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Stocks Mixed Ahead of Fed Chair Powell

Barchart - Fri Dec 1, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.50%.

Stocks this morning are mixed, with the Dow Jones Industrials posting a 1-3/4 year high.  Stocks recovered early losses and turned mixed after U.S. manufacturing activity contracted more than expected last month, which is dovish for Fed policy and knocked T-note yields lower.  Trading activity is muted ahead of comments from Fed Chair Powell later today that may provide clues as to the future direction of Fed policy. 

On the negative side for stocks, Pfizer is down more than -5% after it dropped the development of its experimental weight loss drug danuglipron after a high rate of side effects appeared in a mid-stage study.  Also, Marvell Technology is down more than -4% after forecasting Q4 net revenue below consensus.  In addition, Dell Technologies is down more than -6% after reporting Q3 total net revenue below consensus and forecasting weaker-than-expected Q4 revenue. 

On the positive side, Ulta Beauty is up more than +10 % after reporting stronger-than-expected Q3 net sales.  Also, Paramount Global is up more than +5% after the Wall Street Journal reported that Apple has discussed bundling its streaming services with Paramount at a discount.  In addition, Freeport-McMoRan is up more than +4% after gold prices rallied to a 7-month high and copper prices rallied to a 3-month high. 

U.S. equity markets also have carryover support from today’s rally in the Euro Stoxx 50 to a 4-month high.  Today’s jump in copper prices to a 3-month high has fueled a rally in mining stocks to lead European equities higher.  Copper is moving higher after today’s news showed an unexpected expansion in Chinese manufacturing activity last month.  European stocks extended their gains when the 10-year German bund yield tumbled to a 4-1/2 month low after ECB Governing Council member Villeroy de Galhau said, "Barring any shock, ECB rate hikes are over."

The U.S. Nov ISM manufacturing index was unchanged at 46.7, weaker than expectations of an increase to 47.8 and the 13th consecutive month of contraction in manufacturing activity.

U.S. Oct construction spending rose +0.6% m/m, stronger than expectations of +0.3% m/m.

Chicago Fed President Goolsbee said, "There's no evidence that inflation has stalled at 3%, and I think it's still on track to get to 2%."

The markets are discounting a 1% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024.  The markets are then discounting a 64% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and have fully discounted (a 131% chance) that same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting. 

U.S. and European government bond yields today are lower. The 10-year T-note yield is down -2.5 bp at 4.301%.  The 10-year German bund yield dropped to a 4-1/2 month low of 2.379% and is down -5.7 bp at 2.390%.  The 10-year UK gilt yield is down -0.7 bp at 4.169%. 

The China Nov Caixin manufacturing PMI rose +1.2 to 50.7, stronger than expectations of 49.6.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.72%.  China’s Shanghai Composite Index closed up +0.06%.  Japan’s Nikkei Stock Index closed down -0.17%.

Today’s stock movers…

Pfizer (PFE) is down more than -5% to lead losers in the S&P 500 after it dropped development of its experimental weight loss drug danuglipron after a high rate of side effects appeared in a mid-stage study. 

Marvell Technology (MRVL) is down more than -5% to lead losers in the Nasdaq 100 after forecasting Q4 net revenue of $1.42 billion, below the consensus of $1.46 billion.

Dell Technologies (DELL) is down more than -6% after reporting Q3 total net revenue of $22.25 billion, below the consensus of $22.98 billion, and forecasting Q4 revenue of $21.5 billion-$22.5 billion, weaker than the consensus of $23.79 billion.   

Tesla (TSLA) is down more than -2% after RBC Capital Market said the company’s new Cybertruck pickup was priced at the higher end of expectations, which may hurt demand. 

Digital Realty Trust (DLR) is down more than -1% after HSBC initiated coverage of the stock with a recommendation of reduce and a price target of $112. 

Albemarle (ALB) is down more than -1% as the price of China lithium carbonate sank to a 2-1/4 year low today.   

Ulta Beauty (ULTA) is up more than +10% to lead gainers in the S&P 500 after reporting Q3 net sales of $2.49 billion, stronger than the consensus of $2.47 billion.

Paramount Global (PARA) is up more than +5% after the Wall Street Journal reported that Apple has discussed bundling their streaming services with Paramount at a discount. 

Freeport-McMoRan (FCX) is up more than +4% after gold prices rallied to a 7-month high and copper prices rallied to a 3-month high. 

Norfolk Southern (NSC) is up more than +3% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $248.

UiPath (PATH) is up more than +20% after reporting Q3 adjusted EPS of 12 cents, stronger than the consensus of 7 cents. 

Samsara (IOT) is up more than +14% after reporting Q3 revenue of $237.5 million, better than the consensus of $224.7 million, and raised its 2024 revenue forecast to $918 million-$920 million from a previous forecast of $896 million-$900 million, stronger than the consensus of $898.9 million. 

Salesforce Inc (CRM) is up more than +2% to lead gainers in the Dow Jones Industrials and is adding to Thursday’s +8% surge after it reported better-than-expected Q3 adjusted EPS and raised its 2024 adjusted EPS forecast.   

Across the markets…

March 10-year T-notes (ZNH24) this morning are up +12 ticks, and the 10-year T-note yield is down -2.5 bp at 4.301%.  Dec T-note prices this morning moved moderately higher after the U.S. Nov ISM manufacturing index contracted more than expected. Also, dovish comments from Chicago Fed President Goolsbee boosted T-notes when he said that inflation is still on track to return to the Fed’s 2% goal.   

The dollar index (DXY00) today is up by +0.09%.  The dollar this morning is slightly higher on short-covering and position squaring ahead of comments later today from Fed Chair Powell.  Gains in the dollar are limited after the U.S Nov ISM manufacturing index contracted more than expected. 

EUR/USD (^EURUSD) today is down by -0.35% and posted a 2-week low.  The euro gave up an early advance and retreated today on dovish comments from ECB Governing Council member Villeroy de Galhau, who said, "Barring any shock, ECB rate hikes are over."  The euro today initially moved higher after the Eurozone Nov S&P manufacturing PMI was revised upward. 

ECB Governing Council member Villeroy de Galhau said, "Barring any shock, ECB rate hikes are over," and we can look at rate cuts when the time comes in 2024. 

The Eurozone Nov S&P manufacturing PMI was revised upward by +0.4 to 44.2 from the initially reported 43.8.

Swaps tied to ECB meeting dates have now priced in a 77% chance that the ECB will reduce its benchmark rate by -25 bp at the March 7 meeting and have more than priced in (+156%) a -25 bp rate cut at the April 11 ECB meeting.

USD/JPY (^USDJPY) today is down by -0.45%.  The yen today is moving higher on weakness in T-note yields under pressure from a stronger dollar and higher T-note yields.  The yen also found support from today’s Japanese economic news that showed the Oct jobless rate unexpectedly fell, a sign of labor market strength, and after the Japan Nov Jibun Bank manufacturing PMI was revised upward. 

Today's economic news was mainly better than expected and supported the yen.  The Nov Jibun Bank manufacturing PMI was revised upward by +0.2 to 48.3 from the previously reported 48.1.  Also, the  Oct jobless rate unexpectedly fell -.1 to 2.5%, showing a stronger labor market than expectations of no change at 2.6%.  Conversely, Q3 capital spending ex-software rose +1.7% y/y, weaker than expectations of +3.4% y/y.

February gold (GCG4) today is up +9.4 (+0.46%), and Mar silver (SIH24) is up +0.035 (+0.14%).  Precious metals prices today are moderately higher, with gold climbing to a 7-month high and silver climbing to a 6-3/4 month high.  Today’s decline in T-note yields is bullish for precious metals.  Also, dovish comments today from Chicago Fed President Goolsbee gave precious metals a boost when he said that inflation is still on track to return to the Fed’s 2% goal, which signals he favors pausing Fed rate hikes.  Silver prices also found carryover support today from a rally in copper prices to a 3-month high after a gauge of Chinese manufacturing activity unexpectedly expanded last month, a sign of strength in industrial metals demand.   Gains in metals were limited due to a stronger dollar.



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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.