Markets Today: Stock Indexes Slightly Higher as Bond Yields Fall

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.09%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.15%.

U.S. stock index futures this morning are slightly higher on a decline in bond yields.  Bonds are climbing, and yields are falling this morning on a decline in inflation expectations.  The 10-year T-note yield is down -3.7 bp to 3.927% after the 10-year breakeven inflation rate dropped to a 2-1/2 week low of 2.356%.

Gains in stock indexes were muted after this morning’s report showed Feb ADP employment change rose more than expected, signaling labor market strength that is hawkish for Fed policy. The U.S. Feb ADP employment change rose +242,000, stronger than expectations of +200,000.

Stock indexes have stabilized this morning from Tuesday’s selloff after Fed Chair Powell signaled the Fed would raise interest rates than previously anticipated if inflation stays hot. After today’s ADP report, the markets are pricing in a 75% chance the Fed will raise interest rates by 50 bp at the March 21-22 FOMC meeting.

Positive corporate news today is also supportive of the overall market.  CrowdStrike Holdings jumped more than +6% in pre-market trading after reporting stronger-than-expected Q4 revenue and forecasting 2024 revenue above consensus. Also, Occidental Petroleum is up more than +2% after a regulatory filing showed Berkshire Hathaway bought 5.8 million shares of the stock between March 3 and March 7.  In addition, Campbell Soup is up more than +1% after reporting better-than-expected Q2 organic net sales.

On the negative side, United Natural Foods plunged more than -20% in pre-market trading after reporting Q2 adjusted EPS well below the consensus and cutting its full-year adjusted EPS forecast. Also, Brown-Forman dropped more than -2% after reporting Q4 EPS, which was well below consensus.  In addition, Tesla and Edwards Lifesciences are down more than -1% after being downgraded.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +0.30%.  China’s Shanghai Composite stock index closed down -0.06%, and Japan’s Nikkei Stock Index closed up +0.48%. 

The Euro Stoxx 50 index recovered from early losses today and is slightly higher.  Some positive corporate news boosted stocks after Continental AG jumped more than +5% after forecasting stronger-than-expected 2023 sales.  Also, European cybersecurity stocks rose after CrowdStrike rallied late Tuesday after reporting better-than-expected earnings. In addition, lower government bond yields are supporting stocks, with the 10-year German bund yield down -3.6 bp to 2.656%.  European stocks initially moved lower today on the heels of the sharp decline in U.S. equity markets on Tuesday and after Eurozone Q4 GDP was revised lower.

ECB Governing Council member Visco said, "uncertainty is so high that the Governing Council of the ECB has agreed to decide meeting by meeting, without forward guidance.  I don't appreciate statements by my colleagues about future and prolonged interest rate hikes."

Eurozone Q4 GDP was revised downward to unchanged m/m and+1.8% y/y from the initially reported +0.1% m/m and +1.9% y/y.

German Jan industrial production rose +3.5% m/m, stronger than expectations of +1.4% m/m and the largest increase in 2-1/2 years.

German Jan retail sales unexpectedly fell -0.3% m/m, weaker than expectations of +2.3% m/m.

China’s Shanghai Composite today fell to a 1-week low and closed slightly lower.  Weakness in Chinese technology stocks weighed on the overall market after Tuesday’s hawkish comments from Fed Chair Powell that the ultimate level of interest rates is likely to be higher than previously anticipated hurt appetite for risk assets.  Chinese mining stocks and commodity producers also fell on concern higher interest rates from the Fed will slow economic growth and demand for commodities.  Today's strength in Chinese solar stocks was positive for the overall market after China’s National Energy Administration said solar installations in China in 2022 rose +59% y/y to a record-high 87.4 gigawatts.  The China Photovoltaic Industry Association said another 95 to 120 gigawatts of solar could be added in China this year.

Japan’s Nikkei Stock Index today rallied to a 3-1/2 month high and closed moderately higher.  A rally in Japanese exporter stocks led the overall market higher today after the yen tumbled to a 2-3/4 month low against the dollar.  Also, Japanese retailer stocks climbed after SMBC Nikko said Japan’s department-store sales “continue to recover industrywide.”

Japan’s economic news today was mixed for stocks.  On the positive side,  the Feb eco watchers expectations survey rose +1.5 to a 9-month high of  50.8, stronger than expectations of 49.7.  Conversely, the Jan leading index CI fell -0.4 to a 2-year low of 96.5, weaker than expectations of 96.9.

Pre-Market U.S. Stock Movers

CrowdStrike Holdings (CRWD) jumped more than +6% in pre-market trading after reporting Q4 revenue of $637.4 million, above the consensus of $624.8 million, and forecasting 2024 revenue of $2.96 billion-$3.0 1billion, stronger than the consensus of $2.96 billion.

Occidental Petroleum (OXY) climbed more than +2% in pre-market trading after a regulatory filing showed Berkshire Hathaway bought 5.8 million shares of the stock between March 3 and March 7. 

Amgen (AMGN) rose more than +1% in pre-market trading after the company maintained its regular quarterly cash dividend at $2.12 per share. 

Campbell Soup (CPB) gained more than +1% in pre-market trading after reporting Q2 organic net sales rose +13%, stronger than the consensus of +9.79%. 

AGNC Investment Corp (AGNC) gained more than +1% in pre-market trading after JPMorgan Chase upgraded the stock to overweight from neutral.

Tesla (TSLA) fell more than -1% in pre-market trading after Berenberg downgraded the stock to hold from outperform. 

Brown-Forman (BF/B) dropped more than -2% in pre-market trading after reporting Q4 EPS of 21 cents, well below the consensus of 47 cents.

Shoals Technology Group (SHLS) tumbled more than -8% in pre-market trading after an offering of 24.5 million class A shares by holders priced at $24.70 via Morgan Stanley, representing a 7% discount from Tuesday’s close.

Edwards Lifesciences (EW) slid more than -1% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Permian Resources (PR) dropped more than -4% in pre-market trading after holders NGP Capital and Riverstone Investment Group offered 27.5 million shares of the stock via JPMorgan Chase and Citigroup.

United Natural Foods (UNFI) plunged more than -20% in pre-market trading after reporting Q2 adjusted EPS of 78 cents, well below the consensus of $1.43, and cut its full-year adjusted EPS forecast to $3.05-$3.90 from a prior estimate of $4.85-$5.15, weaker than the consensus of $4.97. 

Today’s U.S. Earnings Reports (3/8/2023)

Brown-Forman Corp (BF/B), Campbell Soup Co (CPB), MongoDB Inc (MDB).

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