The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.71%.

Stocks on Tuesday recovered from early losses and settled mixed, with the Dow Jones Industrials falling to a 1-1/2 week low.  The broader market rebounded Tuesday, led by a +4% jump in Nvidia ahead of an expected stellar earnings report after the close on Wednesday. Market expectations are for Nvidia to report record Q3 revenue of $33.25 billion and forecast 2025 revenue of $126.58 billion.  Also, strength in the Magnificent Seven technology stocks sparked a recovery in the broader market.  In addition, strong earnings results from Walmart were supportive for the overall market Tuesday after Walmart climbed +3% after reporting stronger-than-expected Q3 adjusted EPS and raising its full-year adjusted EPS forecast.

Stocks on Tuesday initially opened lower as an escalation of the Ukraine-Russian war sparked risk-off sentiment in equity markets and liquidation of stocks.  Markets were rattled after Ukraine forces reportedly carried out their first missile strikes on a border region in Russia using Western-supplied missiles.  Also, Russian President Putin approved an updated nuclear doctrine that expands the conditions for Russia to use atomic weapons, including in response to a conventional attack on its soil.  The ramped-up war risks fueled flight to safety into government bonds, knocking the 10-year T-note yield to a 1-week low and increasing safe-haven demand for gold, pushing gold prices to a 1-week high. 

Weaker-than-expected US housing news was also negative for stocks after Oct housing starts fell -3.1% m/m to 1.311 million, weaker than expectations of 1.334 million.  Also, Oct building permits, a proxy for future construction, unexpectedly fell -0.6% m/m to 1.416 million versus expectations of an increase to 1.435 million.

Of the 90% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average.  According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.5% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 56% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 tumbled to a 3-month low and closed down -0.82%.  China's Shanghai Composite Index recovered from a 2-week low and closed up +0.67%.  Japan's Nikkei Stock 225 Index closed up +0.51%.

Interest Rates

December 10-year T-notes (ZNZ24) Tuesday closed up +7 ticks.  The 10-year T-note yield fell -3.2 bp to 4.382%.  Dec T-notes Tuesday rallied to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.336%.  T-notes moved higher Tuesday on positive carryover from a rally in European government bonds.  Also, T-notes rose on increased safe-haven demand from the escalation of the Ukraine-Russian conflict after reports said Ukraine carried out its first strike within Russian territory using Western-supplied missiles.  T-notes added to their gains Tuesday on the weaker-than-expected US Oct housing starts and building permits reports.

European government bond yields Tuesday moved lower.  The 10-year German bund yield fell to a 3-week low of 2.269% and finished down -3.6 bp to 2.338%.  The 10-year UK gilt yield fell to a 2-week low of 4.386% and finished down -2.3 bp to 4.442%.

ECB Governing Council member Panetta said, "Restrictive monetary conditions are no longer necessary, and the ECB needs to normalize its monetary-policy stance and move to neutral or even expansionary territory, if necessary."

ECB Governing Council member Muller said the ECB will likely reduce interest rates by a quarter-point at its December 18-19 meeting.

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 +31% to lead gainers in the S&P 500 and Nasdaq 100 after it hired a new auditor and filed a plan to come into compliance with Nasdaq listing requirements. 

Nvidia (NVDA) closed up more than +4% to lead gainers in the Dow Jones Industrials after Stifel raised its price target for the stock to $180 from $165.

Walmart (WMT) closed up +3% after reporting Q3 adjusted EPS of 58 cents, above the consensus of 53 cents, and raised its full-year adjusted EPS forecast to $2.42-$2.47 from a previous forecast of $2.35-$2.43. 

Strength in the Magnificent Seven technology stocks Tuesday supported the overall market.  Netflix  (NFLX) and Tesla (TSLA) closed up more than +2%.  Also, Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META) closed up more than +1%. 

GE Vernova (GEV) closed up more than +4% after agreeing to acquire Woodward’s gas turbine parts business.

United Airlines Holdings (UAL) closed up more than +4% after TD Cown raised its price target on the stock to $125 from $100.

Symbotic (SYM) closed up more than +27% after reporting Q4 total revenue of $576.8 million, well above the consensus of $469.9 million, and forecast Q1 total revenue of $495 million-$515 million, stronger than the consensus of $494.6 million. 

BioNTech (BNTX) closed up more than +4% after Berenberg initiated coverage on the stock with a buy recommendation and a price target of $130. 

Incyte Corp (INCY) closed down more than -8% to lead losers in the S&P 500 after it said it would pause enrollment in a Phase 2 study of its MRGPRX3, which is aimed at treating chronic urticaria due to preclinical toxicology findings. 

Tax preparer stocks retreated Tuesday after the Washington Post reported that the leaders of President-elect Trump’s Department of Government Efficiency discussed creating a mobile app for Americans to file their taxes for free. As a result, H&R Block (HRB) closed down more than -8%, and Intuit (INTU) closed down more than -5%.

Lowe’s (LOW) closed down more than -4% after reporting a Q3 gross margin of 33.7%, below the consensus of 33.8%. 

Medtronic Plc (MDT) closed down more than -3% after forecasting Q3 EPS of $1.35-$1.37, weaker than the consensus of $1.37. 

Stellantis NV (STLA) closed down more than -2% after Bloomberg Intelligence said that the company’s auto inventory days had risen nearly 50% in the past year. 

STMicroelectronics NV (STM) closed down more than -1% after Bloomberg Intelligence said the company may be losing market share in analog semiconductors in China to Texas Instruments.

Kraft Heinz (KHC) closed down more than -1% after Piper Sandler downgraded the stock to neutral from overweight. 

Earnings Reports (11/20/2024)

NVIDIA Corp (NVDA), Palo Alto Networks Inc (PANW), Snowflake Inc (SNOW), Target Corp (TGT), TJX Cos Inc/The (TJX), Williams-Sonoma Inc (WSM).