Stocks Finish Sharply Lower on Economic Concerns

The S&P 500 Index ($SPX) (SPY) Friday closed down -1.71%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.06%.  March E-mini S&P futures (ESH25) are down -1.70%, and March E-mini Nasdaq futures (NQH25) are down -2.07%. 

Stock indexes sold off sharply Friday, with the S&P 500 and Nasdaq 100 sliding to 1-week lows and the Dow Jones Industrials falling to a 1-month low.  Stocks opened lower on negative corporate news as Akamai Technologies fell more than -21% after forecasting full-year revenue below consensus.  Also, UnitedHealth Group closed down more than -7% after the Wall Street Journal reported that the US Department of Justice has launched an investigation into the company’s Medicare billing practices. 

Stocks extended their losses Friday after weaker-than-expected economic news raised concerns about the economy.  Also, US consumer sentiment in Feb unexpectedly fell to a 15-month low amid a surge in consumers’ inflation expectations to a 29-year high.  In addition, chip stocks retreated to add pressure to the overall market.

The US Feb S&P Global manufacturing PMI rose +0.4 to an 8-month high of 51.6, stronger than expectations of 51.4.  However, the Feb S&P Global services PMI unexpectedly fell -3.2 to 49.7, weaker than expectations of an increase to 53.0 and the steepest pace of contraction in 2 years.

The University of Michigan US Feb consumer sentiment index was revised lower by -3.1 to a 15-month low of 64.7, weaker than expectations of no change at 67.8.

The University of Michigan US Feb 1-year inflation expectations remained unchanged at 4.3%, right on expectations.  However, the Feb 5-10 year inflation expectations unexpectedly accelerated to a 29-year high of 3.5%, higher than expectations of no change at 3.3%.

US Jan existing home sales fell -4.9% m/m to 4.08 million, weaker than expectations of -2.6% to 4.13 million.

The markets are discounting the chances at 6% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets Friday settled higher.  The Euro Stoxx 50 closed up +0.25%.  China’s Shanghai Composite Index climbed to a 7-week high and closed up +0.85%.  Japan’s Nikkei Stock 225 recovered from a 2-1/2 week low and closed up +0.26%.

Interest Rates

March 10-year T-notes (ZNH25) Friday closed up by +16.5 ticks.  The 10-year T-note yield fell by -9.1 bp to 4.414%.  March T-note prices rallied Friday on carryover support from gains in 10-year German bunds.  Also, Friday’s -2% decline in WTI crude oil to a three-session low weighed on inflation expectations, a supportive factor for T-notes.  T-note prices extended their gains after today’s US economic reports showed Feb consumer sentiment dropped to a 15-month low and Jan existing home sales fell more than expected.  Friday’s slump in stocks also boosted some safe-haven demand for T-notes.

European government bond yields on Friday moved lower.  The 10-year German bund yield fell -6.4 bp to 2.470%.  The 10-year UK gilt yield fell -3.6 bp to 4.571%.

The Eurozone Feb S&P manufacturing PMI rose +0.7 to 46.6, stronger than expectations of 47.0.  The Feb S&P composite PMI was unchanged at 50.2, weaker than expectations of an increase to 50.5.

Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Akamai Technologies (AKAM) closed down more than -21% to lead losers in the S&P 500 after forecasting full-year revenue of $4.00 billion-$4.20 billion, below the consensus of $4.25 billion. 

UnitedHealth Group (UNH) closed down more than -7% to lead losers in the Dow Jones Industrials after the Wall Street Journal reported that the US Department of Justice has launched an investigation into the company’s Medicare billing practices.   

Chip stocks retreated Friday and weighed on the overall market. Nvidia (NVDA), Qualcomm (QCOM), GlobalFoundries (GFS), Microchip Technology (MCHP), Marvell Technology (MRVL), and Intel (INTC) closed down more than -4%.  Also, Micron Technology (MU), Broadcom (AVGO), NXP Semiconductors NV (NXPI), and Lam Research (LRCX) closed down more than -3%.  In addition, Advanced Micro Devices (AMD), KLA Corp (KLAC), Applied Materials (AMAT), and ON Semiconductor Corp (ON) closed down more than -2%. 

Block (XYZ) closed down more than -17% after forecasting Q1 gross profit of $2.32 billion, weaker than the consensus of $2.38 billion. 

NU Holdings Ltd (NU) closed down more than -18% after reporting Q4 net income of $552.6 million, below the consensus of $566.4 million. 

Globant SA (GLOB) closed down more than -27% after forecasting Q1 revenue of $618 million-$628 million, below the consensus of $637.8 million. 

Crowdstrike Holdings (CRWD) closed down more than -6% after Bloomberg News reports the Justice Department and the SEC are investigating a $32 million deal between Crowdstrike and a technology distributor to provide cybersecurity to the Internal Revenue Service.

RingCentral (RNG) closed down more than -5% after forecasting Q1 adjusted EPS of 93 cents to 97 cents, weaker than the consensus of $1.00. 

Rivian Automotive (RIVN) closed down more than -4% after saying it expects about 8,000 vehicle deliveries in Q1, below the more than 14,000 it made in Q4.

Moderna (MRNA) closed up more than +5% to lead vaccine stocks higher and gainers in the S&P 500 after the South China Morning Post reported a research team in China found a new bat coronavirus they said could risk animal-to-human transmission and has the same human receptor as the virus that caused Covid-19. 

MercadoLibre (MELI) closed up more than +7% to lead gainers in the Nasdaq 100 after reporting Q4 net revenue of $6.10 billion, better than the consensus of $5.96 billion. 

Friday’s slump in the overall market boosted defensive food producer stocks. Hershey (HSY) and Mondelez International (MDLZ) closed up more than +4%.  Also, Conagra Brands (CAG), Archer-Daniels-Midland (ADM), and General Mills (GIS) closed up more than +3%.  In addition, PepsiCo (PEP), Hormel Foods (HRL), J M Smucker (SJM), and Tyson Foods (TSN) closed up more than +2%.

PDD Holdings (PDD) closed up more than +5% after better-than-expected earnings from Alibaba lifted US-listed Chinese stocks. 

Innodata (INOD) closed up more than +13% after reporting Q4 diluted EPS of 31 cents, well above the consensus of 22 cents. 

Consolidated Edison (ED) closed up more than +2% after reporting Q4 adjusted EPS of 98 cents, stronger than the consensus of 95 cents. 

Unity Software (U) closed up more than +1% after HSBC upgraded the stock to buy from hold with a price target of $34. 

Five9 Inc (FIVN) closed up more than +1% after reporting Q4 adjusted EPS of 79 cents, better than the consensus of 70 cents, and forecast full-year adjusted EPS of $2.58-$2.62, stronger than the consensus of $2.55. 

Earnings Reports (2/24/2025)

Coterra Energy Inc (CTRA), Diamondback Energy Inc (FANG), Domino’s Pizza Inc (DPZ), ONEOK Inc (OKE), Public Storage (PSA), Realty Income Corp (O), SBA Communications Corp (SBAC).