Stocks Fluctuate as We Head Into a 3-Day Weekend

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.1%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.32%.

U.S. stock index futures are slightly higher despite weakness in the automakers. Tesla  tumbled after announcing it was cutting car prices in the U.S. and Europe.  Stock indexes recovered from their worst levels after the University of Michigan U.S. Jan consumer sentiment rose more than expected to a 9-month high

Bond yields are slightly higher after this morning’s U.S. import prices ex-petroleum unexpectedly rose, signaling increased price pressures.  The 10-year T-note yield is up +1.4 bp at 3.454%.

Tesla is down more than -2% after cutting its Model 3 sedan and Model Y SUV prices in the U.S. and several European markets.  Also, Delta Air Lines is down more than -3% after forecasting below-consensus Q1 adjusted EPS.

U.S. bank stocks are rallying, after initially sliding this morning on disappointing Q4 earnings results. 

The University of Michigan U.S. Jan consumer sentiment index rose +4.9 to a 9-month high of 64.6, stronger than expectations of 60.7.  The University of Michigan Jan 5-10-year inflation expectations measure unexpectedly rose +0.1 to 3.0%, stronger than expectations of no change at 2.9%.

The U.S. Dec import price index ex-petroleum unexpectedly rose +0.8% m/m, the most in 9 months and above expectations of a -0.3% m/m decline, which was an unfavorable inflation indicator.

Overseas markets today are mixed.  The Euro Stoxx 50 index is up +0.73%.  The Shanghai Composite Stock index closed up by +1.01%, and Japan’s Nikkei Stock index closed down -1.25%.

Today’s stock movers…

Money center bank stocks are falling today and are weighing on the overall market.  Wells Fargo (WFC) is down more than -3% after reporting Q4 revenue of $19.66 billion, below the consensus of $19.95 billion.  Also,  Bank of America (BAC) is down more than -2% in pre-market trading after reporting Q4 net interest income FTE of $14.80 billion, below the consensus of $14.95 billion, and Q4 net charge-offs of $689 million, above the consensus of $639.6 million.  In addition, JPMorgan Chase (JPM) is down more than -1% to lead losers in the Dow Jones Industrials.

Automakers are falling today after Tesla cut prices of its Model 3 sedan and Model Y SUV in the U.S. and several European markets. Rivian Automotive (RIVN) is down more than -7% to lead losers in the Nasdaq 100.  Also, Ford Motor (F) is down more than -6% to lead losers in the S&P 500.  General Motors (GM) and Lucid Group (LCID) are down more than -5%, and Tesla (TSLA) is down more than -4%. 

Delta Air Lines (DAL) is down more than -4% after forecasting Q1 adjusted EPS of 15-40 cents, well below the consensus of 54 cents.

Lockheed Martin (LMT) is down more than -2% after Goldman Sachs downgraded the stock to sell from neutral.

Healthcare stocks are climbing today after UnitedHealth Group reported Q4 adjusted EPS of $5.34, stronger than the consensus of $5.17.  UnitedHealth Group (UNH) is up more than +2% to lead gainers in the Dow Jones Industrials.  Also, Cigna (CI) is up more than +2%.  In addition, Molina Healthcare (MOH), Elevance Health (ELV), and Humana (HUM) are up more than +1%.

U.S.-listed Chinese stocks are climbing today on optimism that earnings will improve as China’s economy reopens from pandemic restrictions.  Pinduoduo (PDD) is up more than 5% to lead gainers in the Nasdaq 100.  Also, NetEase (NTES) is up more than +3%.  JD.com (JD) and Alibaba Group Holding (BABA) are up more than +2%.

Hanesbrands (HBI) is up more than +3% after it said it would report Q4 net sales “slightly above the top end” of its guidance range. 

Across the markets…

March 10-year T-notes (ZNH23) today are down -3 ticks, and the 10-year T-note yield is up +1.4 bp at 3.454%.  Mar T-notes today are slightly lower.  An unexpected increase in U.S. Dec import prices ex-petroleum weighed on T-notes.  Also, a jump in the University of Michigan U.S. Jan consumer sentiment to a 9-month high undercut T-note prices.  Losses in T-notes are limited due to a rally in European government bonds today, as the 10-year UK gilt yield fell to a 4-week low of 3.264%, and the 10-year German bund yield is down -2.9 bp at 2.129%. 

The dollar index (DXY00) today is down by -0.02%.  The dollar index today is slightly lower and posted a 7-1/4 month low. Strength in the Japanese yen and Chinese yuan today is undercutting the dollar.  The yen rallied to a 7-1/2 month high today against the dollar, and the yuan climbed to a 6-month high against the dollar. 

Losses in the dollar are limited as weakness in stocks today has boosted the liquidity demand for the dollar.  Also, higher T-note yields today are positive for the dollar. 

EUR/USD (^EURUSD) today is down by -0.27%.  Lower European government bond yields today have weakened the euro’s interest rate differentials and are weighing on EUR/USD. Loses are limited by better-than-expected economic news and hawkish ECB comments.

Today’s economic news was supportive for EUR/USD after Eurozone Nov industrial production rose +1.0% m/m, stronger than expectations of +0.5% m/m.

Hawkish ECB comments today were bullish for the euro.  ECB Governing Council member Kazaks said, "it is possible for core inflation to continue trending up even as headline inflation is coming down due to swings in energy prices."  Therefore, borrowing costs in the Eurozone should rise "well into restrictive territory."  Also, ECB Governing Council member Vujcic said inflation remains high and "the ECB's response should be to continue to tighten monetary policy."

USD/JPY (^USDJPY) today is down by -1.15%.  The yen today is moving sharply higher for a second day and posted a 7-1/4 month high against the dollar on speculation the BOJ will soon end its ultra-easy monetary policy.  The yen also garnered support today from soaring Japanese government bond yields after the 10-year JGB bond yield rose to an 8-1/4 year high today at 0.575%, well above the upper limit of the BOJ’s 0.00%-0.50% targeted 10-year yield range.  The yen rallied today even after the BOJ announced two unscheduled bond purchases.  

The BOJ boosted QE and announced unscheduled bond purchases for a second time on Friday after the first round of buying failed to lower the 10-year JGB bond yield.  The BOJ bought a record amount of bonds Friday, including 1.8 trillion yen ($14 billion) of one-to-25-year debt at market yields and 3.21 trillion yen of 10-year notes and futures-linked securities at a fixed yield of 0.5%.

The BOJ also said it would conduct additional outright purchases of Japanese government bonds on Monday, with the amounts to be determined by market conditions.  The BOJ has conducted a combination of additional unlimited and fixed-amount purchase operations every business day since Dec 28, except for Jan 5, 10, and 12. 

February gold (GCG3) this morning is up +13.6 (+0.72%), and March silver (SIH23) is up +0.136 (+0.57%).  Precious metals prices this morning are moderately higher, with gold posting an 8-1/2 month high.  Precious metals are climbing today on carry-over from Thursday’s benign U.S. Dec CPI report, which bolsters expectations for the Fed to dial back its rate-hike regime.  Also, record bond purchases today by the BOJ have boosted demand for precious metals as a store of value.  A weaker dollar today is bullish for metals.

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