Stocks Slide After the Fed Chairman Powell Warns Rates Will Likely Be Higher

Morning Markets

The S&P 500 Index ($SPX) (SPY) today is down -0.41%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.46%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.25%.

Stock are headed lower after Federal Reserve Chair Jerome Powell said in his prepared remarks that, “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”

The 10-year T-note yield is up +1.5 bp to 3.98%. 

Fed Chair Powell’s semi-annual testimony today to the Senate Banking Committee will be scoured for views on the economic outlook, inflation, wage pressures, employment, and clues on the Fed’s interest rate path. 

Meta Platforms is up more than +1% in after a Bloomberg News report said the company is planning a fresh round of layoffs and will cut thousands of employees as soon as this week.   Also, Dick’s Sporting Goods is up more than +9% after reporting better-than-expected Q4 net sales.  In addition, Dish Network is up more than +6% on signs of insider buying after an SEC filing showed board member Defranco bought $15.7 million worth of stock on March 2.

On the negative side, Nutanix is slumping -8% after saying it would delay its 10-Q filing amid an investigation into its use of third-party evaluation software.  Also, Rivian Automotive is down more than -11% after announcing plans to raise $1.3 billion through the sale of green convertible bonds.  In addition, KeyCorp is down -2.8% after cutting guidance on 2023 net interest income.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is down -0.67%.  China’s Shanghai Composite stock index closed down -1.11%, and Japan’s Nikkei Stock Index closed up +0.25%. 

The Euro Stoxx 50 index today reversed early gains and is slightly lower on concern the ECB will raise interest rates higher and for longer after economic news showed that German Jan factory orders unexpectedly increased. Stocks initially moved higher today on a decline in government bond yields.  An easing of inflation expectations gave bonds a boost and knocked yields lower after the ECB's monthly survey said consumer expectations for inflation over the next 12 months dropped, declining “significantly” for three years ahead.  The 10-year German bund yield is down -7.5 bp to 2.674%. 

The ECB's monthly survey showed Jan consumer expectations for 12 months fell to 4.9% from 5.0% in Dec, and Jan inflation expectations three years ahead decreased to 2.5% from 3.0% in Dec. 

German Jan factory orders unexpectedly rose +1.0% m/m, stronger than expectations of -0.7% m/m.

China’s Shanghai Composite today closed moderately lower.  Economic concerns weighed on Chinese stocks today after trade news showed China’s exports and imports continued to decline in the first two months of the year. Global demand for Chinese goods started falling in late 2022 as soaring inflation in the rest of the world, and higher interest rates dampened consumer spending worldwide.  Heightened U.S.-China tensions also weighed on stocks after new Chinese Foreign Minister Qin Gang warned the U.S. risks catastrophe with moves to “contain” China.

Chinese trade data were mixed.  China Feb exports fell -6.8% year-to-date y/y, stronger than expectations of -9.0% year-to-date y/y.  However, Feb imports fell -10.2% year-to-date y/y, weaker than expectations of -5.5% year-to-date y/y.

Japan’s Nikkei Stock Index today climbed to a new 3-month high and closed moderately higher.  Japanese food makers rallied today after NHK reported that Japan’s agriculture ministry plans to take measures to keep the rise in imported wheat prices at 5%.  Stocks also found support as today’s economic news showed signs of scant Japanese wage pressures that bolstered speculation the BOJ will maintain its ultra-easy monetary policy after Japan Jan real cash earnings fell by the most in 8-1/2 years. The BOJ meets this Thursday for a 2-day meeting.

Japan Jan real cash earnings fell -4.1% y/y, weaker than expectations of -3.2% y/y and the biggest decline in 8-1/2 years.

Pre-Market U.S. Stock Movers

Meta Platforms (META) is up more than +1% in pre-market trading after a Bloomberg News report said the company is planning a fresh round of layoffs and will cut thousands of employees as soon as this week. 

Dick’s Sporting Goods (DKS) jumped more than +6% in pre-market trading after reporting Q4 net sales of $3.60 billion, stronger than the consensus of $3.46 billion. 

United Airlines Holdings (UAL) rose more than +1% in pre-market trading after Exane BNP Paribas upgraded the stock to outperform from underperform. 

Trip.com (TCOM) climbed more than +3% in pre-market trading after the company reported Q4 revenue of 5.03 billion yuan, better than the consensus of 4.86 billion yuan, and said domestic travel demand in China had recovered strongly since Covid restrictions were dropped, with hotel and airline bookings exceeding 2019 levels. 

Squarespace (SQSP) rallied more than +13% in pre-market trading after forecasting full-year revenue of $955 million-$970 million, above the consensus of $950.8 million.

Dish Network (DISH) climbed more than +3% in pre-market trading on signs of insider buying after an SEC filing showed board member Defranco bought $15.7 million worth of stock on March 2.

Nutanix (NTNX) slumped more than -9% in pre-market trading after saying it will delay its 10-Q filing amid an investigation into its use of third-party evaluation software.

Rivian Automotive (RIVN) tumbled more than -5% in pre-market trading after announcing plans to raise $1.3 billion through the sale of green convertible bonds. 

KeyCorp (KEY) slid more than -3% in pre-market trading after cutting guidance on 2023 net interest income to up 1% to 4% from prior guidance of up 6% to 9%. 

Zynex (ZYXI) plunged more than -12% in pre-market trading after saying it will postpone the release of its Q4 and full-year financial results and conference call initially scheduled for Monday.

Ovintiv (OVV) fell more than -1% in pre-market trading after BMO Capital Markets downgraded the stock to market perform from outperform. 

Cara Therapeutics (CARA) plummeted more than -30% in pre-market trading after reporting a Q4 loss per share of -56 cents, wider than the consensus of -34 cents. 

Fergusson Plc (FERG) dropped more than -3% in pre-market trading after reporting Q2 adjusted Ebitda of $630 million, weaker than the consensus of $637 million.

Today’s U.S. Earnings Reports (3/7/2023)

Casey's General Stores Inc (CASY), Crowdstrike Holdings Inc (CRWD), Dick's Sporting Goods Inc (DKS), Esab Corp (ESAB), Masterbrand Inc (MBC), Thor Industries Inc (THO).

More Stock Market News from Barchart

• How To Generate Extra Income From Your Bank Shares
• S&P Futures Tick Higher Ahead of Powell Testimony
• These 2 Dividend Elites Are Beating Their Own Sector Indices!
• Stocks Close Only Slightly Higher as Bond Yields Rise