Market Update: Stocks Dip Amid Higher Bond Yields and Trade Deficit Woes
Today, the S&P 500 Index ($SPX) (SPY) is down -0.73%, with the Dow Jones Industrials Index ($DOWI) (DIA) declining -0.31% and the Nasdaq 100 Index ($IUXX) (QQQ) falling -1.22%. Meanwhile, March E-mini S&P futures (ESH25) are lower by -0.71%, and March E-mini Nasdaq futures (NQH25) are down -1.21%.
Market Squeeze from Rising Bond Yields
Stocks are moderately lower today, pressured by higher bond yields. The yield on the 10-year T-note is up +1.0 basis points at 4.593%, approaching Thursday’s seven-month high. Additionally, weakness in major technology stocks is contributing to the market’s decline. On a positive note, energy stocks are rallying as the price of WTI crude oil climbs more than +1%.
Widening Trade Deficit Affects Outlook
The U.S. trade deficit for November expanded to -$102.9 billion from -$98.3 billion in October, exceeding the projected -$101.2 billion. This broader deficit could negatively impact fourth-quarter GDP and adds bearish sentiment to the stock market.
Support from Asian Markets
Asian equity markets are providing some support for U.S. stocks. China’s Shanghai Composite Index has reached a two-week high, driven by expectations of more stimulus for its economy. Similarly, Japan’s Nikkei Stock Index surged to a 5-1/4 month peak, buoyed by exporter strength as the yen hit a five-month low against the dollar, fueled by optimistic economic data on retail sales and industrial production.
Market Expectations for Rate Cuts
Currently, markets are pricing in an 11% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 28-29.
International Markets Show Gains
Global stock markets are mostly up today with the Euro Stoxx 50 rising to a one-week high, up +0.68%. The Shanghai Composite Index added +0.06%, while Japan’s Nikkei 225 posted a +1.80% increase.
Interest Rates on the Move
March 10-year T-notes (ZNH25) are down -3 ticks, while the 10-year T-note yield has risen by +1.0 basis points to 4.593%. Weakness in T-notes is largely due to falling bond prices in Europe and Japan. The 10-year German bund yield fell to its lowest in 1-1/4 months, while UK Gilts and Japanese JGB bonds also saw declines. Concerns over the potential for growth and inflation resulting from President-elect Trump’s policies are contributing to this trend.
European Bonds Yield Higher
European government bond yields are gaining today, with the 10-year German bund yield hitting a 1-1/4 month high of 2.403%—up +5.0 basis points to 2.373%. Likewise, the 10-year UK gilt yield reached a one-week high of 4.645%, increasing by +3.8 basis points to 4.614%.
Insider Selling Hits Major Companies
On the U.S. stock front, Tesla (TSLA) has dipped more than -2% due to reports that rental car company Hertz is hurrying to sell off Tesla vehicles with cheap buyout options for customers.
Netflix (NFLX) also saw a decline of more than -2% following mixed reviews of its new “Squid Game Season 2.” Furthermore, significant tech stocks like Nvidia (NVDA), Amazon.com (AMZN), Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META) experienced drops of over -1%.
Notable Insider Activities
Crowdstrike Holdings (CRWD) fell over -1%, prompted by signs of insider selling after CEO Kurtz unloaded $6.5 million in shares. Similarly, Broadcom (AVGO) decreased by over -1% following the CFO’s $2.89 million sale of shares. KKR & Co (KKR) is also down more than -1% after news of offers exceeding $5 billion for Japan’s Seven & I’s non-core assets.
Fastenal (FAST) has dropped -0.9% after announcing that CFO Lweis will resign in April.
Energy Stocks Rally
In contrast, energy producers are thriving today, coinciding with a more than +1% rise in WTI crude prices. Chevron (CVX) and Occidental Petroleum (OXY) are leading the index gains, each up by more than +1%. Other notable performers include Haliburton (HAL), Exxon Mobil (XOM), and Devon Energy (DVN), all gaining over +1%. Diamondback Energy (FANG) also rose +0.87%, leading the Nasdaq in gains.
Companies Making Waves
VeriSign (VRSN) is up more than +1%, buoyed by Berkshire Hathaway’s recent purchase of $28.5 million worth of its stock. Meanwhile, Progyny (PGNY) surged more than +12% following insider buying, with Executive Chairman Schlanger acquiring $2.2 million in shares. Amedisys (AMED) climbed over +4% after extending the timeline for the $3.3 billion acquisition by UnitedHealth Group.
Tencent Music Entertainment Group ADRs (TEM) rose more than +3% after 86Research upgraded their rating from hold to buy, with a price target set at $14.
Earnings Reports (12/27/2024)
Daily Journal Corp (DJCO), Dakota Gold Corp (DC), Immersion Corp (IMMR).
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 are those of the author and do not necessarily reflect those of Nasdaq, Inc.
