Markets Today: Stock Indexes Mixed on Corporate Earnings and Higher Bond Yields

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.05%, and March Nasdaq 100 E-Mini futures (NQH23) are down -0.05%.

U.S. stock index futures this morning are mixed.  Better-than-expected quarterly corporate earnings are supportive of the overall market. However, higher bond yields today weigh on technology stocks and Nasdaq 100 futures.  Bond yields rose on concern global central banks will need to keep tightening monetary policy after reports today showed accelerating inflation in France and Spain.

Higher bond yields today are bearish for stocks, with the 10-year T-note yield up +3.1 bp to 3.945%.  A jump in European government bond yields is undercutting T-note prices, as the 10-year German bund yield rose to an 11-year high today at 2.669%, and the 10-year UK gilt yield rose to a 4-month high of 3.872%.

Today’s U.S. economic news was positive for stocks after Jan wholesale inventories unexpectedly fell -0.4% m/m versus expectations of a +0.1% m/m increase.  The -0.4% m/m decline is the most in 2-1/2 years and may spark companies to ramp up production to replace declining stocks.

Positive corporate news is supportive of the overall market.  Zoom Video Communications is up more than +6% in pre-market trading after reporting better-than-expected Q4 adjusted EPS. Also, Advanced Auto Parts is up more than +3% after forecasting stronger-than-expected 2023 net sales. In addition, Target is up more than +1% after reporting Q4 sales above the consensus.

On the negative side, Norwegian Cruise Line Holdings Ltd tumbled more than -6% in pre-market trading after reporting a wider-than-expected Q4 adjusted loss per share. Also, Universal Health Services is down more than -3% after forecasting 2023 adjusted EPS below the consensus. In addition, Dish Network is down more than -5% after  Bank of America downgraded the stock two notches.

Overseas stock markets are higher.  The Euro Stoxx 50 today is up +0.26%.  China’s Shanghai Composite stock index closed up +0.66%, and Japan’s Nikkei Stock Index closed up +0.08%. 

The Euro Stoxx 50 index today is slightly higher.  Strength in bank stocks is leading the overall market higher.  Banco Santander SA, Spain’s largest bank, is up more than +4% after it said it would pay out 50% of profit over the next three years, up from 40% previously.  Also, Adidas AG rose more than +1% after Berenberg upgraded the stock to a buy.  On the negative side, Bayer AG dropped more than -4% after issuing 2023 guidance that fell short of the consensus.  Also, interest rate-sensitive stocks are under pressure today after an unexpected increase in French, and Spanish consumer prices pushed the 10-year German bund yield up to an 11-year high of 2.664%.

The German Jan import price index eased to 6.6% y/y from 12.6% y/y in Dec, the slowest pace of increase in nearly two years.

France's Feb CPI (EU harmonized) unexpectedly rose +0.2 to a record high 7.2% y/y, stronger than expectations of no change at 7.0%.

Span Feb CPI (EU harmonized) unexpectedly rose +0.2 to 6.1% y/y, stronger than expectations of a decline to 5.7% y/y.

China’s Shanghai Composite today recovered from a 1-week low and closed moderately higher.  Strength in Chinese telecommunication stocks led the overall market higher after guidelines released by the central committee of the Communist Party and the State Council said the government will promote the digital sector’s integration with the real economy to bolster economic growth.  Also, tourism and travel stocks rose after Hong Kong said the city would scrap its mask mandate starting March 1.  Chinese stocks initially opened lower on weakness in video-stream platform operators after China’s National Radio and Television Administration said it plans to improve oversight of short videos and prevent minors from spending too much time watching them. 

Japan’s Nikkei Stock Index posted a 1-week high today and closed slightly higher.  Japanese travel and tourism stocks rallied today after the government said it would ease Covid testing requirements for travelers from China starting March 1.  Exporter stocks also moved higher today as the yen fell to a 2-1/4 month low against the dollar, which improved the earnings prospects of exporters. Gains in the overall market were limited on signs of an uneven economic recovery after Jan retail sales posted their largest gain in 2-1/2 years, but Jan industrial production posted its biggest decline in 8 months.

Today’s Japanese economic news was mixed.  On the positive side, Jan retail sales rose +1.9% m/m, stronger than expectations of +0.4% m/m and the largest increase in 2-1/2 years. Conversely, Jan industrial production fell -4.6% m/m, weaker than expectations of -2.9% m/m and the biggest decline in 8 months.

Pre-Market U.S. Stock Movers

Chevron (CVX) rose by more than +1% in pre-market trading after it raised its annual stock repurchase plan to $17.5 billion from a previously planned $15 billion. 

Target (TGT) rose more than +1% in pre-market trading after reporting Q4 sales of $30.98 billion, better than the consensus of $30.46 billion. 

Zoom Video Communications (ZM) jumped more than +6% in pre-market trading after reporting Q4 adjusted EPS of $1.22, well above the consensus of 80 cents, and forecast 2025 adjusted EPS of $4.11-$4.18, stronger than the consensus of $3.53.

Seagen (SGEN) rose more than +1% in pre-market trading after Oppenheimer raised its price target on the stock to $210 from $180.

Advanced Auto Parts (AAP) climbed more than +3% in pre-market trading after forecasting 2023 net sales of $11.40 billion-$11.60 billion, above the consensus of $11.34 billion. 

International Game Technology (IGT) rallied more than +4% in pre-market trading after reporting Q4 revenue of $1.09 billion, better than the consensus of $1.03 billion.

Dentsply Sirona (XRAY) climbed more than +3% in pre-market trading after reporting Q4 adjusted EPS of 46 cents, above the consensus of 32 cents, and forecasting 2023 adjusted EPS of $1.80-$2.00, stronger than the consensus of $1.84.

Norwegian Cruise Line Holdings Ltd (NCLH) tumbled more than -6% in pre-market trading after reporting a Q4 adjusted loss per share of -$1.04, a steeper loss than the consensus of -87 cents.

Workday (WDAY) fell more than -2% in pre-market trading after forecasting 2-24 subscription revenue of $6.53 billion-$6.58 billion, the midpoint below the consensus of $6.56 billion. 

Universal Health Services (UHS) dropped more than -3% in pre-market trading after forecasting 2023 adjusted EPS of $9.50-$10.50, weaker than the consensus of $10.74. 

Dish Network (DISH) tumbled more than -5% in pre-market trading after Bank of America downgraded the stock two notches to underperform from buy. 

Keurig Dr Pepper (KDP) fell more than -2% in pre-market trading after a block of the company’s shares was offered at $34.55 to $35.00 apiece from Morgan Stanley, below Monday’s closing price of $35.37.

Occidental Petroleum (OXY) slid more than -1% in pre-market trading after reporting Q4 adjusted EPS of $1.61, weaker than the consensus of $1.79.

Today’s U.S. Earnings Reports (2/28/2023)

Advance Auto Parts Inc (AAP), Agilent Technologies Inc (A), AutoZone Inc (AZO), DENTSPLY SIRONA Inc (XRAY), First Solar Inc (FSLR), HP Inc (HPQ), J M Smucker Co/The (SJM), Monster Beverage Corp (MNST), Norwegian Cruise Line Holdings (NCLH), Ross Stores Inc (ROST), Sempra Energy (SRE), Target Corp (TGT), Verisk Analytics Inc (VRSK).

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