Stocks Settle Mixed on Strength in Energy Stocks and Weakness in Tech

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.50%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.62%.

Stock indexes Friday settled mixed, with the Nasdaq 100 falling to a 1-week low.  Strength in energy stocks Friday led the broader market higher after the prices of WTI crude rose more than +2% to a 1-1/2 week high when Russia said it plans to cut March oil production by 500,000 bpd in retaliation for international sanctions.  OPEC+ said they wouldn’t boost output to make up for the shortfall.

Stocks also found support after Friday’s report from the University of Michigan on U.S. Feb consumer sentiment rose more than expected to a 13-month high. 

On the positive side for stock indexes, Dexcom closed up more than +9% after reporting netter-than-expected Q4 revenue.  Also, Motorola Solutions closed up more than +5% after reporting stronger-than-expected Q4 net sales, and Global Payments closed up more than +5% after forecasting 2023 adjusted revenue that was above the consensus.

Weakness in technology stocks Friday pressured the Nasdaq as higher bond yields weighed on the tech sector.  The 10-year T-note yield climbed to a 5-week high Friday at 3.749% as a chorus of Fed speakers this week reinforced the need for the Fed to keep raising interest rates for longer. 

Some disappointing earnings results weighed on stock indexes Friday.  Lyft plunged more than -33% after forecasting Q1 revenue well below expectations. Also, News Corp is down more than -8% after reporting weaker-than-expected Q2 revenue and saying it would cut about 5% of its workforce this year.  In addition, Expedia Group is down more than -8% after reporting Q4 gross bookings below consensus. 

Philadelphia Fed President Harker said the fed funds rate must get above 5% and stay there to ensure price pressures ease.

The University of Michigan U.S. Feb consumer sentiment rose +1.5 to a 13-month high of 66.4, stronger than expectations of 65.0. 

The University of Michigan U.S. Feb 1-year inflation expectations rose +0.3 to 4.2%, above expectations of 4.0%.  The Feb 5-10 year inflation expectations were unchanged at 2.9%, right on expectations.

Overseas markets Friday settled mixed.  The Euro Stoxx 50 index closed down -1.23%.  China’s Shanghai Composite stock index closed down -0.30%, and Japan’s Nikkei Stock index closed up +0.31%. 

Today’s stock movers…

Dexcom (DXCM) closed up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 revenue of $815.2 million, better than the consensus of $810.1 million. 

A rally in WTI crude oil Friday to a 1-1/2 week high lifted energy producers and energy service providers.  Valero Energy (VLO) and Marathon Oil (MRO) closed up more than +6%. Also, Diamondback Energy (FANG), Devon Energy (DVN), and Phillips 66 (PSX) closed up more than +5%. In addition, ConocoPhillips (COP), Schlumberger (SLB), and Exxon Mobil (XOM) closed up more than +4%. Finally, Chevron (CVX) closed up more than +2% to lead gainers in the Dow Jones Industrials. 

Motorola Solutions (MSI) closed up more than +5% after reporting Q4 net sales of $2.70 billion, above the consensus of $2.53 billion.

Global Payments (GPN) closed up more than +5% after forecasting 2023 adjusted revenue of $8.58 billion-$8.68 billion, stronger than the consensus of $8.56 billion. 

Yelp (YELP) closed up more than +3% after reporting Q4 adjusted Ebitda of $80.4 million, better than the consensus of $78.2 million. 

Cloudflare (NET) closed up more than +3% after forecasting full-year revenue of $1.33 billion-$1.34 billion, above the consensus of $1.31 billion.  

News Corp (NWSA) closed down more than -9% to lead losers in the S&P 500 after reporting Q2  revenue of $2.52 billion, weaker than the consensus of $2.58 billion, and said it would cut about 5% of its workforce this year.

Expedia Group (EXPE) closed down more than -8% after reporting Q4 gross bookings of $20.51 billion, weaker than the consensus of $21.06 billion.  Booking Holdings (BKNG) also fell more than -4% on the news.

Mohawk Industries (MHK) closed down more than -4% after reporting Q4 net sales of $265 billion, below the consensus of $2.70 billion.

Salesforce (CRM) closed down more than -3% to lead losers in the Dow Jones Industrials after UBS said that checks with Salesforce’s largest partners showed they missed their Q4 targets, which points to weakness in Salesforce.

A jump in the 10-year T-note yield Friday to a 5-week high undercut technology stocks.  Tesla (TSLA) closed down more than -5%. Also, Nvidia (NVDA) and Netflix (NFLX) closed down more than -4%. In addition, Datadog (LRCX), Zoom Video Communications (LRCX), and Crowdstrike Holdings (CRWD) closed down by more than -3%. Finally, Meta Platforms (META), Advanced Micro Devices (AMD), KLA Corp (KLAC), Microchip Technology (MCHP), and Lam Research (LRCX) closed down more than -2%. 

Lyft (LYFT) closed down by more than -36% after forecasting Q1 revenue of $975 million, well below the consensus of $1.09 billion. 

Across the markets…

March 10-year T-notes (ZNH23) on Friday closed down -11 ticks, and the 10-year T-note yield rose by +8.7 bp to 3.745%.  Mar T-notes Friday fell to a 5-week low, and the 10-year T-note yield climbed to a 5-week high of 3.749%.  T-notes Friday opened lower on negative carry-over from a slide in German bunds as the 10-year German bund yield rose +6.1 bp to 2.364%.  Losses in T-notes accelerated Friday after the University of Michigan U.S. Feb consumer sentiment index rose more than expected to a 13-month high.  In addition, the +2% jump in crude prices Friday to a 1-1/2 week high raised inflation expectations and undercut T-notes.

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