Stocks See Downard Pressure from Mixed Corporate Earnings Results

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.14%.

Stocks on Tuesday settled mixed, with the Nasdaq 100 climbing to a 1-month high.  A surge in Tesla by more than +7% led technology stocks and the Nasdaq 100 higher, while a rally of more than +5% in Morgan Stanley was positive for the overall market after the company reported stronger-than-expected Q4 net revenue. 

Negative corporate news Tuesday was bearish for stocks. Goldman Sachs closed down more than -6% and weighed on the Dow Jones Industrials, and Citizens Financial Group fell more than -2%, after both companies reported weaker-than-expected Q4 net revenue.  Also, Travelers closed down more than -4% after reporting weaker-than-expected Q4 core EPS. 

Higher bond yields weighed on stocks after the 10-year T-note yield Tuesday rose +2.5 bp to 3.529%.  Bond yields rose on hawkish comments from Richmond Fed President Barkin, who said, "I would want to see inflation convincingly back to our 2% target" before easing up on interest rate hikes.  "As long as inflation stays elevated, we need to keep raising interest rates."

Tuesday’s U.S. economic news was negative for stocks after the Jan Empire manufacturing survey general business conditions index unexpectedly fell -21.7 to a 2-1/2 year low of -32.9, weaker than expectations of an increase to -8.6.

Overseas markets Tuesday were mixed.  The Euro Stoxx 50 index closed up +0.42%.  The Shanghai Composite Stock index closed down by -0.10%, and Japan’s Nikkei Stock index closed up by +1.23%.

Today’s stock movers…

Goldman Sachs (GS) closed down more than -6% to lead losers in the Dow Jones Industrials after reporting Q4 net revenue of $10.59 billion, below the consensus of $10.70 billion. 

Mohawk Industries (MHK) closed down more than -6% after lowering its Q4 EPS forecast to $1.27-$1.31 from a previous forecast of $1.40-$1.50., well below the consensus of $1.46.

Travelers Cos (TRV) closed down more than -4% after reporting Q4 core EPS of $3.40, weaker than the consensus of $4.06.

Pfizer (PFE) closed down more than -3% after Wells Fargo Securities downgraded the stock to equal weight from overweight.

AO Smith (AOS) closed down more than -2% after Loop Capital Markets downgraded the stock to hold from buy.

Citizens Financial Group (CFG) closed down more than -2% after reporting Q4 revenue of $2.20 billion, below the consensus of $2.22 billion.

U.S.-listed Chinese stocks retreated Tuesday on concern China’s recovery from the pandemic will be uneven as an expected slowdown in the global economy will undercut demand for Chinese exports.  JD.com (JD) closed down more than -5% to lead lowers in the Nasdaq 100.  Also, Baidu (BIDU) closed down by more than -6%, and Pinduoduo (PDD) closed down by more than -2%.  In addition, Alibaba Group Holding (BABA) closed down more than -1%.

Tesla (TSLA) closed up more than +7% to lead gainers in the S&P 500 and the Nasdaq 100 after Hertz said it will make as many as 25,000 electric vehicles available to Uber drivers in European capital cities by 2025.

Morgan Stanley (MS) closed up more than +6% after reporting Q4 net revenue of $12.70 billion, above the consensus of $12.43 billion.

Vertex Pharmaceuticals (VRTX) closed up more than +3% after SVB Securities upgraded the stock to outperform from market perform.

Church & Dwight (CHD) closed up more than +3% after Credit Suisse upgraded the stock to outperform from neutral.

Global Payments (GPN) closed up more than +3% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight.

Domino’s Pizza (DPZ) closed up more than +2% after Gordon Haskett upgraded the stock to buy from hold.

Across the markets…

March 10-year T-notes (ZNH23) on Tuesday closed down -3 ticks, and the 10-year T-note yield rose by +2.5 bp to 3.529%.  T-note prices Tuesday posted modest losses on hawkish comments from Richmond Fed President Barkin, who said, “As long as inflation stays elevated, we need to keep raising interest rates." T-notes briefly recovered their losses Tuesday and moved higher on carry-over support from a rally in 10-year German bunds to a 1-month high when Bloomberg reported that ECB sources said that policymakers are starting to consider a slower pace of interest rate hikes than ECB President Lagarde indicated last month.

T-notes Tuesday found support on lowered inflation expectations after the 10-year breakeven inflation rate dropped to a 4-week low of 2.159%.  Also, Tuesday’s weaker-than-expected U.S. report on general business conditions in the Jan Empire manufacturing survey was dovish for Fed policy and bullish for T-notes.

• The Pros and Cons of Ryan Cohen’s Latest Activist Play
• Strength in Meta Platforms May Not Last
• Stocks in the Red After Mixed Earnings Releases
• Morgan Stanley Spikes on Results Making Short Puts Attractive to Income Investors