Stocks Climb on Tech Strength and U.S. Economic Optimism

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.48%.

U.S. stock index futures this morning are moderately higher, with the S&P 500 and Nasdaq 100 posting 6-week highs and the Dow Jones Industrials posting a 1-week high.  Strength in mega-cap technology stocks is leading the overall market higher, with Tesla up more than +7% after reporting stronger-than-expected Q4 revenue. Stocks also have support after today’s better-than-expected U.S. economic reports eased recession fears and suggested the economy still has a path to a soft landing.

Positive corporate news today is supportive of stock indexes. Seagate Technology Holdings jumped more than +6% after reporting better-than-expected Q2 revenue.  Also, Chevron climbed more than +2% after raising its dividend and announcing plans to buy back $75 billion of its shares. In addition, Nucor, Packaging Corp, and ServiceNow are up more than +3% after reporting stronger-than-expected Q4 EPS.

On the negative side for stocks, IBM is down more than -4% after reporting weaker-than-expected Q4 free cash flow.  Also, Sherwin-Williams is down more than -7%, and Dow Inc is down more than -2% after reporting weaker-than-expected Q4 net sales.  McCormick and Southwest Airlines are down more than -4% after reporting disappointing Q4 earnings.

Higher bond yields are bearish for stocks, with the 10-year T-note yield up +4.0 bp at 3.482%.  Also, the 10-year German bund yield is up +3.3 bp at 2.191%, and the 10-year Japan JGB bond yield climbed to a 1-week high of 0.497%.

U.S. weekly initial unemployment claims unexpectedly fell -6,000 to a 9-month low of 186,000, showing a stronger labor market than expectations of an increase to 205,000.

U.S. Q4 GDP rose +2.9% (q/q annualized), stronger than expectations of +2.6%.  The Q4 core PCE deflator rose +2.9%, right on expectations and the weakest report since Q1 of 2021.

U.S. Dec durable goods orders rose +5.6% m/m, stronger than expectations of +2.5% m/m and the biggest increase in nearly 2-1/2 years. Dec capital goods new orders nondefense ex-aircraft and parts fell -0.2% m/m, right on expectations.

U.S. Dec new home sales unexpectedly rose +2.3% m/m to 616,000, stronger than expectations of a decline to 612,000.

Overseas markets are mixed.  The Euro Stoxx 50 index is up +0.62%.  Japan’s Nikkei Stock index closed down -0.12%, and Hong Kong’s Hang Seng Index closed up +2.37%.  China remained closed for the Lunar New Year holidays. 

Today’s stock movers…

Tesla (TSLA) is up more than +7% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 revenue of $24.32 billion, better than the consensus of $24.07 billion. 

Seagate Technology Holdings (STX) is up more than +6% after reporting Q2 revenue of $1.89 billion, stronger the consensus of $1.83 billion, and forecasting Q3 revenue of $1.85 billion-$2.15 billion, the midpoint above the consensus of $1.89 billion.

Chevron (CVX) is up more than +2% to lead gainers in the Dow Jones Industrials after announcing plans to buy back $75 billion of its shares and raising its dividend by 6.3% to $1.51 a share.

Nucor (NUE) is up more than +4% after reporting Q4 net sales of $8.72 billion, stronger than the consensus of $8.64 billion.

ServiceNow (NOW) is up more than +3% after reporting Q4 adjusted revenue of $2.03 billion, better than the consensus of $2.01 billion, and forecasting full-year subscription revenue of $8.44 billion-$8.50 billion, stronger than the consensus of $8.45 billion.

Packaging Corp (PKG) is up more than +4% after reporting Q4 adjusted EPS of $2.35, better than the consensus of $2.23.

United Rental (URI) is up more than +3% after reporting Q4 revenue of $3.30 billion, above the consensus of $3.29 billion, and forecasting full-year revenue of $13.7 billion-$14.2 billion, stronger than the consensus of $13.11 billion.

Sherwin-Williams (SHW) is down more than -7% to lead losers in the S&P 500 after reporting Q4 net sales of $5.23 billion, weaker than the consensus of $5.26 billion, and forecasting 2023 adjusted EPS of $7.95-$8.65, well below the consensus of $10.18.

International Business Machines (IBM) is down more than -4% to lead losers in the Dow Jones Industrials after reporting Q4 free cash flow of $5.21 billion, below the consensus of $5.80 billion.

McCormick (MKC) is down more than -6% after reporting Q4 adjusted EPS of 73 cents, weaker than the consensus of 86 cents, and forecast 2023 adjusted EPS of $2.56-$2.61, below the consensus of $2.90. 

CSX Corp (CSX) is down more than -4% to lead losers in the Nasdaq 100 after it said it sees “near-term headwinds facing international intermodal.” 

Raymond James Financial (RJF) is down more than -4% after reporting Q1 net revenue of $2.79 billion, below the consensus of $2.83 billion.

Southwest Airlines (LUV) is down more than -4% after reporting a Q4 adjusted loss of -38 cents a share, wider than the consensus of -7.3 cents.

Dow Inc (DOW) is down more than -2% after reporting Q4 net sales of $11.86 billion, below the consensus of $12.07 billion.

Across the markets…

March 10-year T-notes (ZNH23) today are down -5 ticks, and the 10-year T-note yield is up +4.0 bp at 3.482%.  Stronger-than-expected U.S. Q4 GDP and weekly initial unemployment claims reports were hawkish for Fed policy and weighed on T-note prices. Supply pressures are also weighing on T-notes as the Treasury will auction $35 billion of 7-year T-notes later today as part of this week’s $120 billion auction package of T-notes.  However, losses in T-notes are limited by easing price pressures after the U.S. Q4 core PCE deflator posted its smallest increase since Q1 of 2021.

The dollar index (DXY00) today is up by +0.06%.  The dollar today recovered from a 7-3/4 month low and is slightly higher. Better-than-expected U.S. economic data today is hawkish for Fed policy, pushed bond yields higher, and supported the dollar.  However, strength in stocks today has curbed liquidity demand for the dollar and is limiting the dollar’s upside.   

EUR/USD (^EURUSD) today is down by -0.21%.  The euro today fell back from a 9-month high and is moderately lower.  A recovery in the dollar from overnight losses sparked long liquidation in EUR/USD. Losses in EUR/USD were limited by higher European government bond yields, with the 10-year German bund yield up +3.6 bp to 2.193%.  

The Italian Jan consumer confidence index unexpectedly fell -1.6 to 100.9, weaker than expectations of no change at 102.5.

USD/JPY (^USDJPY) today is up by +0.55%.  The yen is under pressure today after an account of the Jan BOJ meeting showed a policy maker said more time was needed for December’s yield curve control adjustment to have an impact on the functioning of markets and that there is still “a long way to go” to achieve the BOJ’s sustainable price target.  In addition, higher T-note yields today are also bearish for the yen. 

The Japan Dec PPI services prices rose +1.5% y/y, weaker than expectations of +1.6% y/y and the smallest increase in 9 months.

February gold (GCG3) this morning is down -6.8 (-0.35%), and March silver (SIH23) is up +0.109 (+0.46%).  Precious metals prices this morning are mixed, with silver posting a 1-week high.  A weaker dollar today and higher global bond yields are bearish for metals prices.  However, silver prices jumped today on the prospects of stronger industrial metals demand after the U.S. Q4 GDP expanded more than expected.

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