Stocks End Higher as Bank Stocks Recover Early Losses

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.71%.

Stocks on Friday recovered from early losses and posted moderate gains. The Dow Jones Industrials climbed to a 1-month high and the Nasdaq 100 climbed to a 4-week high.  Bank stocks Friday reversed course as they rebounded from early losses and moved higher, which lifted the broader market.  Also, strength in technology stocks Friday supported gains in the overall market.

Stocks began their recovery Friday after U.S. economic news showed that the University of Michigan’s U.S. Jan consumer sentiment index rose more than expected to a 9-month high and the 1-year inflation expectations measure fell more than expected to a 21-month low.

Stocks Friday initially opened lower as several big U.S. money center banks reported disappointing Q4 earnings results before the open.  Wells Fargo opened lower after reporting weaker-than-expected Q4 revenue.  Also, JPMorgan Chase retreated Friday morning after reporting weaker-than-expected Q4 FICC sales and trading revenue.  In addition, Bank of America slid early Friday after reporting below-consensus Q4 net interest income.

Automakers tumbled Friday and weighed on the overall market after Tesla announced it was cutting car prices in the U.S. and Europe. 

The University of Michigan’s 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’s Jan 1-year inflation expectations measure fell to a 21-month low of 4.0% from 4.4% in Dec, weaker than expectations of 4.3%.  However, the longer-term 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 Friday settled mixed.  The Euro Stoxx 50 index closed up +0.58%.  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 Friday recovered from early losses and moved higher, lifting the overall market.  Wells Fargo (WFC) closed up more than +3%.  Also, JPMorgan Chase (JPM) closed up more than +2% to lead gainers in the Dow Jones Industrials.  In addition, Bank of America (BAC) closed up more than +2%, and Capital One Financial (COF), Bank of New York Mellon (BK), and Citigroup (C) closed up more than +1%.

Stanley Black & Decker (SWK) closed up more than +3% after Mizuho Securities raised its price target on the stock to $90 from $80.

Technology stocks pushed higher Friday and boosted the overall market. Marvell Technology (MRVL) and Illumina (ILMN) closed up more than +3%.  Also, Amazon.com (AMZN), Nvidia (NVDA), and Zscaler (ZS) closed up more than +2%. In addition, Apple (AAPL), Google (GOOGL), and Palo Alto Networks (PANW) closed up more than +1%. 

Hanesbrands (HBI) closed up more than +2% after it said it would report Q4 net sales “slightly above the top end” of its guidance range. 

Northrop Grumman (NOC) closed down more than -5% to lead losers in the S&P 500 after Goldman Sachs downgraded the stock to sell from neutral.  Other defense stocks also moved lower after Goldman Sachs said fiscal policy in the U.S. could “increasingly become downward pressure” for the Department of Defense budget.  As a result, General Dynamics (GD) and Huntington Ingalls Industries (HII) closed down more than -2%, and Raytheon Technologies (RTX) and Textron (TXT) closed down more than -1%.

Automakers retreated Friday after Tesla cut prices of its Model 3 sedan and Model Y SUV in the U.S. and several European markets.  Rivian Automotive (RIVN) closed down more than -6% to lead losers in the Nasdaq 100.  Also, Ford Motor (F) closed down more than -5%, and General Motors (GM) closed down more than -4%.  In addition,  Lucid Group (LCID) closed down -1.93%, and Tesla (TSLA) closed down -0.94%. 

Delta Air Lines (DAL) closed down more than -3% after forecasting Q1 adjusted EPS of 15-40 cents, well below the consensus of 54 cents.

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

Across the markets…

March 10-year T-notes (ZNH23) on Friday closed down -15 ticks, and the 10-year T-note yield rose by +6.7 bp to 3.507%.  T-note prices Friday moved moderately lower on hawkish U.S. economic news that showed the Dec import prices ex-petroleum unexpectedly increased, and the University of Michigan U.S. Jan consumer sentiment rose more than expected to a 9-month high.  Also, a recovery in stocks reduced the safe-haven demand for T-notes.

Supportive factors for T-notes Friday included the decline in the University of Michigan’s Jan 1-year inflation expectations measure to a 21-month low of 4.0% and the fall in the 10-year breakeven inflation rate to a 3-1/2 week low of 2.179%.

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