Stocks Settle Mixed as Bond Yields Decline

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.39%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.68%.

Stock indexes Friday settled mixed, with the S&P 500 dropping to a 2-week low and the Dow Jones Industrials falling to a 3-week low.  Stocks were under pressure Friday as hawkish central bank comments bolstered expectations of higher global interest rates.  Fed Governor Bowman said, "I don't think we're seeing what we need to be seeing, especially with inflation, so I think we'll have to continue to raise the federal funds rate until we start to see a lot more progress on that."  Also, ECB Executive Board member Schnabel warned that markets risked underestimating inflation.

Stock indexes recovered from their worst levels, with the Dow Jones Industrials moving into positive territory after bond yields fell on dovish central bank comments.  The 10-year T-note yield retreated from a 3-1/4 month high Friday of 3.925% and fell -4.2 bp to 3.819% to give stocks a boost after Richmond Fed President Barkin said he "supports 25 bp rate hikes" by the Fed as it "gives us the flexibility to respond" to data as it comes in.  German bund yields Friday retreated from a 7-week high of 2.568% and fell -3.8 bp to 2.440% after ECB Governing Council member de Galhau said ECB interest rate-hike bets have been volatile recently.

Friday’s U.S. economic news on import prices was bearish for stocks and bonds after the Jan import price index ex-petroleum unexpectedly rose +0.2% m/m, stronger than expectations of a decline of -0.3% m/m. Also, Friday’s slump in WTI crude prices of more than -2% to a 1-1/2 week low knocked energy stocks lower.

Negative corporate news Friday also weighed on stock indexes. Moderna closed down more than -3% after reporting mixed results in the Phase 3 trial of its mRNA-1010 flu shot. Also, Zebra Technologies closed down more than -3% after forecasting weaker-than-expected Q1 adjusted EPS.  In addition, Epam Systems, Generac Holdings, and Airbnb closed down -2% or more after being downgraded.

On the positive side, Deere & Co closed up more than +7% after reporting stronger-than-expected Q1 net sales. Also, DraftKings closed up more than +15% after reporting better-than-expected Q4 revenue and raising its full-year revenue forecast.  In addition, consumer staple stocks rallied on a defensive play due to weakness in the overall market. 

Overseas markets Friday settled lower as the Euro Stoxx 50 closed down -0.52%.  Also, China’s Shanghai Composite stock index closed down -0.77%, and Japan’s Nikkei Stock index closed down -0.66%. 

Today’s stock movers…

A slump of more than -2% in WTI crude oil Friday to a 1-1/2 week low weighed on energy stocks and energy service providers.  APA Corp (APA), Hess Corp (HES), Haliburton (HAL), and Phillips 66 (PSX) closed down more than -5%.  Also, Devon Energy (DVN), Diamondback Energy (FANG), and Schlumberger (SLB) closed down more than -4%.  In addition, ConocoPhillips (COP), Marathon Oil (MRO), Baker Hughes (BKR), Exxon Mobil (XOM), and Valero Energy (VLO) closed down more than -3%.  Finally, Chevron (CVX) closed down more than -2% to lead losers in the Dow Jones Industrials. 

Homebuilders were under pressure Friday after the 10-year T-note yield jumped to a 3-1/4 month high.  As a result, DR Horton (DHI), Lennar (LEN), PulteGroup (PHM), and Toll Brothers (TOL) closed down more than -2%. 

Airbnb (ABNB) closed down more than -5% to lead losers in the Nasdaq 100 after Phillip Securities downgraded the stock to accumulate from buy.

Moderna (MRNA) closed down more than -3% after reporting mixed results in the Phase 3 trial of its mRNA-1010 flu shot. 

Zebra Technologies (ZBRA) closed down more than -3% after forecasting Q1 adjusted EPS of $3.70 to $4.00, weaker than the consensus of $4.11.

Epam Systems (EPAM) closed down more than -2% after Cowen downgraded the stock to market perform from outperform.

Generac Holdings (GNRC) closed down more than -2% after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Deere & Co (DE) closed up more than +7% to lead gainers in the S&P 500 after reporting Q1 net sales of $11.40 billion, above the consensus of $11.23 billion and raising its full-year net income forecast to $8.75 billion-$9.25 billion from a previous estimate of $8.0 billion-$8.5 billion. 

DraftKings (DKNG) closed up more than +15% after reporting Q4 revenue of $855.1 million, stronger than the consensus of $798.6 million, and raising its full-year revenue forecast to $2.85 billion-$3.05 billion from a prior forecast of $2.8 billion-$3.0 billion, the midpoint above the consensus of $2.93 billion. 

GE Healthcare Technologies (GEHC) closed up more than +3% after Mizuho Securities initiated coverage of et stock with a buy rating and a price target of $90.

Consumer staple stocks rallied on a defensive play from Friday’s slide in the broader market.  Campbell Soup (CPB), Colgate Palmolive (CL), Hershey Co (HSY), Kellogg (K), General Mills (GIS), and Procter & Gamble (PG) closed up more than +2%.  Also, Hormel Foods (HRL), Mondelez International (MDLZ), J M Smucker (SJM), and Conagra Brands (CAG) closed up more than +1%. 

Coca-Cola (KO) closed up more than +1% after Citigroup initiated coverage of the stock with a buy recommendation and a price target of $68. 

Across the markets…

March 10-year T-notes (ZNH23) on Friday closed up +3.5 ticks, and the 10-year T-note yield fell by -4.2 bp to 3.819%.  Mar 10-year T-notes Friday recovered from a 3-1/4 month low and moved slightly higher, and the 10-year T-note yield fell back from a 3-1/4 month high of 3.925% and moved lower.  T-notes erased early losses Friday and moved higher on dovish comments from Richmond Fed President Barkin, who said he "supports 25 bp rate hikes" by the Fed.  Also, a decline in German bund yields sparked short-covering in T-notes after the 10-year German bund yield retreated from a 7-week high of 2.568% and fell -3.8 bp to 2.440% after ECB Governing Council member de Galhau said ECB interest rate-hike bets have been volatile recently.   

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