What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday closed down -0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.58%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.30%.

Stocks on Monday settled mixed, with the S&P 500 posting a 4-1/2 month low and the Dow Jones Industrials posting a 2-week low.  Stocks recovered from their worst levels Monday as short covering emerged after the 10-year T-note yield fell back from a 16-year high.  Also, M&A activity supported stocks after Chevron agreed to acquire Hess Corp for about $53 billion and Stonepeak agreed to buy Textainer Group for about $7.4 billion.

Geopolitical risks in the Middle East eased slightly. Western countries have intensified efforts to stop the Israeli-Hamas war from spreading, with EU leaders endorsing a United Nations call for a “humanitarian pause” in the war. President Biden spoke with the presidents of Canada, France, Germany, and Italy to strengthen coordination among allies.  Meanwhile, the prime ministers of Greece and the Netherlands are due in Israel on Monday, and French President Macron will meet Israeli leaders on Tuesday. 

Israel said it supports diplomatic efforts to get Hamas to release hostages from Gaza, a move that could delay a possible ground invasion, although Israel said it won’t wait long to start its ground assault.  Iran and its proxy forces in Lebanon, Iraq, and Yemen have warned they could retaliate against Israel if Israeli troops enter Gaza.

Monday’s U.S. economic news supported stocks after the Sep Chicago Fed national activity index rose +0.24 to 0.02, stronger than expectations of -0.14.

The markets are discounting a 2% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 23% chance for that +25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields on Monday moved lower.  The 10-year T-note yield fell back from a 16-year high of 5.019% and fell -7.0 bp to 4.844%.  The 10-year German bund yield fell back a 2-1/2 week high of 2.972% and fell -1.5 bp at 2.874%.  The 10-year UK gilt yield fell back from a 2-month high of 4.737% and fell -5.2 bp at 4.599%. 

Overseas stock markets on Monday settled mixed.  The Euro Stoxx 50 closed up +0.42%.  China’s Shanghai Composite Index closed down -1.47%. Japan’s Nikkei 225 today closed down -0.83%.

Today’s stock movers…

MGM Resorts International (MGM) closed up more than +3% to lead gainers in the S&P 500 after HSBC initiated coverage on the stock with a buy recommendation and a price target of $49.

Walgreens Boots Alliance (WBA) closed up more than +3% to lead gainers in the Dow Jones Industrials after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30.

Nvidia (NVDA) closed up more than +3% to lead gainers in the Nasdaq 100 after Reuters reported that Nvidia will begin designing central processing units to run Microsoft’s Windows operating system using technology from ARM Holdings. 

Carnival (CCL) closed up more than +3% on signs of insider buying after an SEC filing showed Carnival director Weisenburger bought $1.15 million shares of his company’s stock last Thursday.

Wynn Resorts Ltd (WYNN) closed up more than +2% after HSBC initiated coverage on the stock with a buy recommendation and a price target of $111.

Booking Holdings (BKNG) closed up more than +2% after HSBC initiated coverage on the stock with a buy recommendation and a price target of $3,650.

Textainer Group (TGH) closed up more than +44% after Stonepeak agreed to acquire the company for about $7.4 billion.

Pinterest (PINS) closed up more than +2% after Stifel upgraded the stock to buy from neutral with a price target of $32. 

Church & Dwight (CHD) closed up more than +1% after Raymond James upgraded the stock to market perform from underperform. 

FMC Corp (FMC) closed down more than -13% to lead losers in the S&P 500 after cutting its full-year revenue outlook to $4.48 billion-$4.72 billion from a previous estimate of $5.20 billion-$5.40 billion.  Other agriculture companies fell on the news, with Mosaic (MOS) and CF Industries (CF) closing down more than -3% and Corteva (CTVA) closing down more than -2%.

Okta Inc (OKTA) closed down more than -8% after Evercore ISI added the stock to its Tactical Underperform List.

Chevron (CVX) closed down more than -3% to lead losers in the Dow Jones Industrials after agreeing to acquire Hess Corp in a deal valued at about $53 billion. 

Viatris Inc (VTRS) closed down more than -4% after Bank of America Global Research downgraded the stock to underperform from neutral.

Hasbro (HAS) closed down more than -2% after D.A. Davidson cut its price target for the stock to $71 from $80.

Unity Software (U) closed down more than -2% after Piper Sandler downgraded the stock to neutral from overweight. 

EOG Resources (EOG) closed down more than -1% after Citigroup downgraded the stocks to neutral from buy.   

Across the markets…

December 10-year T-notes (ZNZ23) Monday closed up +15.5 ticks, and the 10-year T-note yield fell -7.0 bp to 4.844%.   Dec T-notes Monday recovered from early losses, and the 10-year T-note yield fell back from a 16-year high of 5.019%. Short covering emerged in T-notes after yields moved above 5% for the first time since 2007.   T-notes today initially moved lower on concerns that the Fed will leave interest rates higher for longer and on supply overhang.  The Treasury on Tuesday will auction $51 billion of 2-year T-notes as part of this week’s $167 billion auction package of T-notes and floating-rate T-notes.

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