Stocks Close Only Slightly Higher as Bond Yields Rise

What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.09%.

Stock indexes Monday posted modest gains, with the S&P 500 and Nasdaq 100 climbing to 2-week highs and the Dow Jones Industrials posting a 1-1/2 week high.  A more than +1% rally in Apple led technology stocks higher after Goldman Sachs initiated coverage on the stock with a buy rating.  However, stock indexes fell back from their best levels and gave up most of their gains after T-note yields failed to hold an early decline and rose +2.5 bp to 3.977%.

Concerns about global growth also limited the upside in stocks Monday.  Chinese leaders at the annual National People’s Congress set a lower-than-expected 5% GDP target for China this year, which implies China is unlikely to add large-scale stimulus to boost economic growth.

Positive corporate news Monday gave the overall market a boost.  Merck & Co closed up more than +3% Monday after Jeffries initiated a buy rating on the stock and after Merck reported full data from a late-stage study of its drug sotatercept showed it demonstrated improvements across the primary endpoint of patients with pulmonary arterial hypertension.  Also, Domino’s Pizza closed up more than +3% on signs of insider buying after an SEC filing showed CEO Weiner bought $1.01 million of the company’s stock on March 2.  In addition, Ciena closed up more than +3% after reporting stronger-than-expected Q1 revenue.

On the negative side, Dexcom closed down more than -7% after Abbott Laboratories said the FDA cleared its integrated continuous glucose monitoring sensors for connectivity with automated insulin delivery systems, which has bearish implications for Dexcom.  Also, Marvell Technology closed down more than -4% on falling price estimates after the average price targets of 15 analysts who cover Marvell fell -10% since the company reported earnings last Thursday. In addition, Tesla closed down more than -2% after it announced it was cutting the price of its Model S and X electric vehicles for the second time this year.

Monday’s U.S. news showed Jan factory orders fell -1.6% m/m, stronger than expectations of -1.8% m/m.  Also, Jan factory orders ex-transportation rose +1.3% m/m, stronger than expectations of +1.0% m/m.

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 closed up +0.44%.  China’s Shanghai Composite stock index closed down -0.19%, and Japan’s Nikkei Stock Index closed up +1.11%. 

Today’s stock movers…

Merck & Co (MRK) closed up more than +3% Monday to lead gainers in the Dow Jones Industrials after Jeffries initiated a buy rating on the stock, saying the company finds itself in the “sweet spot” of execution and value.  Gains accelerated Monday afternoon after Merck reported full data from a late-stage study of its drug sotatercept showed it demonstrated improvements across the primary endpoint of patients with pulmonary arterial hypertension.

Domino’s Pizza (DPZ) closed up more than +3% on signs of insider buying after an SEC filing showed CEO Weiner bought $1.01 million of the company’s stock on March 2. 

Ciena (CIEN) closed up more than +3% after reporting Q1 revenue of $1.06 billion, well above the consensus of $958.1 million. 

MercadoLibre (MELI) closed up more than +2% after MI Somerset Global Emerging Markets Fund and Fidelity Advisor Equity Growth Fund added MercadoLibre to their investments.   

Apple (AAPL) closed up more than +1% after Morgan Stanley raised its price target on the stock to $180 from $175 and said the company has five under-appreciated catalysts that can drive a re-rating over the next 12 months. 

CrowdStrike Holdings (CRWD) closed up more than +1% after announcing a strategic partnership with Dell Technologies.

Emerson Electric (EMR) closed up more than +2% after UBS upgraded the stock to buy from neutral.

Monster Beverage (MNST) closed up more than +1% after Redburn upgraded the stock to buy from neutral.

Dexcom (DXCM) closed down more than -7% to lead losers in the S&P 500 and Nasdaq 100 after Abbott Laboratories said the FDA cleared its integrated continuous glucose monitoring sensors for connectivity with automated insulin delivery systems, a move that has bearish implications for Dexcom.

Marvell Technology (MRVL) closed down more than -4% on falling price estimates after the average price targets of 15 analysts who cover Marvell fell -10% since the company reported earnings last Thursday.

Tesla (TSLA) closed down more than -2% after it announced it was cutting the price of its Model S and X electric vehicles for the second time this year. 

Incyte Corp (INCY) closed down more than -2% after the company said it would discontinue its Phase 3 LIMBER-304 trial following an interim analysis that indicated the trial was unlikely to meet its primary endpoint. 

Freeport McMoRan (FCX) closed down more than -2% as mining stocks fell on Chinese industrial metals demand concerns after Chinese leaders didn’t announce any significant new stimulus measures at the National People’s Congress.

Walgreens Boots Alliance (WBA) closed down more than -1% after California Governor Newsome said his state would stop doing business with Walgreens after the company moved to stop sales of abortion pills in 20 states. 

Across the markets…

June 10-year T-notes (ZNM23) on Monday closed down -3.5 ticks, and the 10-year T-note yield rose by +2.5 bp to 3.977%.  T-notes Monday erased an early rally and closed lower on negative carryover from a jump in German bund yields.  The 10-year German bund yield Monday moved up from a low of 2.637% to 2.749% after ECB Governing Council member Holzmann said that "core inflation will not weaken significantly in the first half of this year," therefore, the ECB should raise interest rates by 50 bp in March, May, June, and July.  Supply concerns also weighed on T-notes as the Treasury will auction $90 billion of T-notes and T-bonds this week, beginning with Tuesday’s $40 billion auction of 3-year T-notes.

T-notes Monday initially moved higher on reduced inflation concerns after Chinese leaders at the annual National People’s Congress set a lower-than-expected 5% GDP target for China this year, which implies China is unlikely to add large-scale stimulus.

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