Stocks Moderately Lower on Mixed Economic News Ahead of FOMC

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.61%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.08%.

U.S. stock index futures this morning are moderately lower ahead of the results of this afternoon’s FOMC meeting and comments from Fed Chair Powell. Conflicting labor market news today is weighing on stocks after the Jan ADP employment change rose less than expected at the slowest pace in 2 years, but the Dec JOLTS job openings unexpectedly increased to a 5-month high.  Other U.S economic reports today on Jan ISM manufacturing and Dec construction spending were weaker than expected.

Expectations are for the FOMC later today to raise the fed funds target range by 25 bp to 4.50%-4.75%, slowing from last month’s 50 bp rate increase and November’s 75 bp increase.  The markets will look to post-FOMC meeting comments from Fed Chair Powell to see if he will push back against market expectations of easier monetary policy later this year.

Some negative corporate news today is bearish for stocks. Westrock sank more than -12% after reporting disappointing Q1 consolidated adjusted Ebitda.  Also, Electronic Arts are down more than -11% after cutting its full-year net bookings forecast.  In addition, Amgen, Juniper Networks, and Western Digital are all lower after reporting weaker-than-expected revenue. 

On the positive side, Stryker is up more than +7% after reporting Q4 adjusted EPS above consensus, and Advanced Micro Devices is up more than +6% to lead chip stocks higher after reporting better-than-expected Q4 revenue.

Strength in European stocks today is providing carry-over support to U.S. stock indexes.  An easing of Eurozone consumer price pressures is fueling stock gains today after Eurozone Jan CPI eased to 8.5% y/y from 9.2% y/y in Dec, weaker than expectations of 8.9% y/y and the slowest pace of increase in 8 months.

The U.S. Jan ADP employment change rose +106,000, weaker than expectations of +180,000 and the smallest increase in 2 years.

The U.S. Jan ISM manufacturing index fell -1.0 to 47.4, weaker than expectations of 48.0 and the steepest pace of contraction in more than 2-1/2 years.

U.S. Dec construction spending unexpectedly fell -0.4% m/m weaker than expectations of no change and the biggest decline in 4 months.

U.S. Dec JOLTS job openings unexpectedly rose +572,000 to a 5-month high of 11.012 million, showing a stronger labor market than expectations of a decline to 10.3 million.

Overseas markets are higher.  The Euro Stoxx 50 index is up +0.17%.  China’s Shanghai Composite stock index closed up +0.90%, and Japan’s Nikkei Stock index closed up +0.07%. 

Today’s stock movers…

Westrock (WRK) is down more than -12% today to lead losers in the S&P 500 after reporting Q1 consolidated adjusted Ebitda of $652.1 million, weaker than the consensus of $702.2 million, and saying that it is removing its fiscal 2023 earnings guidance. 

Electronic Arts (EA) is down more than -11% to lead losers in the Nasdaq 100 after cutting its full-year net bookings forecast to $7.07 billion-$7.17 billion from a previous estimate of$7.65 billion-$7.85 billion, well below the consensus of $7.78 billion.  The company also announced a six-week delay in releasing its next Star Wars game. 

Juniper Networks (JNPR) is down more than -5% after reporting Q4 net revenue of $1.45 billion, weaker than the consensus of $1.48 billion.

Western Digital (WDC) is down more than -3% after forecasting Q3 revenue of $2.60 billion-$2.80 billion, weaker than the consensus of $3.12 billion.

Amgen (AMGN) is down more than -3% to lead losers in the Dow Jones Industrials after forecasting full-year revenue of $26.0 billion-$27.2 billion, below the consensus of $28.05 billion.

Match Group (MTCH) is down more than -7% after reporting Q4 revenue of $786.2 million, below the consensus of $788.5 million, and forecasting Q1 revenue of $790 million-$800 million, weaker than the consensus of $816 million.

Johnson Controls International (JCI) is down more than -5% after reporting Q1 adjusted bet sales of $6.07 billion, weaker than the consensus of $6.24 billion.

Stryker (SYK) is up more than +7% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $3.00, better than the consensus of $2.84, and forecast 2023 adjusted EPS of $9.85-$10.15, well above the consensus of $9.83.

Advanced Micro Devices (AMD) is up more than +6% to lead gainers in the Nasdaq 100 after reporting Q4 revenue of $5.60 billion, stronger than the consensus of $5.52 billion.  Other chip stocks are also rallying on the AMD news, with Nvidia (NVDA), Lam Research (LRCX), NXP Semiconductors (NXPI), Applied Materials (AMAT), and Globalfoundries (GFS) up more than +2%.

Old Dominion Freight Lines (ODFL) is up more than +5% after reporting Q4 operating income of $430.2 million, above the consensus of $400.8 million.

Altria Group (MO) is up more than +5% after forecasting 2023 adjusted EPS of $4.98-$5.13, the midpoint above the consensus of $5.02.  The company also announced a new $1 billion share buyback program.

Edwards Lifesciences (EW) is up more than +3% after reporting Q4 sales of $1.35 billion, better than the consensus of $1.33 billion and forecasting Q1 sales of $1.37 billion-$1.45 billion, above the consensus of $1.37 billion. 

Across the markets…

March 10-year T-notes (ZNH23) today are up +7 ticks, and the 10-year T-note yield is down -0.9 bp at 3.498%.  Mar T-notes this morning pushed higher after today’s report on Jan employment change showed U.S. companies slowed their pace of hiring more than expected, which is dovish for Fed policy.  Also, short-covering ahead of this afternoon’s FOMC results and comments from Fed Chair Powell is underpinning T-note prices. T-notes fell back from their best levels after the U.S. Dec JOLTS job openings unexpectedly rose more than expected to a 5-month high.

The dollar index (DXY00) today is down by -0.25%.  The dollar today is moderately lower after a weaker-than-expected U.S. Jan ADP employment report knocked T-note yields lower.  The dollar is also under pressure on expectations for the FOMC today to slow its pace of interest rate hike to 25 bp from 50 bp in December and 75 bp in November.

EUR/USD (^EURUSD) today is up +0.35%.  A weaker dollar today is benefiting the euro.  Also, today’s report on Eurozone Jan CPI showed core prices remain stubbornly high, which is hawkish for ECB policy.  Short-covering today is also boosting EUR/USD on expectations for the ECB to raise interest rates by 50 bp on Thursday.

Eurozone Jan CPI eased to 8.5% y/y from 9.2% y/y in Dec, weaker than expectations of 8.9% y/y and the slowest pace of increase in 8 months.  However, Jan core CPI remained unchanged at 5.2% y/y, stronger than expectations of 5.1% y/y.

The Eurozone Dec unemployment rate was unchanged at 6.6% y/y, showing a weaker labor market than expectations of a decline to 6.5% y/y.

USD/JPY (^USDJPY) today is down by -0.51%.  The yen is moving higher today on a weaker dollar.  Also, lower T-note yields today are supportive of the yen.  Gains in the yen were limited after the Nikkei stock index today rallied to a 1-1/2 month high, which curbed safe-haven demand for the yen.

February gold (GCG3) this morning is up +2.4 (+0.12%), and March silver (SIH23) is down -0.101 (-0.42%).  Precious metals prices this morning are mixed.  Weakness in the dollar today is bullish for metals prices.  Also, lower global bond yields are supportive of metals prices.   In addition, precious metals are supported by expectations for the FOMC later today to slow their pace of interest rate hikes to 25 bp from 50 bp in December.  Silver prices retreated today after India, the world’s largest silver consumer, said it plans to raise import taxes on silver ore, which may reduce its demand for the metal.   

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