Stocks Sink as 10-year T-note Yield Rises to 3-1/4 Month High

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -2.00%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -2.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.41%.

Stock indexes Tuesday closed sharply lower, with the S&P 500 falling to a 3-1/2 week low, the Dow Jones Industrials dropping to a 1-month low, and the Nasdaq 100 falling to a 2-1/2 week low.  Stocks sold off Tuesday on concern the Fed may raise interest rates higher for longer after hawkish comments last week from several Fed presidents.  The 10-year T-note yield Tuesday jumped to a 3-1/4 month high of 3.958%, just shy of 4%.

Negative corporate news Tuesday was also bearish for the overall market.  Nordson closed down more than -13% after reporting weaker-than-expected Q1 EPS and cutting its full-year adjusted EPS estimate.   Also, Home Depot closed down more than -7% after reporting an unexpected decline in Q4 comparable same-store sales.  In addition, technology stocks sold off Tuesday after the 10-year T-note climbed to a 3-1/4 month high. 

On the positive side, General Mills closed up more than +4% after boosting its full-year adjusted operating profit constant currency. Also, Molson Coors Beverage closed up more than +3% after reporting Q4 underlying EPS.  Walmart closed up +0.61% after reporting better-than-expected Q4 comparable same-store sales.   

Tuesday’s U.S. economic news was mixed for stocks.  On the negative side, Jan existing home sales unexpectedly fell -0.7% m/m to a 12-year low of 4.00 million, weaker than expectations of an increase to 4.10 million.  Conversely, the Feb S&P U.S. manufacturing PMI rose +0.9 to a 4-month high of 47.8, stronger than expectations of 47.2.

Overseas markets Tuesday settled mixed.  The Euro Stoxx 50 closed down -0.49%.  China’s Shanghai Composite stock index closed up +0.49%, while Japan’s Nikkei Stock index closed down -0.21%. 

Today’s stock movers…

A jump in the 10-year T-note yield Tuesday to a 3-1/4 month high weighed on technology stocks.  Intel (INTC) closed down more than -5%.  Also, Tesla (TSLA), Zoom Video Communications (ZM), and Illumina (ILMN) closed down by more than -4%.  In addition, Marvell Technology (MRVL), Applied Materials (AMAT), Nvidia (NVDA), and Microchip Technology (MCHP) closed down more than -3%.

Nordson (NDSN) closed down more than -13% to lead losers in the S&P 500 after reporting Q1 EPS of $1.81, weaker than the consensus of $1.98 and cutting its full-year adjusted EPS estimate to $8.75-$9.50 from a prior estimate of $9.45.   

Generac Holdings (GNRC) closed down more than -8% after Janney Montgomery Scott LLC downgraded the stock to neutral from buy. 

Home Depot (HD) closed down more than -7% to lead losers in the Dow Jones Industrials after reporting Q4 comparable same-store sales unexpectedly fell -0.30% versus expectations of a +0.29% increase.

Expeditors International of Washington (EXPD) closed down more than -5% after reporting Q4 revenue of $3.40 billion, well below the consensus of $3.88 billion.

AutoNation (AN) closed down more than -8% after JPMorgan Chase downgraded the stock to underweight from neutral.

DocuSign (DOCU) closed down more than -7% after UBS downgraded the stock to sell.

Huntsman (HUN) closed down more than -5% after reporting Q4 adjusted EPS of 4 cents, weaker than the consensus of 10 cents. 

General Mills (GIS) closed up more than +4% to lead gainers in the S&P 500 after boosting its full-year adjusted operating profit constant-currency +6% to +7% from a prior estimate of +3% to +5%.

Molson Coors Beverage (TAP) closed up more than +3% after reporting Q4 underlying EPS of $1.30, stronger than the consensus of $1.07.

Walmart (WMT) closed up +0.61% to lead gainers in the Dow Jones Industrials after reporting Q4 total U.S. comparable same-store sales ex-gas rose +8.80%, stronger than the consensus of +5.24%.

Copart (CPRT) closed up +0.94% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $956.7 million, better than the consensus of $930.7 million. 

Medtronic Plc (MDT) closed up +0.81% after reporting Q3 revenue of $7.73 billion, stronger than the consensus of $7.52 billion. 

Across the markets…

March 10-year T-notes (ZNH23) on Tuesday closed down -30 ticks, and the 10-year T-note yield rose by +13.6 bp to 3.951%.  Mar 10-year T-notes Tuesday sold off to a 3-1/2 month low, and the 10-year T-note yield jumped to a 3-1/4 month high of 3.958%. 

T-note prices also fell on the stronger-than-expected Feb S&P U.S. manufacturing PMI.  In addition, an increase in inflation expectations undercut T-notes after the 10-year breakeven inflation rate rose to a 2-1/2 month high of 2.439%.  T-notes posted their lows Tuesday afternoon on weak demand for the Treasury’s $42 billion auction of 2-year T-notes with a bid-to-cover ratio of 2.61, below the 10-auction average of 2.63.  Higher German bund yields Tuesday also weighed on T-note prices, as the 10-year German bund yield rose +6.5 bp to 2.529%. 

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