Stocks Mixed as Global Bond Yields Jump

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.32%.

U.S. stock indexes this morning are mixed.  The broader market is under pressure today on rising global bond yields.  Signs of faster inflation in Germany pushed the 10-year German bund yield to an 11-year high, and hawkish Fed comments pushed the 10-year T-note yield up to a 3-1/2 month high.  However, stock losses were limited by optimism in the global economic outlook after Chinese manufacturing activity last month expanded at the fastest pace in more than ten years. 

Higher bond yields today are weighing on stocks, with the 10-year T-note yield up +7.3 bp to 3.993%.  The 10-year German bund yield rose to an 11-year high today at 2.726% after German Feb CPI unexpectedly accelerated to 9.3% y/y from Jan’s +9.2% y/y pace.

Hawkish Fed comments today pushed bond yields higher and weighed on stocks.  Atlanta Fed President Bostic said, "I think we will need to raise the federal funds rate to between 5% and 5.25% and leave it there until well into 2024" to ensure that inflation returns to the Fed's 2% target.  Also, Minneapolis Fed President Kashkari said, "we're not seeing much of a sign of our interest rate increases slowing down the service sector of the economy, and that is concerning to me."

Negative corporate news is also weighing on the overall market. Rivian Automotive is down more than -17% after forecasting full-year production below estimates.  Also, Lowe’s is down more than -5% after reporting an unexpected decline in Q4 comparable same-store sales, and Agilent Technologies is down more than -2% after forecasting weaker-than-expected Q2 adjusted EPS.

Today’s economic news was weaker than expected.  The Feb ISM manufacturing index rose +0.3 to 47.7, weaker than expectations of 48.0.  Also, Jan construction spending unexpectedly fell -0.1% m/m, weaker than expectations of an increase of +0.2% m/m.

Positive corporate news is supportive of the overall market.  Verisk Analytics is up more than +4% after reporting stronger-than-expected Q4 revenue.  Also, 3M Co is up more than +3% after the company said U.S. Department of Defense records show no hearing loss among a “vast majority” of plaintiffs in the Combat Arms earplug litigation.  In addition,  Dollar Tree is up more than +2% after reporting Q4 net sales above the consensus.

The China Feb manufacturing PMI rose +2.5 to 52.6, stronger than expectations of 50.6 and the fastest pace of expansion in more than ten years.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +0.03%.  China’s Shanghai Composite stock index closed up +1.00%, and Japan’s Nikkei Stock Index closed up +0.26%. 

Today’s stock movers…

Lowe’s (LOW) is down more than -5% to lead losers in the S&P 500 after reporting Q4 comparable same-store sales unexpectedly fell -1.5%, weaker than the consensus of a +0.88% gain.

Rivian Automotive (RIVN) is down more than -12% to lead losers in the Nasdaq 100 after forecasting full-year production of 50,000 vehicles, well below the consensus of 62,797. 

Advanced Auto Parts (AAP) is down more than -4% after Raymond James cut its price target on the stock to $180 from $200. 

Agilent Technologies (A) is down more than -2% after forecasting Q2 adjusted EPS of $1.24-$1.27, weaker than the consensus of $1.27. 

Monster Beverage (MNST) is down more than -2% after reporting Q4 adjusted EPS of 57 cents, below the consensus of 62 cents.

Universal Health Services (UHS) is down more than -3% after Wolfe Research downgraded the stock to peer perform from outperform.

Verisk Analytics (VRSK) is up more than +4% after reporting Q4 revenue of $630.4 million, stronger than the consensus of $622.6 million. 

3M Co (MMM) is up more than +3% to lead gainers in the Dow Jones Industrials after the company said U.S. Department of Defense records show that there was no hearing loss among a “vast majority” of plaintiffs in the Combat Arms earplug litigation. 

Caterpillar (CAT) is up more than +3% after the company announced that it reached a tentative agreement with its 7,000 United Auto Workers union members.

Dollar Tree (DLTR) is up more than +2% after reporting Q4 net sales of $7.72 billion, better than the consensus of $7.65 billion. 

U.S.-listed Chinese stocks are rallying today after economic reports showed China’s economy is on track for a stronger recovery.  PDD Holdings (PDD) and NetEase (NTES) are up more than +5%.  Also, Baidu (BIDU) is up more than +4%.  In addition, Alibaba Group Holding (BABA) and JD.com (JD) are up more than +3%. 

Across the markets…

March 10-year T-notes (ZNH23) today are down -19 ticks, and the 10-year T-note yield is up +7.3 bp at 3.993%.  Mar 10-year T-notes this morning tumbled to a 3-1/2 month low, and the 10-year T-note yield climbed to a 3-1/2 month high of 4.000%.  Negative carryover from a jump in European government bond yields is undercutting T-mote prices.  Today’s economic news showed an unexpected acceleration of inflation in Germany that pushed the 10-year German bund yield to an 11-year high of 2.726%.  Hawkish comments today from Atlanta Fed President Bostic also weighed n T-note when he said, "I think we will need to raise the federal funds rate to between 5% and 5.25% and leave it there until well into 2024."

The dollar index (DXY00) today is down by -0.21%.  Weaker-than-expected U.S. economic news today on Feb ISM manufacturing and Jan construction spending is weighing on the dollar.  Also, strength in the euro and yuan today undercut the dollar as both currencies rose to 1-week highs against the dollar.

EUR/USD (^EURUSD) today is up by +0.76% and posted a 1-week high. The euro today rallied after the German Feb CPI unexpectedly accelerated, which raises expectations for tighter ECB policy.  Also, hawkish comments today from ECB Governing Council member and Bundesbank President Nagel boosted the euro when he said “further significant interest-rate steps might be necessary” after the ECB raises rated by 50 bp this month.

German Feb CPI (EU harmonized) rose +1.0% m/m and +9.3% y/y, stronger than expectations of +0.7% m/m and +9.0% y/y.

German Feb unemployment unexpectedly rose +2,000, showing a weaker labor market than expectations of -10,000.

ECB Governing Council member and Bundesbank President Nagel said, "the 50 bp interest rate increase announced for March will not be the last.  Further significant interest-rate steps might even be necessary afterward, too."

USD/JPY (^USDJPY) today is up by +0.01%.  The yen today gave up overnight gains and is little changed.  An increase in the 10-year T-note yield today to a 3-1/2 month high is weighing on the yen.  Also, BOJ board member Nakagawa's comments today undercut the yen when he said the BOJ “needs to continue with easing” to support the economy.

The Japan Feb Jibun Bank manufacturing PMI was revised upward by +0.3 to 47.7 from the previously reported 47.4.

April gold (GCJ3) this morning is up +8.7 (+0.47%), and March silver (SIH23) is down -0.036 (-0.17%).  Precious metals prices this morning are mixed.  A weaker dollar today is supportive of metals prices.  Also, an unexpected acceleration of consumer prices in Germany has boosted demand for gold as an inflation hedge.  However, higher global bond yields today are limiting gains in precious metals.   Also, precious metals are being weighed down by comments today from Minneapolis Fed President Kashkari and Atlanta Fed President Bostic, who said they favor tighter monetary policy.

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