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The stock market attempted yesterday to ignore yet another bothersome inflation report, but that attempt was pre-empted by a more judgmental Treasury market. The yield on the inflation-sensitive 10-yr note increased five basis points to 4.32%.
Stocks -- and small-cap stocks in particular -- were upended by that move as it triggered valuation concerns and misgivings about how far the Fed will ultimately go after a rate cut next week to get to what it thinks is the neutral rate.
The concerns, to be fair, were not acute. The Nasdaq Composite, which was up 33.3% for the year and 4.2% for the month, slipped just 0.7%. The S&P 500, up 27.4% for the year and 0.8% for the month, fell 0.5%.
Bullish order, however, has been restored for the time being courtesy of the earnings results and/or guidance from Broadcom (AVGO) and RH (RH). Those stocks are up 17% and 13%, respectively, with the former capitalizing on AI growth prospects and the latter capitalizing on improving demand trends.
That is a nice combination for market participants to contemplate as it has positive connotations for enterprise spending and consumer spending. Not surprisingly, there is a positive bias in the equity futures trade that is favoring the Nasdaq 100 futures.
The S&P 500 futures are up 22 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 166 points and are trading 0.8% above fair value, and the Dow Jones Industrial Average futures are up 44 points and are trading 0.1% above fair value.
Broadcom's gain is driving things given its carryover effect for other semiconductor stocks, including NVIDIA (NVDA) which is up 1.7%, and other AI/growth stocks that tend to get the market's momentum heart racing.
The question today is, what will ultimately carry the day for stocks? Will it be Broadcom or will it be the Treasury market?
The 10-yr note yield is up another three basis points to 4.35%. On the surface, that isn't a big move, yet it belies the fact that the 10-yr note yield has sneakily risen 20 basis points this week, with the Nasdaq topping 20,000, following the not-so-great Consumer Price Index (CPI) and Producer Price Index (PPI) reports.
There wasn't much reaction this morning to the November Export-Import Price Index, which always has a tough act to follow coming after the CPI and PPI readings.
Export prices were unchanged month-over-month in November following an upwardly revised 1.0% increase (from 0.8%) in October. Excluding agricultural products, they were up 0.1% following an upwardly revised 0.8% increase (from 0.6%) in October. Import prices rose 0.1% month-over-month following a downwardly revised 0.1% increase (from 0.3%) in October. Excluding fuel, they were flat following an unrevised 0.2% increase in October.
The year-over-year readings were fairly benign with all exports up 0.8%, non-agricultural exports up 1.2%, all imports up 1.3%, and nonfuel imports up 2.3%.
