What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday closed up +.19%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.06%.

Stocks on Monday posted moderate gains, with the S&P 500 posting a 1-month high, the Dow Jones Industrials climbing to a 1-1/4 month high, and the Nasdaq 100 posting a 2-week high.  U.S. stocks Monday had carry-over support from a +1.47% rally in the Euro Stoxx 50 to a 5-week high after Rishi Sunak was set to become the UK’s next prime minister, easing the political crisis in the UK.  A rally in telecom stocks Monday was also supportive of the overall market.  In addition, optimism ahead of earnings reports this week from mega-cap technology companies is supporting gains in the overall market.

Higher T-note yields Monday were a bearish factor for the overall market.  The 10-year T-note yield Monday rose +1.7 bp to 4.234%.  A jump in inflation expectations pushed T-note yields higher after the 10-year breakeven inflation rate climbed to a 7-week high Monday of 2.61%. 

Monday’s U.S. economic news was bearish for stocks after the Oct U.S. S&P Global manufacturing PMI fell -2.1 to 49.9, weaker than expectations of 51.0 and the steepest pace of contraction in 2-1/4 years. Also, the Oct U.S. S&P Global services PMI unexpectedly fell -2.7 to 46.6, weaker than expectations of an increase to 49.5.

Today’s stock movers…

HCA Healthcare (HCA) closed up more than +6% Monday to lead gainers in the S&P 500 after Raymond James said last Friday’s selloff in HCA Healthcare was an overreaction and “likely exacerbated by a larger selloff of its peer” Tent Healthcare.“  

Telecom stocks rose Monday after Raymond James said, ”while we still caution investors that telecom stocks may not be the most defensive, the businesses definitely are, and we do not expect weakness in the fundamentals.”  AT&T (T) closed up more than +2% after Raymond James upgraded the stock to strong buy from outperform.  Also, Verizon Communications (VZ) closed up more than +1%. 

Coca-Cola (KO) closed up more than +2% Monday after JPMorgan Chase said they expect a potential upside to Coca-Cola's quarterly earnings results on Tuesday and even a boost to its full-year organic sales targets after peer PepsiCo’s strong results on Oct 12.

Fifth Third Bancorp (FITB) closed up more than +4% Monday on signs of insider buying after a filing with the SEC showed CEO Spence bought $250,690 of shares of his company’s stock last Friday.

Avis Budget Group (CAR) closed up more than +16% Monday after JPMorgan Chase upgraded the stock to overweight from neutral.

U.S.-listed casino stocks with exposure to Macau moved lower Monday on concern China will maintain its strict Covid Zero policies.  Las Vegas Sands (LVS) closed down more than -10% to lead losers in the S&P 500.  Also, Melco Resorts (MLCO) closed down more than -11%, and Wynn Resorts (WYNN) closed down more than -3%. 

U.S.-listed Chinese stocks plunged Monday on concern China will pivot toward more state control versus a market-driven economy after Chinese President Xi Jinping moved to stack his leadership ranks with loyalists.  Pinduoduo (PDD) closed down more than -24% to lead losers in the Nasdaq 100.  Also, JD.com (JD) closed down by more than -13%, and Alibaba Group Holding (BABA) and Baidu (BIDU) closed down by more than -12%.  In addition, NetEase (NTES) closed down more than -9%. 

Starbucks (SBUX) closed down more than -5% Monday on concerns that Chinese President Xi Jinping’s tighter control on China’s ruling party will lead to harsh policy decisions, including the continuation of China’s strict Covid Zero policies.  Maintaining pandemic restrictions will undercut economic activity and hurt companies with significant exposure to China, including Starbucks.

Tesla (TSLA) closed down more than -1% Monday at a 16-month low after cutting the price of its cars in China by about 5%. 

Across the markets…

Dec 10-year T-notes (ZNZ22) on Monday closed down -2 ticks, and the 10-year T-note yield rose +1.7 bp to 4.234%.  Dec T-note prices Monday were under pressure from rising U.S. inflation expectations after the 10-year breakeven inflation rate rose to a 7-week high of 2.610%.  T-notes recovered from their worst levels after Monday’s U.S. economic news showed the Oct S&P Global manufacturing and service PMIs fell more than expected.  T-notes also garnered carry-over support Monday from a drop in the 10-year UK gilt yield to a 1-month low of 3.726%.

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