The S&P 500 Index ($SPX) (SPY) Friday closed down -1.11%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.77% and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.36%.  March E-mini S&P futures (ESH25) are down -1.08%, and March E-mini Nasdaq futures (NQH25) are down -1.30%. 

Stocks on Friday settled moderately lower, weighed down by a selloff in the Magnificent Seven technology stocks.  Also, higher T-note yields on Friday undercut equity prices. Low volumes and thin trading conditions due to holiday trading this week and next are leading to exaggerated moves in stocks.

The US Nov trade deficit widened to -$102.9 billion from -$98.3 billion in Oct, a larger deficit than expectations of -$101.2 billion, a negative development for Q4 GDP and bearish for stocks.

US Nov wholesale inventories unexpectedly fell -0.2% m/m versus expectations of a +0.1% m/m increase.  Nov retail inventories rose +0.3% m/m, which is right on expectations.

Strength in Asian equity markets was supportive of US stocks. China’s Shanghai Composite Stock Index rose to a 2-week high Friday on the prospects of additional stimulus to bolster its economy.  Japan’s Nikkei Stock index rallied to a 5-1/4 month high, led by strength in exporters as the yen weakened to a 5-month low against the dollar.  Also, better-than-expected economic news on retail sales and industrial production boosted Japanese stocks.

The markets are discounting the chances at 11% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets on Friday settled higher.  The Euro Stoxx 50 rose to a 1-week high and closed up +0.84%.  China’s Shanghai Composite Index climbed to a 2-week high and closed up +0.06%.  Japan’s Nikkei Stock 225 rallied to a 5-1/4 month high and closed up +1.80%.

Interest Rates

March 10-year T-notes (ZNH25) Friday closed down -7 ticks.  The 10-year T-note yield rose +3.4 bp to 4.617%.  Mar T-notes Friday posted moderate losses but held above Thursday’s 7-month low.  Carryover pressure from weakness in European and Japanese government bonds weighed on T-note prices.  10-year German bunds fell to a 1-1/4 month low, 10-year UK Gilts fell to a 1-week low, and 10-year Japanese JGB bonds dropped to a 13-year low.  T-notes are also being undercut on the concern that President-elect Trump’s policy agenda may spark growth and inflation and potentially worsen the US fiscal backdrop.  T-notes recovered from their worst levels after a slump in stocks boosted safe-haven demand for government debt. 

European government bond yields on Friday moved higher.  The 10-year German bund yield climbed to a 1-1/4 month high of 2.403% and finished up +7.3 bp to 2.396%.  The 10-year UK gilt yield rose to a 1-week high of 4.645% and finished up +5.8 bp to 4.633%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and at 12% for a -50 bp rate cut at that meeting.

US Stock Movers

Mega-cap technology stocks retreated on Friday and weighed on the broader market.  Tesla (TSLA) closed down more than -4% to lead losers in the Nasdaq 100.  Also, Nvidia (NVDA) closed down more than -2% to lead losers in the Dow Jones Industrials.  In addition, Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOGL), and Apple (AAPL) closed down more than -1%.

Cruise line operators moved lower Friday, with Norwegian Cruise Line Holdings (NCLH), Carnival (CCL), and Royal Caribbean Cruises Ltd (RCL) closing down more than -2%. 

Netflix (NFLX) closed down more than -2% on less-than-favorable reviews for the company’s new “Squid Game Season 2” released Thursday. 

Crowdstrike Holdings (CRWD) closed down more than -2% on signs of insider selling after an SEC filing showed CEO Kurtz sold $6.5 million of shares on Monday.

Broadcom (AVGO) closed down more than -2% on signs of insider selling after an SEC filing showed CFO Spears sold $2.89 million shares last Friday.

KKR & Co (KKR) closed down more than -1% after the Fly reported the company, along with Bain Capital, each offered over $5 billion for Japan’s Seven & I’s non-core assets. 

Fastenal (FAST) closed down more than -2% after announcing that CFO Lweis will resign in April.

Lamb Weston Holdings (LW) closed up more than +2% to lead gainers in the S&P 500 after an amended 13D regulatory filing showed Jana Partners LLC reported a holding in the company. 

Defensive food-producing stocks rose on Friday due to weakness in the broader market.  Hershey Co (HSY), Hormel Foods (HRL), Mondelez International (MDLZ), Kraft Heinz (KHC), Conagra Brands (CAG), and General Mills (GIS) closed up more than +0.3%. 

Progyny (PGNY) closed up more than +15% on signs of insider buying after an SEC filing showed Executive Chairman Schlanger bought $2.2 million shares on Thursday. 

Amedisys (AMED) closed up more than +4% after the company and UnitedHealth Group gave themselves more time for UnitedHealth Group to complete the $3.3 billion deal to purchase the company. 

VeriSign (VRSN) closed up +0.6% after an SEC filing showed Warren Buffet’s Berkshire Hathaway bought $28.5 million of the stock in the three sessions to Tuesday. 

Earnings Reports (12/30/2024)

Gencor Industries Inc (GENC) and Renovaro Inc (RENB).