Stocks Push Higher on U.S Inflation Optimism

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.71%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.75%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.96%.

U.S. stock indexes this morning are moderately higher on hopes that U.S. inflation pressures will continue to ease.  Tuesday’s monthly inflation report is expected to show that U.S. Jan CPI eased to 6.2% y/y from 6.5% y/y in Dec.  Also, Jan core CPI is seen easing to 5.5% y/y from 5.7% y/y in Dec. 

U.S. stock index futures are also climbing on positive carry-over from a +0.94% gain in the Euro Stoxx 50 today as European stocks rallied after the EU Commission raised its 2023 Eurozone GDP forecast and lowered its 2023 Eurozone inflation forecast.

Stocks are also receiving a boost from positive earnings results and analyst upgrades.  Monday.com is up more than +11% after reporting stronger-than-expected Q4 adjusted EPS, and Microsoft is up more than +3% after Stifel raised its price target on the stock to $290 from $275.  Also, Henry Schein Inc is up more than +3% after the company announced that it would buy back as much as $400 million of its common stock. 

On the negative side, Fidelity National Information is down more than -14% after forecasting weaker-than-expected Q1 revenue.   Also, Caterpillar,  CF Industries Holdings, and  Zim Integrated Shipping Services Ltd are all down more than -1% after being downgraded.

In a note to clients, Morgan Stanley warned that U.S. stocks are ripe for a selloff after prematurely pricing in a pause in Fed rate hikes, saying, "while the recent move higher in front-end rates is supportive of the notion that the Fed may remain restrictive for longer than appreciated, the equity market is refusing to accept this reality."

Overseas markets are mixed.  The Euro Stoxx 50 index is up +0.94%.  China’s Shanghai Composite stock index closed up +0.72%, and Japan’s Nikkei Stock index closed down -0.88%. 

Today’s stock movers…

Microsoft (MSFT) is up more than +3% today to lead gainers in the Dow Jones Industrials after Stifel raised its price target on the stock to $290 from $275 and said fiscal 2024 is “positioned for more consistent results as Azure growth likely stabilizes.” 

Monday.com (MNDY) is up more than +11% after reporting Q4 adjusted EPS of 44 cents, above the consensus of 40 cents, and forecast full-year revenue of $688 million-$693 million, stronger than the consensus of $660.2 million.

Henry Schein Inc (HSIC) is up more than +3% after the company announced that it would buy back as much as $400 million of its common stock. 

Zillow Group (Z) jumped more than +4% in pre-market trading after Evercore ISI upgraded the stock to outperform from in line.

Masco (MAS) is up more than +2% after Deutsche Bank upgraded the stock to hold from sell. 

Booking Holdings (BKNG) is up more than +2% after Deutsche Bank raised its price target on the stock to $2.910 from $2,370. 

Yum China (YUMC) is up more than +1% after Industrial Securities initiated coverage of the stock with a buy rating and a price target of $72.61. 

Fidelity National Information (FIS) is down more than -14% to lead losers in the S&P 500 after forecasting Q1 revenue of $3.38 billion-$3.43 billion, well below the consensus of $3.58 billion. 

Zim Integrated Shipping Services Ltd (ZIM) is down more than -6% after Barclays downgraded the stock to underweight from equal weight. 

Newell Brands (NWL) is down more than -2% after Barclays cut its price target on the stock to $11 from $13 and kept its underweight rating on the stock.

CF Industries Holdings (CF) is down more than -2% after Scotiabank downgraded the stock to sector perform from sector outperform. 

Caterpillar (CAT) is down nearly -1% after Baird downgraded the stock to neutral from outperform. 

Across the markets…

March 10-year T-notes (ZNH23) today are up +4 ticks, and the 10-year T-note yield is down -1.3 bp at 3.719%.  Mar 10-year T-notes this morning recovered from a 1-1/4 month low and are slightly higher, and the 10-year T-note yield fell back from a 1-1/4 month high of 3.753%.  T-notes are finding support today on short-covering ahead of Tuesday’s monthly U.S. CPI report, which is expected to show a continued moderation in consumer prices. T-notes this morning initially fell to a 1-1/4 month low on negative carry-over from a slide in 10-year German bunds to a 1-1/4 month low.  

The dollar index (DXY00) today is down by -0.15%.  A rally in stocks today has reduced the liquidity demand for the dollar.  Also, lower T-note yields today have weakened the dollar’s interest rate differentials. However, short covering in the dollar limits losses ahead of Tuesday’s monthly CPI report. 

EUR/USD (^EURUSD) today is up by +0.18%.  The euro today recovered from a 1-month low and is moderately higher after the European Union Commission raised its Eurozone 2023 GDP forecast and lowered its 2023 Eurozone inflation forecast.  Also, upbeat comments today from ECB Vice President Guindos gave EIR/USD a boost when he said the ECB and the European Commission are "a bit more positive" on the Eurozone economic outlook.

ECB Governing Council member Centeno said inflation is coming down faster than expected, but the ECB "really needs to see inflation converging to 2% in the medium term" to moderate the pace of interest rate increases.

The European Union Commission raised its Eurozone 2023 GDP forecast to 0.9% from a prior estimate of 0.3% and cut its 2023 inflation forecast to 5.6% from a previous forecast of 6.1%.

USD/JPY (^USDJPY) today is up by +0.92%.  The yen today is moderately lower.  The yen is retreating on speculation that the appointment of former BOJ member Ueda to be BOJ Governor will not affect BOJ policy when Ueda said, “the BOJ’s current policy is appropriate and monetary easing needs to be continued at this point.” 

April gold (GCJ3) this morning is down -6.7 (-0.36%), and March silver (SIH23) is down -0.090 (-0.41%).  Precious metals prices this morning are moderately lower.  Long liquidation is weighing on precious metals today ahead of Tuesday’s U.S. monthly report on consumer prices.  Also, hawkish ECB comments today from ECB Vice President Guindos weighed on the safe-haven demand for precious metals when he said the ECB and the European Commission are a "bit more positive" on the Eurozone economic outlook.  In addition, gold prices are under pressure due to the continued liquidation of gold holdings in ETFs after holdings of gold in ETFs fell to a 2-3/4 year low Friday.  A weaker dollar today is limiting the downside in metals prices.

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