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Stocks got off to a hot start yesterday but shifted into a cooldown phase close to midday as long-term rates remained elevated and President-elect Trump shot down reports that his tariff policies would be pared down. The Nasdaq still managed a nice 1.2% gain for the session after being up as much as 2.0%, with strength in semiconductor stocks and mega-cap shares underpinning that advance.
There is strength again this morning in the most influential semiconductor company and one of the biggest mega-cap stocks. That would be NVIDIA (NVDA), which is up 2.5% following Jensen Huang's keynote address last night at the Consumer Electronics Show in which he introduced new chips for laptops and desktops using the Blackwell architecture, and talked about growth opportunities in areas such as humanoid robots and autonomous driving.
The afterglow of that speech, however, has been dimmed by analyst downgrades of Apple (AAPL) and Tesla (TSLA). MoffetNathanson cut its rating for Apple to Sell from Neutral while BofA Securities dropped its rating on Tesla to Neutral from Buy.
Shares of AAPL and TSLA are down 0.7% and 1.6%, respectively, which is acting as a restraint on the equity futures market along with a stubborn 10-yr note yield, which has crept up to 4.63%.
There hasn't been a rush, however, to exit the stock market; equity futures are still pointing to a modestly higher open.
Currently, the S&P 500 futures are up 17 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 34 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 125 points and are trading 0.3% above fair value.
A spate of M&A activity that includes GFL Environmental (GFL) selling its Environmental Services business to funds managed by affiliates of Apollo (APO) and BC Partners for an enterprise value of $8.0 billion, Stryker (SYK) acquiring Inari Medical (NARI) for $4.9 billion in cash, or $80.00 per share, and Shutterstock (SSTK) and Getty Images (GETY) tying up in a merger of equals are among the M&A headlines.
That news has unfolded along with the November Trade Balance Report, which was close to expectations.
The trade deficit widened to $78.2 billion in November (Briefing.com consensus -$77.9 billion) from an upwardly revised $73.6 billion (from -$73.8 billion) in October. The widening was the result of exports being $7.1 billion more than October exports and imports being $11.6 billion more than October imports.
The key takeaway from the report is that the import surge likely reflects a bid to get ahead of President-elect Trump's tariff plans, meaning businesses might have more inventory than usual waiting to be utilized/sold that detracts from import demand in coming months (i.e., post-inauguration).
Separately, there was less demand than usual from indirect bidders at yesterday's $58 billion 3-yr note auction. There is another chance today to see if they will step things up when the $39 billion 10-yr note reopening results hit at 1:00 p.m. ET.
Put simply, the confluence of news items this morning makes it clear the holidays are over and that it's back to business. What everyone is waiting to see is if it will be back to a bull market or back to a market that is inclined to do some backing up as rates move up and impede multiple expansion.
