Wall Street Lunch: Awesome Trading Day!

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Stocks are off the the races and yields sink as market looks to move past the Fed. (0:15) U.S. productivity saw the highest non-COVID acceleration since 2009. (1:25) Palantir Technologies (PLTR) rallies post-results. (2:51)

This is an abridged transcript of the podcast.

Out top story so far

Welcome to the everything-is-awesome trading day.

For the first time in this tightening cycle, investors look like they are putting the Fed in the rearview mirror. That means good economic news isn’t viewed as more grist for the relentless Jay Powell rate hike mill. Instead, it’s evidence that a soft landing can happen.

Powell did his best to stress his data-dependent stance and not close the door on more hikes, but he wasn’t too convincing based on the action that followed his presser.

The odds of a hike in December are now down below 20%.

Stocks are rallying, and bond yields are tumbling.

The S&P (SP500) and Nasdaq (COMP.IND) are up +1.5%, leading the Dow (INDU).

The 10-year yield (US10Y) is slumping to around 4.65%.

For the week, the S&P is up +4.5%, potentially its biggest gain since June. A lot will depend on Apple earnings after the bell.

Seeking Alpha analyst Mike Zaccardi says soft labor cost figures in the productive report out premarket fueled “what could be a short-covering rally in the Treasury market.”

“Of course, stocks love lower borrowing rates, so equities across the board rallied,” he says. “And that’s right on cue for this time of year—both large and small caps often perform well in November.”

Q3 nonfarm productivity came in up +4.7%, well ahead of the 4.1% expected and up from +3.6% in Q2. It’s the highest level of productivity since Q3 2020. (But remember, that’s now awesome.)

Gregory Daco, economist at Ernst & Young, says, “What is impressive is that you rarely, if ever, get these types of very strong productivity readings outside of recessions. In fact, if you exclude the pandemic, the (advance) is the strongest since Q4 2009.

“And it’s not a catch-up story either. This seems to be a genuine acceleration in productivity, as productivity is accelerating above the 2007-2019 trend.”

As mentioned, unit labor costs were soft. They unexpectedly fell -0.8%, reversing a +3.2% rise in Q2. The forecast was for a 0.7% rise. Over the last four quarters, unit labor costs are up 1.9%. That’s below the Fed’s 2% target (even more awesome).

Of course, this is one trading day, and the moves could even reverse before the close. The army of bond bears hasn’t slumped off for hibernation overnight. But for now, crank up that Lego Movie soundtrack.

Now looking to active stocks and earnings

Palantir Technologies (PLTR) jumped after the enterprise software maker reported third-quarter results and issued guidance that topped estimates.

In addition, CEO Alex Karp says the stock is now eligible to join the S&P 500. If that happens, it would be the only S&P company named after something in The Lord of the Rings.

Starbucks (SBUX) said global comparable store sales rose 8% during fiscal Q4, beating the consensus estimate of +6.3%. The average ticket was up 4%, and transactions were up 3% during the quarter. Total revenue increased 11.4% during the quarter to $9.4 billion.

Eli Lilly (NYSE:LLY) topped Street estimates for revenue thanks mainly to its diabetes drugs, including Mounjaro, and pushed back the timeline for a potential U.S. approval for its Alzheimer’s therapy donanemab to next year.

In other news of note

You heard about this on Wall Street Breakfast. Now Cedar Fair (FUN) and Six Flags (SIX) confirmed their merger. The combined theme park company will have a pro forma enterprise value of about $8 billion based on both companies’ debt and equity values as of October 31.

Under the terms of the merger agreement, Cedar Fair unitholders will receive one share of common stock in the new combined company for each unit owned, and Six Flags shareholders will receive 0.5800 share of common stock in the new combined company for each.

Following the close of the transaction, Cedar Fair unitholders will own approximately 51.2%, and Six Flags shareholders will own approximately 48.8%.

Looking ahead, the SIX-FUN combination is expected to create a leading amusement park operator in the highly competitive leisure space with an expanded and diversified footprint, a stronger operating model, and a strong revenue and cash flow generation profile.

And in the Wall Street Research Corner

Goldman Sachs is out with its Conviction Buy list for November.

There are two new stocks: Boeing (BA) and Simon Property Group (SPG).

Also in the list are Apple (AAPL), Nvidia (NVDA), First Solar (FSLR), and J.P. Morgan Chase (JPM).

You can get the full list in the story on Seeking Alpha. But while you do that, you should also check out the latest Investing Experts podcast. I talked to Steven Cress, the Seeking Alpha head of quant strategy, about what to know when reading and interpreting Wall Street research. Cress spent more than 30 years on Wall Street and discusses what’s driving these stock picks and market calls and why the goalposts seem to move.