US Markets React to Consumer Confidence Dip and Economic Data Lag
Market Indices Experience Declines
The S&P 500 Index ($SPX) (SPY) has fallen -0.28%, while the Dow Jones Industrials Index ($DOWI) (DIA) decreased by -0.59%. In addition, the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.07%. March E-mini S&P futures (ESH25) are down -0.27%, and March E-mini Nasdaq futures (NQH25) decreased by -0.33%.
Stocks are feeling the pressure today after US consumer confidence unexpectedly dropped, presenting a challenge for the US economy. Reports on durable goods and new home sales also came in below expectations. A rise of +3.6 basis points in the 10-year Treasury note yield added further strain on the market.
Government Shutdown Averted, but Debt Ceiling Looms
During earlier trading, a slight boost was seen after Congress passed a temporary funding bill, preventing a government shutdown just before last Friday’s deadline. This stop-gap, signed by President Biden, will sustain government operations through mid-March 2025. However, the bill did not include the desired suspension of the debt ceiling, which will need to be addressed by Republicans early next year. Starting at midnight on January 2, 2025, the debt ceiling will be reinstated at its current level. The Treasury can employ extraordinary measures to remain compliant until a critical deadline in Spring or Summer 2025, when it will need to act to avoid defaulting on its obligations.
Economic Reports Fall Short
The November US durable goods report showed a decrease of -1.1% month-over-month, worse than the anticipated -0.3%. There was, however, a revision in October, increasing from +0.3% to +0.8%. Excluding transportation, November durable goods orders fell -0.1%, contrary to expectations of a +0.3% rise. In contrast, capital goods orders excluding defense and aircraft—serving as a barometer for capital spending—rose by +0.7% month-over-month, surpassing predictions of +0.1%.
New home sales also disappointed, with November figures showing an increase of +5.9% to 664,000, falling short of expectations for a rise to 669,000. The Conference Board’s December consumer confidence index dropped by -8.1 to 104.7, significantly lower than forecasts of an increase to 113.2.
Market Reactions and International Trends
Currently, the markets are pricing in a 9% chance for a -25 basis point rate cut during the upcoming FOMC meeting on January 28-29. Internationally, stock markets are mixed. The Euro Stoxx 50 decreased by -0.32%, adding to last week’s overall drop of -1.9%. China’s Shanghai Composite Index ended down -0.50%, marking its third consecutive session of losses, while Japan’s Nikkei Stock 225 gained +1.19%, breaking a six-session losing streak.
Interest Rates and Bonds
Trading in March 10-year T-notes (ZNH25) shows a decline of -8 ticks, hovering just above a six-and-a-half-month low reached last week. The yield on these notes is now at +4.558%, which is slightly below last week’s high of +4.592%. T-note prices have reacted negatively to the avoidance of a government shutdown and an upcoming supply of treasury notes, with the Treasury planning to sell $69 billion of 2-year T-notes today, followed by $70 billion of 5-year T-notes on Tuesday and $44 billion of 7-year T-notes on Thursday.
In Europe, government bond yields have risen following remarks from ECB President Lagarde regarding persistent price pressures in the services sector, even as the ECB approaches its inflation target. The yield on the 10-year German bund has increased by +3.2 basis points to 2.317%, while the 10-year UK gilt yield is up +4.4 basis points to 4.554%.
Swaps indicate a 100% likelihood of a -25 basis point cut from the ECB during its meeting on January 30, with a 9% chance of a steeper -50 basis point cut at the same meeting.
Corporate Highlights
In stock movements, Qualcomm (QCOM) saw a rise of over 1% after winning a court case against Arm Holdings Plc (ARM), which is down more than -5%. Other chip stocks performed well, with AMD (AMD) gaining +5.3% and GLOBAFOUNDARIES (GFS) up +4.3%; Microchip Technology (MCHP) and Broadcom (AVGO) also increased by more than +3%.
Xerox (XRX) shares rose +5% following news that it will acquire Lexmark International for $1.5 billion. Meanwhile, Playa Hotels & Resorts (PLYA) skyrocketed +27% due to an exclusive agreement with Hyatt Hotels Corp. (H) to negotiate a possible acquisition of Playa’s beachfront resorts.
In the cryptocurrency sector, stocks showed a downward trend, with Bitcoin (^BTCUSD) decreasing by more than -3%. After suffering a sharp -10% drop last Wednesday and Thursday, Bitcoin only recovered modestly with a +0.14% increase last Friday. Riot Platform (RIOT) and Microstrategy (MSTR) experienced losses of about -5%, whereas Coinbase (COIN) fell more than -3%.
Earnings Reports (12/23/2024)
Companies set to report include Outlook Therapeutics Inc (OTLK), B Riley Financial Inc (RILY), Spire Global Inc (SPIR), Evolv Technologies Holdings Inc (EVLV), AMMO Inc (POWW), Anavex Life Sciences Corp (AVXL), and Limoneira Co (LMNR).
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned. All information and data are for informational purposes only. For further details, please view the Barchart Disclosure Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
