund yield increased by +0.3 basis points to 2.365%, while the 10-year UK gilt yield experienced a decline of -2.7 basis points to 4.472%.
Global Economic Concerns
Bundesbank President and ECB Governing Council member Nagel raised concerns regarding high core inflation and persisting price pressures, particularly in the services sector. He cautioned that President-elect Trump’s tariff proposals could potentially shrink Germany’s GDP by 1% and trigger economic contraction.
Swaps are currently assigning a 100% chance of a -25 basis point rate cut by the ECB during its meeting on December 12, with a 23% chance of a -50 basis point cut at the same time.
Movers in the US Stock Market
Albemarle (ALB) surged over +7% after RBC Capital Markets raised its price target on the stock from $108 to $133.
Charter Communications (CHTR) also climbed more than +3% following its agreement to acquire Liberty Broadband in an all-stock deal. Tesla (TSLA) gained over +4%, benefitting from speculation around Trump’s policies and Musk’s selection to head the new Department of Government Efficiency.
Meanwhile, Cava Group (CAVA) jumped more than +15% after reporting Q3 restaurant comparable sales growth of +18.1%, surpassing expectations of +12.4%. The company also upgraded its forecast for full-year sales growth to +12%-13% from the previous +8.5%-9.5%, exceeding the consensus of +9.95%.
Rivian Automotive (RIVN) saw a +22% increase after Volkswagen AG announced an $800 million increase in its investment in the company. Spotify Technology (SPOT) rose more than +9%, anticipating Q4 monthly active users to hit 665 million, surpassing the consensus of 660.73 million.
Pure Storage (PSTG) grew over +4% after Oppenheimer & Co initiated coverage with an outperform recommendation and set a price target of $70. Emerson Electric (EMR) increased more than +1% following BNP Paribas Exane’s initiation of coverage with a price target of $155.
In contrast, Maplebear Inc (CART) fell over -10% after forecasting Q4 adjusted EBITDA between $230 million and $240 million, which is below the consensus estimate of $244.4 million.
Stocks to Watch
Skyworks Solutions (SWKS) declined by more than -4%, leading losses in the S&P 500 following a revenue forecast of $1.05 billion to $1.08 billion, which underwhelmed compared to the consensus of $1.09 billion. The semiconductor sector faced significant pressure today, with KLA Corp (KLAC) dropping over -2%. Other companies such as ON Semiconductor (ON), Lam Research (LRCX), and Texas Instruments (TXN) also fell more than -1%.
Super Micro Computer (SMCI) declined more than -2% after announcing it couldn’t file its quarterly report on Form 10-Q due to needing to secure a new auditor. Additionally, Groupon (GRPN) plummeted over -28% after posting Q3 revenue of $114.5 million, falling short of the consensus of $118 million and lowering its full-year revenue forecast to between $486 million and $493 million, below the consensus of $507.3 million.
Rocket Companies (RKT) saw a decline of more than -12% after predicting Q4 adjusted net revenue between $1.05 billion and $1.20 billion, significantly less than the consensus of $1.32 billion.
On the Dow Jones Industrials, Caterpillar (CAT) fell more than -1% after Evercore ISI downgraded the stock to underperform with a price target of $365. Concurrently, International Paper (IP) also decreased more than -1% after BNP Paribas Exane downgraded it to underperform from neutral with a new price target of $48.20.
Upcoming Earnings
Scheduled to report earnings on November 13, 2024, are Cisco Systems Inc (CSCO), Loar Holdings Inc (LOAR), NU Holdings Ltd/Cayman Islands (NU), and Tetra Tech Inc (TTEK).
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.
The views and opinions expressed herein reflect those of the author and do not necessarily represent those of Nasdaq, Inc.
