Stocks Fall on Hawkish Powell

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.90%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.70%.

U.S. stock indexes this morning declined, and bond yield rose after Fed Chair Powell said the peak in interest rates could be higher than anticipated as recent U.S. economic news has come in stronger than expected.  As a result, expectations have increased for the Fed to raise interest rates by 50 bp instead of 25 bp at the March 21-22 FOMC meeting. 

Fed Chair Powell said the FOMC is prepared to increase the pace of rate hikes if needed and 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."  He added that there's good reason for the FOMC to keep rates higher for longer, as "the historical record cautions strongly against prematurely loosening policy."

Negative corporate news today is also weighing on stocks.  Rivian Automotive is down more than -12% after announcing plans to raise $1.3 billion by selling green convertible bonds.  Also, DXC Technology is down more than -3% after it said it terminated discussions with a financial sponsor regarding a potential acquisition of the company.  In addition, Nutanix is down more than -7% after saying it will delay its 10-Q filing amid an investigation into its use of third-party evaluation software.

On the negative side, Dick’s Sporting Goods is up more than +6% after reporting better-than-expected Q4 net sales.  Also, Dish Network is up more than +3% on signs of insider buying after an SEC filing showed board member Defranco bought $15.7 million worth of stock on March 2.  In addition, Meta Platforms is up more than +1% 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. 

Overseas stock markets are mixed.  The Euro Stoxx 50 today is down -0.60%.  China’s Shanghai Composite stock index closed down -1.11%, and Japan’s Nikkei Stock Index closed up +0.25%. 

Today’s stock movers…

DXC Technology (DXC) is down more than -3% after it said it terminated discussions with a financial sponsor regarding a potential acquisition of the company.

Rivian Automotive (RIVN) is down more than -12% to lead losers in the Nasdaq 100 after announcing plans to raise $1.3 billion by selling green convertible bonds. 

Bank stocks are under pressure today and weighing on the overall market.  Fifth Third Bancorp (FITB), Zions Bancorp (ZION), Truist Financial (TFC), M&T Bank (MTB), Wells Fargo (WFC), and Citizens Financial Group (CFG) are down more than -2%. 

Nutanix (NTNX) is down more than -7% after saying it will delay its 10-Q filing amid an investigation into its use of third-party evaluation software.

Trimble (TRMB) is down more than -3% after Northcoast Research downgraded the stock to sell from neutral. 

Dish Network (DISH) is up more than +5% to lead gainers in the S&P 500 on signs of insider buying after an SEC filing showed board member Defranco bought $15.7 million worth of stock on March 2.

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. 

Atlassian Corp (TEAM) is up more than +3% to lead gainers in the Nasdaq 100 after the company said it would cut 5% of its workforce.

Delta Air Lines (DAL) is up more than +3% after Evercore ISI upgraded the stock to outperform from inline, citing “upbeat demand.”

United Airlines Holdings (UAL) is up more than +3% after Exane BNP Paribas upgraded the stock to outperform from underperform. 

Costco Wholesale (COST) is up more than +2% after Northcoast Research upgraded the stock to buy from neutral.

ON Semiconductor (ON) is up more than +2% after the company announced a long-term supply agreement with BMW AG, a move that Rosenblatt Securities said was positive.  

Meta Platforms (META) is up more than +1% 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. 

Across the markets…

June 10-year T-notes (ZNM23) today are down -4 ticks, and the 10-year T-note yield is up +1.6 bp at 3.974%.  June 10-year T-notes this morning gave up an early advance and turned lower after Fed Chair Powell said, “the ultimate level of interest rates is likely to be higher than previously anticipated."  Supply concerns are also bearish for T-note prices as the Treasury will auction $40 billion of 3-year T-notes later today as part of this week’s $90 billion offering of T-note and T-bonds.  T-notes initially opened higher on carryover support from a decline in European government bond yields.   The 10-year German bund yield is down -3.5 bp to 2.714% after the ECB's monthly survey showed a decline in inflation expectations.  

The dollar index (DXY00) today is up by +0.76%.  The dollar rallied to a 1-week high today on hawkish comments from Fed Chair Powell, who said the ultimate level of interest rates is likely to be higher than previously anticipated," and there's good reason for the FOMC to keep rates higher for longer.  Weakness in stocks today also boosted the liquidity demand for the dollar. 

EUR/USD (^EURUSD) today is down by -0.66%.  Dollar strength today is weighing on the euro.  Also, a decline in Eurozone inflation expectations is dovish for ECB policy and negative for EUR/USD after the ECB's monthly inflation expectations survey showed Jan consumer expectations declined.  Losses in the euro were limited after German Jan factory orders unexpectedly rose. 

The ECB's monthly survey showed Jan consumer expectations for 12 months fell to 4.9% from 5.0% in Dec, and 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.

USD/JPY (^USDJPY) today is up by +0.43%.  Hawkish comments today from Fed Chair Powell pushed T-note yields higher and weighed on the yen.  Also, today’s rally in the Nikkei Stock Index to a 3-month high reduced safe-haven demand for the yen.  In addition, today’s economic news that showed a plunge in Japanese wages is dovish for BOJ policy and negative for the yen.

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.

April gold (GCJ3) this morning is down -29.1 (-1.57%), and May silver (SIK23) is down -0.705 (-3.34%).  Precious metals prices this morning are sharply lower.  Hawkish comments today from Fed Chair Powell  pushed the dollar up to a 1-week high and undercut metals prices when he said, “the ultimate level of interest rates is likely to be higher than previously anticipated."  Metals prices fell even further when Powell said there was good reason for the FOMC to keep rates higher for longer.  The continued liquidation of long gold positions in ETFs also weighs on gold prices after holdings of gold in ETFs fell to a new 2-3/4 year low Monday.

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