On Tuesday, the S&P 500 Index ($SPX) (SPY) closed up +0.91%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.58%. December E-mini S&P futures (ESZ25) rose +0.90%, and December E-mini Nasdaq futures (NQZ25) rose +0.56%.
Stock indexes recovered from early losses and closed higher on Tuesday, with the Dow Jones Industrials hitting a 1-week high. Dovish US economic news pushed bond yields lower on Tuesday, strengthening the case for the Fed to cut interest rates at next month’s FOMC meeting and sending stocks higher. September retail sales and September core PPI rose less than expected, ADP’s weekly data showed that private payrolls declined, and November consumer confidence fell more than expected, the 10-year T-note yield hit a 3.5-week low of 3.99% and the probability of a Fed rate cut at the December 9-10 FOMC meeting increased to 80%.
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The stock initially opened lower on Tuesday after Nvidia weighed on chip shares, falling more than -2% as information emerged that Meta Platforms is in talks to spend billions on Google’s AI chips, known as tensor processing units (TPUs), in data centers in 2027. An agreement shows Google is making progress in efforts to rival Nvidia’s AI accelerator chips and will help establish TPUs as an alternative to Nvidia’s chips.
US September retail sales rose +0.2% per cubic meter, weaker than expectations of +0.4% per cubic meter. Ex-Auto retail sales rose +0.3% month over month in September, in line with expectations.
US September PPI final demand increased +2.7% year-on-year, stronger than expected +2.6% year-on-year. However, September PPI ex-food and energy increased by +2.6% year-on-year, weaker than expected by +2.7% year-on-year.
The US September S&P Caseshiller Composite-20 Home Price Index rose +1.36% year-on-year, weaker than expectations of +1.40% year-on-year and the smallest pace of increase in more than two years.
The latest weekly update from ADP showed that US private payrolls declined by an average of -13,500 per week in the four weeks ending November 8.
The Conference Board US November consumer confidence index fell -6.8 to a 7-month low of 88.7, weaker than expected at 93.3.
US October pending home sales rose +1.9% per cubic meter, stronger than expectations of +0.2% per cubic meter.
The Bureau of Labor Statistics (BLS) canceled its October consumer prices report last Friday and said the November report will be released on December 18. Last Wednesday, the BLS said it would not publish an October employment report and noted that it would include those payroll data in the November report, which is scheduled for publication on Dec. 16.
The market will keep an eye on this week’s economic news to know the direction. Wednesday brings weekly initial unemployment claims (expected +5,000 to 225,000), September capital goods new orders nondefense ex-aircraft and parts (expected +0.2% m/m), November MNI Chicago PMI (expected unchanged at 43.8), and the Fed Beige Book.
Markets are ruling out an 80% chance of a -25 bp rate cut at the next FOMC meeting on December 9-10.
Q3 corporate earnings season is coming to a close as 475 of the S&P 500 companies have released results. According to Bloomberg Intelligence, 83% of S&P 500 companies reporting earnings beat forecasts for the best quarter since 2021. Third-quarter earnings rose +14.6%, more than double expectations of +7.2% year-over-year.
Foreign stock markets closed with gains on Tuesday. Euro Stoxx 50 closed +0.82% higher. China’s Shanghai Composite closed up +0.87%. Japan’s Nikkei Stock 225 closed up +0.07%.
interest rates
December 10-year T-notes (ZNZ5) closed at +8.5 ticks on Tuesday. The 10-year T-note yield fell -2.3bp to 4.002%. December T-notes hit a 1-month high on Tuesday, and the 10-year T-note yield fell to a 3.5-week low of 3.987%. T-notes received support after Tuesday’s US economic news showed that September retail sales and September core PPI rose less than expected, weekly ADP data showed that private payrolls declined, and November consumer confidence fell more than expected, all disappointing for Fed policy. Also, falling inflation expectations for T-notes are optimistic after the 10-year breakeven inflation rate fell to a 7.25-month low of 2.212% on Tuesday. T-notes hit their highest level on Tuesday afternoon due to strong demand from the Treasury’s auction of $70 billion of 5-year T-notes, with a bid-to-cover ratio of 2.41, above the 10-auction average of 2.37.
Tuesday’s gains in stocks limited gains in T-notes. Additionally, supply pressure for T-notes is negative as the Treasury auctioned $28 billion of 2-year floating rate notes and $70 billion of 5-year T-notes on Tuesday as part of this week’s $211 billion of T-notes and floating-rate note auctions.
European government bond yields edged lower on Tuesday. The 10-year German Bund yield fell to a 1-week low of 2.665% and eased -2.0 bp to 2.672%. 10-year UK gilt yields fell to a 1-week low of 4.483% and ended -4.3bp at 4.494%.
The swaps are giving a discount of -25% to a -25 bp rate cut by the ECB at its next policy meeting on December 18.
US Stock Movers
The strength in Magnificent Seven Technology shares, even without Nvidia, was a supportive factor for the overall market. Meta Platforms (META) closed up more than +3%, and Alphabet (GOOGL) and Amazon.com (AMZN) closed up more than +1%. Additionally, Microsoft (MSFT) closed up +0.63%, Apple (AAPL) closed up +0.38%, and Tesla (TSLA) closed up +0.39%.
Home builders and home construction suppliers rallied on Tuesday after 10-year T-note yields fell to a 3.5-week low of 3.99%, a supportive factor for housing demand. Builders FirstSource (BLDR) closed up more than +8%, and DR Horton (DHI), Toll Brothers (TOL), and Lennar (LEN) closed up more than +6%. Additionally, PulteGroup (PHM) closed up more than +5% and Mohawk Industries (MHK) closed up more than +4%.
Casino stocks rose Tuesday after the Nevada Gaming Control Board reported that Las Vegas Strip gambling revenue rose 8.2% to $748.9 million in October. MGM Resorts International (MGM) and Penn Entertainment (PENN) closed up more than +5%. Additionally, Caesars Entertainment (CZR) closed up more than +4%, Wynn Resorts Ltd. (WYNN) closed up more than +3% and Las Vegas Sands (LVS) closed up more than +2%.
Kohl’s (KSS) closed up more than +42% after reporting third-quarter sales of $3.41 billion, better than the consensus of $3.33 billion, and raised its full-year comparable sales forecast to -2.5% to -3.0% from the previous forecast of -4% to -5% by -4.19%.
Symbiotic (SYM) closed up more than +39% after reporting fourth-quarter revenue of $618.5 million, better than the consensus of $605.1 million, and forecast first-quarter revenue of $610 million to $630 million, well above the consensus of $606.8 million.
Amentum Holdings (AMTM) closed up more than +18% after reporting Q4 pro forma revenues of $3.93 billion, stronger than the $3.61 billion consensus.
Keysight Technologies (KEYS) closed up more than +10% among S&P 500 gainers after reporting Q4 revenue of $1.42 billion, above the $1.38 billion consensus, and estimating Q1 revenue of $1.53 billion to $1.55 billion, well above the $1.42 billion consensus.
Zoom Communications (ZM) closed up more than +9% after reporting Q3 revenue of $1.23 billion, exceeding the consensus of $1.21 billion, and raising its 2026 revenue forecast to $4.85 billion-$4.86 billion from the previous estimate of $4.83 billion-$4.84 billion, better than the consensus of $4.83 billion.
Analog Devices (ADI) closed up more than +5% to lead the Nasdaq 100 after reporting Q4 revenue of $3.08 billion, stronger than the $3.02 billion consensus, and estimating Q1 revenue of $3.0 billion to $3.2 billion, above the $2.97 billion consensus.
Best Buy (BBY) closed up more than +5% after reporting third-quarter revenue of $9.67 billion, stronger than the $9.58 billion consensus, and raising its 2026 revenue forecast to $41.65 billion-$41.95 billion from the previous forecast of $41.1 billion-$41.9 billion, which is the midpoint above the $41.77 billion consensus.
Burlington Stores (BURL) closed down more than -11% after reporting third-quarter revenue of $2.71 billion, falling short of the consensus estimate of $2.72 billion.
JM Smucker (SJM) closed down more than -3% after cutting the top end of its full-year guidance, reducing its 2026 net sales forecast to +3.5% to +4.5% from a previous forecast of +3% to +5%.
Nvidia (NVDA) closed down more than -2% to lead the Dow Jones Industrials after reporting that Meta Platform is in talks to spend billions on Google’s AI chips, suggesting Google is moving ahead in efforts to rival Nvidia’s dominance in AI chips.
Oracle (ORCL) closed down more than 2% after CFRA downgraded the stock from Buy to Hold and cut its price target to $230 from $350.
Coherent Corp (COHR) closed down more than -2% after Bain Capital cut its stake in the company for the second time this month via an unregistered block trade worth $1.14 billion.
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On the date of publication, Rich Asplund did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. Please see the Barchart Disclosure Policy here for more information.
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