What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.31%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.66%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.30%.  

Stocks this morning are mixed ahead of a speech later today by Fed Chair Powell that may provide hints about whether the Fed will slow its pace of interest rate increases, as the markets expect. The markets are expecting only a +50 bp rate hike at the upcoming December 13-14 meeting after the FOMC has raised rates by +75 bp at each of its last four meetings.

U.S. stock indexes have carry-over from a rally in China’s Shanghai Composite Stock Index to a new 2-1/2 month high.  Chinese stocks are underpinned as the easing of Covid restrictions in some parts of the country sparked optimism of an economic reopening.  Also, a rally in European stocks today supports U.S. equities after Eurozone consumer prices in November slowed more than expected. 

Today’s U.S. economic news was mixed for stocks.  On the positive side, Q3 GDP saw a larger-than-expected upward revision, and the Oct JOLTS job openings fell -353,000 to 10.334 million, showing a stronger labor market than expectations of a decline to 10.250 million. Conversely, Nov ADP employment report posted its smallest increase in nearly two years, and the Nov MNI Chicago PMI unexpectedly fell to a 2-1/2 year low.

Higher T-note yields are bearish for stocks, with the 10-year T-note yield up +3.9 bp at 3.783%.

U.S. Nov ADP employment rose +127,000, weaker than expectations of +200,000 and the smallest increase in 22 months.

U.S. Q3 GDP was revised upward by +0.3 to +2.9% (q/q annualized), slightly stronger than expectations of 2.8%, as Q3 personal consumption was revised up by +0.3 to +1.7%, slightly better than expectations of 1.6%.

The U.S. Q3 core PCE deflator was unexpectedly revised upward by +0.1 to +4.6% q/q, stronger than expectations of unchanged at +4.5% q/q.

U.S. Oct wholesale inventories rose +0.8% m/m, higher than expectations of +0.5% m/m.

The U.S. Nov MNI Chicago PMI unexpectedly fell -8.0 to a 2-1/2 year low of 37.2, weaker than expectations of an increase to 47.0.

U.S. Oct pending home sales fell -4.6% m/m, a smaller decline than expectations of -5.3% m/m. 

U.S. Oct JOLTS job openings fell -353,000 to 10.334 million, showing a stronger labor market than expectations of a decline to 10.250 million.

Bitcoin (^BTCUSD) is up +2.4% this morning at a 2-week high, which is a supportive factor for stocks.  Bitcoin rose today on M&A activity after Binance, the world’s biggest cryptocurrency exchange, bought Japan’s Sakura Exchange Bitcoin, which will pave the way for Binance to enter Japan as a regulated entity.  The terms of the transaction were not disclosed.

A potential bearish factor for stocks is a U.S. rail labor dispute that could result in a strike that would stop shipments of goods throughout the country and derail the economy.  President Biden has asked Congress to intervene to avert a strike before the Dec 9 deadline.  Railroads are expected to begin shutting down service as soon as Friday to make sure rail cargo isn’t left stranded if the labor dispute has not been settled.   

Today’s stock movers…

NetApp (NTAP) is down more than -7% today to lead losers in the S&P 500 after reporting Q2 revenue of $1.66 billion, below the consensus of $1.68 billion, and forecasting Q3 net revenue of $1.53 billion-$1.68 billion, weaker than the consensus of $1.71 billion. 

Hormel Foods (HRL) is down more than -4% after reporting Q4 net sales of $3.30 billion, below the consensus of $3.38 billion and forecasting 2023 net sales of $12.6 billion to $12.9 billion, weaker than the consensus of $13.01 billion. 

Bank stocks are weaker today and are weighing on the overall market.  M&T Bank (MTB) and Capital One Financial (COF) are down more than -3%.  Also, JPMorgan Chase (JPM) is down more than -2% to lead losers in the Dow Jones Industrials.  In addition, Goldman Sachs (GS), Citigroup (C), Wells Fargo (WFC), Fifth Third Bancorp (FITB), and Comerica (CMA) are down more than -2%.

Cybersecurity stocks are tumbling today, with Crowdstrike Holdings (CRWD) down more than -18% to lead losers in the Nasdaq 100 after forecasting Q4 revenue of $619.1 million-$628.2 million, weaker than the consensus of $634.8 million.  Also, SentinelOne (S) is down -11%, and Zscaler (ZS) is down more than -5%.

Biogen (BIIB) is up more than +6% to lead gainers in the S&P 500 on optimism in the company’s lecanemab treatment for Alzheimer’s disease following a detailed presentation of clinical data from a late-stage trial for the drug. 

State Street (STT) is up more than +5% today after it said it decided not to pursue an acquisition of Brown Brothers Harriman’s investor-services business. 

HP Enterprise (HPE) is up more than +3% after reporting Q4 revenue of $7.87 billion, well above the consensus of $7.37 billion, and forecasting Q1 net revenue of $7.2 billion-$7.6 billion, above the consensus of $7.0 billion. 

Workday (WDAY) is up more than +11% today to lead gainers in the Nasdaq 100 after raising its 2023 subscription revenue forecast to $5.56 billion from $5.54 billion, better than the consensus of $5.54 billion.

 U.S.-listed Chinese stocks are moving higher today as the easing of Covid restrictions in some parts of China has sparked optimism of an economic reopening.  Alibaba Group Holding (BABA) is up more than +10%.  Also, JD.com (JD) is up more than +8%, and Baidu (BIDU) is up more than +7%.  In addition, Pinduoduo (PDD) and NetEase (NTES) are up more than +2%. 

Across the markets…

Dec 10-year T-notes (ZNZ22) today are down -10 ticks, and the 10-year T-note yield is up +3.9 bp at 3.783%.  Higher European government bond yields today are weighing on T-note prices.  The 10-year German bund yield is up +3.9 bp at 1.962%, and the 10-year UK gilt yield is up +7.3 bp at 3.173%.  T-note prices also fell back after today’s economic news showed the U.S. Q3 core PCE deflator was unexpectedly revised upward by +0.1 to 4.6% q/q. 

The dollar index (DXY00) this morning is down by -0.44%.  The dollar is under pressure on speculation Fed Chair Powell in a speech later today will signal the Fed will begin to slow its pace of interest rate increases.  Also, a rally in the yuan to a 2-week high undercut the dollar as the easing of Covid restrictions in some parts of China sparked some optimism about an economic reopening. 

EUR/USD (^EURUSD) today is up +0.54%.  A weaker dollar today has fueled short covering in the euro.  Also, higher German bund yields today have strengthened the dollar’s interest rate differentials.  On the negative side, today’s economic news showed a slower pace of increase in Eurozone consumer prices and weakness in the German labor market, which may prompt the ECB to slow the pace of its interest rate hikes. 

Eurozone Nov CPI rose +10.0% y/y, a smaller pace of increase than expectations of +10.4% y/y.  Nov core CPI rose a record +5.0% y/y, right on expectations and unchanged from Oct.

German Nov unemployment rose +17,000, above expectations of +13,500 and a sign of a weaker labor market. Also, the German Nov unemployment rate unexpectedly rose +0.1 to a 17-month high of 5.6%, showing a weaker labor market than expectations of no change at 5.5%.

USD/JPY (^USDJPY) this morning is up by +0.75%.  Signs of weakness in Japan’s economy are weighing on the yen after today’s economic news showed Japan’s factory output fell more than expected.  Also, higher T-note yields today are undercutting the yen. 

Japan Oct industrial production fell -2.6% m/m, weaker than expectations of -1.8% m/m and the biggest decline in 5 months.

December gold (GCZ2) this morning is up +7.7 (+0.44%), and December silver (SIZ22) is up +0.516 (+2.43%).  Precious metals prices this morning are moderately higher, with gold posting a 1-1/2 week high and silver posting a 2-week high.  A weaker dollar today is bullish for metals prices.  Also, speculation that Fed Chair Powell later today will signal a slower pace of Fed rate hikes is boosting metals prices.  Silver also garnered support today after China eased Covid restrictions in some parts of the country, which will boost economic activity that is positive for industrial metals demand. 

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