Stocks Rally as Chip, Tech Stocks Continue to Show Strength; Bitcoin (^BTCUSD) Rallies +5%

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +1.10%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.91%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.37%. March E-mini S&P futures (ESH25) rose +1.04%, and March E-mini Nasdaq futures (NQH25) rose +1.35%. The NYSE and Nasdaq on Tuesday closed early at 1PM Eastern time for the Christmas Eve holiday.

The S&P March E-mini futures (ESM25) on Monday fell -0.35%, and the Nasdaq March E-mini futures (NQM25) fell -0.30%.

The NYSE and Nasdaq on Monday closed early at 1PM Eastern time for the Christmas Eve holiday.

Stocks on Monday continued to rally due to strength in chip and tech stocks.  Chip stocks saw continued strength after the Biden administration on Monday announced a trade investigation of Chinese chips, which may pave the way for the incoming Trump administration to slap tariffs on Chinese chips, thus providing trade protection for US chip makers.

China may sell a record 3 trillion yuan ($411 billion) of special Treasury bonds in 2025 to bolster economic stimulus for its economy, according to a report Monday by Reuters.  That would be sharply higher from 1 trillion yuan of bonds sold this year.  The news that China may boost its economic stimulus measures was supportive of global stocks.

Stocks were undercut by Monday's moderate -6.4 bp rise in the 10-year T-note yield, which hit its highest level since May 2023. 

The Philadelphia Fed's Dec non-manufacturing activity index fell by -0.1 point to -6.0 from -5.9 in November, weaker than expectations for an increase to -2.4.

The Richmond Fed's Dec manufacturing index rose +4 points to -10 from November's -14, which was in line with market expectations.

The markets are discounting the chances at 9% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets on Monday were mixed.  The Euro Stoxx 50 on Monday fell -0.30%, extending its losing streak to 3 sessions.  China's Shanghai Composite Index closed up +1.26%, snapping a 2-session losing streak.  Japan's Nikkei Stock 225 closed up +1.19%.

Interest Rates

March 10-year T-notes (ZNM25) on Monday edged to a new 7-month low but then recovered and ended the day down -1.5 ticks. The 10-year T-note yield rose +0.2 bp to 4.589%, and edged to a new 7-month high.  T-note prices early Monday saw continued weakness after Congress last Friday averted a US government shutdown that would have been negative for the US economy.  T-note prices were also undercut by supply overhang as the Treasury on Monday sold $70 billion of 5-year T-notes.  The Treasury will sell $44 billion of 7-year T-notes on Thursday.  T-notes found some support Monday from the weak Philadelphia Fed report. 

The German markets were closed Monday.  The 10-year German bund yield on Friday fell -0.8 bp to 2.323%.  The 10-year UK gilt yield Monday fell -0.8 bp to 4.575%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and at 8% for a -50 bp rate cut at that meeting.

US Stock Movers

The Magnificent 7 stocks showed strength, led by Tesla (TSLA), with a gain of more than +7%.  Amazon (AMZN), Meta Platforms (META), and Apple (AAPL) showed gains of more than +1%.

Chip stocks were leaders in the Nasdaq 100 index again Monday. Arm Holdings (ARM) and Broadcom (AVGO) showed gains of more than +3%.  Marvel Technology (MRVL), ON Semiconductor (ON), Analog Devices (ADI), GlobalFoundries (GFS), Advanced Micro Devices (AMD), Texas Instruments (TXN), and Microchip Technology (MCHP) all showed gains of more than +1%.

Crypto-stocks rallied due to Monday's rally of more than +5% in bitcoin (^BTCUSD).  Microstrategy (MSTR) rallied more than +7% and topped the Nasdaq 100 leaderboard. Riot Platforms (RIOT) rose +8%, and Coinbase (COIN) rose more than +4%.

American Airlines (AAL) fell -5.37% in pre-opening trade after it early Monday morning grounded all its flights nationwide for about an hour due to a software glitch.  The ground halt was lifted at about 7 AM Eastern time.

Starbucks (SBUX) fell -0.26% after its workers union said that a barista strike would spread to more than 300 cafes.