The S&P 500 Index ($SPX) (SPY) Monday closed up +0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.12%.

Stocks on Monday mainly settled higher, with the S&P 500 and Nasdaq 100 posting new all-time highs.  Better-than-expected US economic news Monday on Nov ISM manufacturing and Oct construction spending bolstered the outlook for a soft landing and boosted stocks.  Also, a sharp rally in chip stocks supported the overall equity market. 

Stocks extended their gains Monday afternoon on dovish comments from Fed Governor Waller, who said, "At present, I am leaning toward supporting a cut to the policy rate at our December meeting." 

Corporate news on Monday was mixed for stocks.  On the positive side, Super Micro Computer surged more than +28% to lead gainers in the S&P 500 and Nasdaq 100 after a special committee found no evidence of misconduct by management or the board.  Also, Tesla closed up more than +4% after Roth Capital Partners upgraded the stock to buy from neutral.  On the negative side, Stellantis NV closed down more than -5% after Bloomberg reported that CEO Tavares is unexpectedly stepping down.  Also, Upstart Holdings closed down more than -14% after JPMorgan Chase downgraded the stock to underweight from neutral.

The US Nov ISM manufacturing index rose +1.9 to a 5-month high of 48.4, stronger than expectations of 47.5.

US Oct construction spending rose +0.4% m/m, stronger than expectations of +0.2% m/m.

Monday’s comments from Atlanta Fed President Bostic were neutral for stocks when he said, "The risks to achieving the FOMC's dual mandates of maximum employment and price stability have shifted such that they are roughly in balance, so we likewise should begin shifting monetary policy toward a stance that neither stimulates nor restrains economic activity."

The markets are looking ahead to Wednesday’s Nov ISM services index (expected -0.5 to 55.5).  Also, on Wednesday, Fed Chair Powell will speak at a moderated discussion event in New York.  Finally, the markets are awaiting Friday’s Nov nonfarm payrolls (expected +200,000) and Nov average hourly earnings (expected to ease to +3.9% y/y from +4.0% y/y in Oct). 

The markets are discounting the chances at 78% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets on Monday settled higher.  The Euro Stoxx 50 climbed to a 3-week high and closed up +0.88%.  China's Shanghai Composite Index rose to a 1-week high and closed up by +1.13%.  Japan's Nikkei Stock 225 closed up +0.80%.

Interest Rates

March 10-year T-notes (ZNH25) Monday closed down -2.5 ticks.  The 10-year T-note yield rose +2.7 bp to 4.196%.  On Monday, Mar T-notes were under pressure from an increase in corporate supply, with as much as $25 billion in corporate debt offerings expected this week, which prompted bond dealers to short T-notes as a hedge against the incoming new supply. T-notes also tracked Japanese bonds lower on hawkish comments from BOJ Governor Ueda, who said interest rate hikes from the BOJ are "nearing." T-notes fell to their lows Monday on the stronger-than-expected US ISM manufacturing and construction spending reports. 

However, T-notes recovered from their worst levels on dovish comments from Fed Governor Waller, who said he’s leaning toward a Fed rate cut at the December 17-18 FOMC meeting.  T-notes also had carryover support from Monday’s rally in 10-year German bunds to a 2-month high after ECB Governing Council member Kazaks said the ECB Is debating a larger 50 bp rate cut at next week’s ECB meeting. 

European government bond yields Monday moved lower.  The 10-year German bund yield fell to a 2-month low of 2.031% and finished down -5.4 bp to 2.034%.  The 10-year UK gilt yield dropped to a 1-month low of 4.208% and finished down -2.9 bp to 4.212%.

The German Nov S&P manufacturing PMI was revised downward by -0.2 to 43.0 from the previously reported 43.2.

ECB Governing Council member Kazaks said the ECB will likely cut interest rates when it meets next week and that a bigger move is currently up for debate.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 18% for a -50 bp rate cut at the same meeting.

US Stock Movers

Super Micro Computer (SMCI) closed up more than +28% to lead gainers in the S&P 500 and Nasdaq after a special committee found no evidence of misconduct by management or the board. 

Chip stocks rallied Monday and supported gains in the broader market.  Lam Research (LRCX) closed up more than +6%, and Applied Materials (AMAT) closed up more than +5%.  Also, ARM Holdings Plc (ARM), GlobalFoundries (GFS), Marvell Technology (MRVL), and ON Semiconductor (ON) closed up more than +4%.  In addition, Microchip Technology (MCHP), Advanced Micro Devices (AMD), ASML Holding NV (ASML), and KLA Corp (KLAC) closed up more than +3%. 

Tesla (TSLA) closed up more than +3% after Roth Capital Partners upgraded the stock to buy from neutral with a price target of $380. 

Cruise line operators moved higher Monday after Truist Securities raised their price targets on the stocks, saying that pricing for 2025 bookings has accelerated from prior checks, suggesting a significant upside to current consensus expectations.  As a result, Norwegian Cruise Line Holdings (NCLH) closed up more than +5%, and Carnival (CCL) closed up more than +2%.  Also, Royal Caribbean Cruises (RCL) closed up more than +1%.

The Gap (GAP) closed up more than +6% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30. 

Cloudflare (NET) closed up more than +5% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $130. 

NextEra Energy Partners (NEP) closed up more than +13% after Morgan Stanley double-upgraded the stock to overweight from underweight with a price target of $22. 

Akamai Technologies (AKAM) closed up more than +4% after Oppenheimer & Co. upgraded the stock to outperform from peer perform with a price target of $120.

Commercial Metals (CMC) closed up more than +3% after Goldman Sachs reinstated coverage on the stock with a recommendation of buy and a price target of $75. 

PG&E (PCG) closed down more than -4% after offering $1.2 billion of convertible preferred stock shares.

Stellantis NV (STLA) closed down more than -5% after Bloomberg reported that CEO Tavares is unexpectedly stepping down as his views on the company’s future differed from those of the board and some shareholders. 

Upstart Holdings (UPST) closed down more than -14% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $57.

LendingClub (LC) closed down more than -4% after JPMorgan Chase downgraded the stock to neutral from overweight. 

NU Holdings (NU) closed down more than -3% after Citigroup initiated coverage on the stock with a recommendation of sell and a price target of $11.

Toast Inc (TOST) closed down more than -2% after Goldman Sachs downgraded the stock to neutral from buy.

SentinelOne (S) closed down more than -1% after Morgan Stanley downgraded the stocks to equal weight from overweight. 

Earnings Reports (12/3/2024)

Core & Main Inc (CNM), Donaldson Co Inc (DCI), Marvell Technology Inc (MRVL), Okta Inc (OKTA), Pure Storage Inc (PSTG), Salesforce Inc (CRM).