The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.64%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.77%. March E-mini S&P futures (ESH26) rose +0.64%, and March E-mini Nasdaq futures (NQH26) rose +0.77%.
Stock indexes settled higher on Monday, with the S&P 500 posting a 1-week high and the Dow Jones Industrial Average posting a new all-time high. Optimism about AI spending boosted chipmakers and data storage companies on Monday. Also, energy companies rallied on Monday after President Trump said a team of US officials will “run” Venezuela after capturing Venezuelan President Maduro and that the US requires “total access” to the country, including its oil reserves. In addition, mining stocks surged as escalating geopolitical risks in South America boosted demand for precious metals as haven assets, with gold climbing more than 2% and silver soaring more than 7%.
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Lower bond yields were another supportive factor for stocks on Monday, as the 10-year T-note yield fell by -3 bp to 4.16%. Monday’s US economic news boosted bond prices after the Dec ISM manufacturing index unexpectedly fell -0.3 to 47.9, weaker than expectations of an increase to 48.4 and the steepest pace of contraction in 14 months.
Dovish comments on Saturday from Philadelphia Fed President Anna Paulson were supportive for equity and bond prices after she said she sees “inflation moderating, the labor market stabilizing, and growth coming in around 2% this year. If all that happens, then some modest further adjustments to the funds rate would likely be appropriate later in the year.”
However, Monday’s comments from Minneapolis Fed President Neel Kashkari were slightly hawkish for Fed policy when he said that US interest rates may be “close to neutral” for the economy.
Strength in European stocks on Monday provided carryover support to US equity markets after the Euro Stoxx 50 rallied to a new record high.
The market’s focus this week will be on US economic news. On Tuesday, the Dec S&P manufacturing PMI is expected to be unrevised at 52.9. On Wednesday, the Dec ADP employment change is expected to increase by +48,000. Also, the Dec ISM services index is expected to slip -0.3 to 52.3. In addition, the Nov JOLTS job openings are expected to climb by +9,000 to 7.679 million. Finally, on Wednesday, Oct factory orders are expected to decline by -1.1% m/m. On Thursday, Q3 nonfarm productivity is expected to climb by +4.7%, and unit labor costs are expected to rise by +0.3%. Also, initial weekly unemployment claims are expected to increase by 12,000 to 211,000. On Friday, Dec nonfarm payrolls are expected to increase by +59,000, and the Dec unemployment rate is expected to slip by -0.1 to 4.5%. Also, Dec average hourly earnings are expected to be up by 0.3% m/m and 3.6% y/y. In addition, Oct housing starts are expected to increase by 1.4% m/m to 1.325 million, and Oct building permits are expected to rise by 1.1% m/m to 1.350 million. Finally, the University of Michigan’s Jan consumer sentiment index is expected to climb by 0.6 points to 53.5.
The markets are discounting the odds at 16% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.
Overseas stock markets settled higher on Monday. The Euro Stoxx 50 rose to a new all-time high and closed up by +1.25%. China’s Shanghai Composite rallied to a 1.5-month high and closed up by +1.38%. Japan’s Nikkei Stock 225 climbed to a 2-month high and closed up sharply by +2.97%.
Interest Rates
March 10-year T-notes (ZNH6) on Monday closed up by +7 ticks. The 10-year T-note yield fell -2.8 bp to 4.163%. Mar T-notes moved higher on Monday due to dovish comments from Philadelphia Fed President Anna Paulson, who said she sees the Fed cutting interest rates later this year if inflation moderates. Also, heightened global geopolitical risks boosted safe-haven demand for T-notes after the US raided Venezuela and captured Venezuelan President Maduro. T-notes extended their gains on Monday after the Dec ISM manufacturing index unexpectedly contracted by the most in 14 months, a dovish factor for Fed policy.
Strength in stocks on Monday limited the upside in T-note prices. Also, comments from Minneapolis Fed President Neel Kashkari undercut T-notes when he said that US interest rates may be “close to neutral” for the economy.
European government bond yields moved lower on Monday. The 10-year German bund yield fell -3.0 bp to 2.870%. The 10-year UK gilt yield fell -3.0 bp to 4.506%.
Swaps are discounting a 0% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.
US Stock Movers
Chip makers and data storage companies rose on Monday, helping lift the overall market. KLA Corp (KLAC) closed up more than +6%, and Applied Materials (AMAT), Lam Research (LRCX), and ASML Holding NV (ASML) closed up more than +5%. Also, ON Semiconductor (ON) and Microchip Technology (MCHP) closed up more than +3%. In addition, NXP Semiconductors NV (NXPI), Analog Devices (ADI), Marvell Technology (MRVL), Qualcomm (QCOM), and ARM Holdings Plc (ARM) closed up more than +1%.
Energy producers and energy service providers rallied on Monday after President Trump said a team of US officials will “run” Venezuela and that the US requires “total access” to the country, including its oil reserves. Valero Energy (VLO) closed up more than +9% to lead gainers in the S&P 500, and SLB (SLB) and Halliburton (HAL) closed up more than +8%. Also, Phillips 66 (PSX) closed up more than +6%, and Marathon Petroleum (MPC) closed up more than +5%. In addition, Chevron (CVX) closed up more than +5% to lead gainers in the Dow Jones Industrials.
Mining stocks are moving higher today, with the price of gold up more than +2%, copper up +6%, and silver up more than +7%. Coeur Mining (CDE) closed up more than +6%, and Hecla Mining (HL) and Freeport McMoRan (FCX) closed up more than +4%. Also, Barrick Mining (B) closed up more than +3%, and Newmont Mining (NEM) closed up more than +2%.
Cryptocurrency-exposed stocks are climbing today, with Bitcoin (^BTCUSD) up more than +4% at a 4-week high. Coinbase Global (COIN) closed up more than +7%, and Galaxy Digital Holdings (GLXY) and Mara Holdings (MARA) closed up more than +6%. Also, Strategy (MSTR) and Riot Platforms (RIOT) closed up more than +4%.
Drugmakers retreated on Monday. AbbVie (ABBV) and Eli Lilly (LLY) closed down more than -3%, and Amgen (AMGN) closed down more than -2% to lead losers in the Dow Jones Industrials. Also, Gilead Sciences (GILD) closed down more than -2%, and Biogen (BIIB) and Johnson & Johnson (JNJ) closed down more than -1%.
QXO Inc (QXO) closed up more than +18% after saying that Apollo Global and other investors agreed to invest $1.2 billion in the company through a new series of convertible perpetual preferred stock.
GH Research Plc (GHRS) closed up more than +17% after it said the FDA lifted the clinical hold on its Investigational New Drug Application for its GH001 drug, advancing the company toward initiating its global Phase 3 trial for treatment-resistant depression.
Centene (CNC) closed up more than +6% after Barclays upgraded the stock to overweight from equal weight with a price target of $54.
Moody’s Corp (MCO) closed up more than +5% after Stifel upgraded the stock to buy from hold with a price target of $574.
United Rentals (URI) closed up more than +5% after UBS upgraded the stock to buy from neutral with a price target of $1,025.
Versant Media Group (VSNT) closed down more than -13% to lead losers in the S&P 500 and Nasdaq 100 after the company’s separation from Comcast Corp was announced.
Domino’s Pizza (DPZ) closed down more than -3% after TD Cowen downgraded the stock to hold from buy, citing growth challenges for the company.
Fortive Corp (FTV) closed down more than -2% after Mizuho Securities double-downgraded the stock to underperform from outperform with a price target of $51.
Pentair Plc (PNR) closed down more than -2% after TD Cowen downgraded the stock to sell from hold with a price target of $90.
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