Stocks Settle Mixed Ahead of Big-Tech Earnings

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.22%.

Stocks on Tuesday settled mixed ahead of quarterly earnings results from mega-cap technology companies.  Long liquidation in stocks pressured the broader market on concern that market expectations may be too optimistic about Q4 tech company earnings. According to Bloomberg Intelligence data, Q4 earnings for tech firms are projected to drop 9.2% from the same period a year ago, the steepest drop in 7 years. 

Microsoft jumped more than +4% after Tuesday’s close when it reported Q2 earnings results that beat expectations.

Negative corporate news Tuesday weighed on stock indexes. Alphabet closed down more than -2% after the U.S. Justice Department and eight states sued the company over alleged illegal monopolization of the digital advertising market.  Also, 3M Co fell more than -6% after reporting weaker-than-expected Q4 adjusted EPS.  Union Pacific closed down more than -3% after reporting weaker-than-expected Q4 operating revenue.

On the positive side for stocks, Paccar soared more than +8%, and Travelers Co closed up more than +3% after reporting stronger-than-expected Q4 revenue.  Also, Raytheon Technologies climbed more than +3%, and DR Horton rose more than +1% after reporting better-than-expected quarterly earnings results.

Tuesday’s U.S. manufacturing news was mixed for stocks. The Jan S&P Global manufacturing PMI unexpectedly rose +0.6 to 46.8, stronger than expectations of a decline to 46.0.  However, the Jan Richmond Fed manufacturing index fell -12 to a 2-1/2 year low of -11, weaker than expectations of -5.

A decline in global bond yields was supportive of stocks. The 10-year T-note yield fell -4.4 bp Tuesday to 3.466%.  Also, the 10-year German bund yield fell -5.2 bp to 2.155%, and the 10-year UK Gilt yield fell -8.4 bp to 3.277%. 

Overseas markets Tuesday settled higher.  The Euro Stoxx 50 index closed up +0.05%, and Japan’s Nikkei Stock index closed up +1.46%. China and Hong Kong were closed for the Lunar New Year holidays. 

Today’s stock movers…

3M Co (MMM) closed down more than -6% Tuesday to lead losers in the S&P 500 and Dow Jones Industrials after reporting Q4 adjusted EPS of $2.28, weaker than the consensus of $2.36.

Brown & Brown (BRO) closed down more than -5% after its retail segment missed expectations on organic growth and margins. 

Union Pacific (UNP) closed down more than -3% after reporting Q4 operating revenue of $6.18 billion, weaker than the consensus of $6.26 billion.

EQT Corp (EQT) closed down more than -2% after Cowen cut its price target on the stock to $48 from $54.

Alphabet (GOOGL) closed down more than -2% after the U.S. Justice Department and eight states sued the company over alleged illegal monopolization of the digital advertising market.

Dollar Tree (DLTR) closed down more than -2% after Gordon Haslett downgraded the stock to accumulate from buy. 

Advanced Micro Devices (AMD) closed down more than -2% after Bernstein downgraded the stock to market perform from outperform.

Sealed Air (SEE) closed down more than -2% after UBS downgraded the stock to neutral from buy.

Paccar (PCAR) closed up more than +8% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 consolidated revenue of $8.13 billion, better than the consensus of $7.48 billion.

Travelers Cos (TRV) closed up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q4 revenue of $9.64 billion, stronger than the consensus of $9.45 billion.

Raytheon Technologies (RTX) closed up more than +3% after reporting Q4 adjusted EPS of $1.27, above the consensus of $1.24.

Verizon Communications (VZ) closed up nearly +2% after reporting that it added 217,000 new wireless phone subscribers in Q4, above the consensus of 209,600. 

HighPeak Energy (HPK) closed up more than +5% after the company’s board of directors voted to initiate a process to evaluate strategic alternatives, including a potential sale.

D.R. Horton (DHI) closed up more than 1% after reporting Q4 revenue of $7.26 billion, well above the consensus of $6.42 billion.

Across the markets…

March 10-year T-notes (ZNH23) on Tuesday closed up +11 ticks, and the 10-year T-note yield fell by -4.4 bp to 3.466%.  Strength in European government bonds Tuesday underpinned T-note prices.  T-notes also found support on safe-haven buying due to weakness in stocks. T-notes raced to their highs Tuesday afternoon on strong demand for the Treasury’s $42 billion auction of 2-year T-notes.  The auction had a bid-to-cover ratio of 2.94, well above the 10-auction average of 2.58 and the strongest in 2-1/2 years.  A bearish factor was an increase in inflation expectations after the 10-year breakeven inflation expectations rate Tuesday rose to a 3-week high of 2.295%.

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