Stocks Mixed After Powell Says No Decision Made Yet on Pace of Rate Hikes

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.31%.

U.S. stock indexes this morning are mixed.  The broader market is moving higher today as bond yield declined after Fed Chair Powell said that no decision had been made yet on the pace of Fed rate hikes.  However, stock gains are muted after today’s U.S. reports on Feb ADP employment change and Jan JOLTS job openings showed 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.  Also, the Jan JOLTS job openings fell -410,000 to 10.824 million, stronger than expectations of 10.546 million.

Fed Chair Powell said, "the FOMC has not made any decision about the pace of rate hikes at the March meeting" and won't do so until they see the incoming data. 

Bonds are climbing, and yields are falling this morning on Fed Chair Powell’s comments.  Also, a decline in inflation expectations is supportive of bonds.  The 10-year T-note yield is down -6.1 bp to 3.903% after the 10-year breakeven inflation rate dropped to a 3-week low of 2.344%.

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 stronger-than-expected Feb ADP employment and Jan JOLTS job openings reports, 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.  Molson Coors Beverage is up more than +4% after Gordon Haskett said the company may have received a takeover approach based on language in its 10-K.  Also, lower bond yields today are boosting chip stocks.  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 -27% after reporting Q2 adjusted EPS well below the consensus and cutting its full-year adjusted EPS forecast.  Also, Brown-Forman dropped more than -4% after reporting Q4 EPS, which was well below consensus.  In addition, Tesla and Edwards Lifesciences are down more than -3% after being downgraded.

Overseas stock markets are mixed.  The Euro Stoxx 50 today is up +0.33%.  China’s Shanghai Composite stock index closed down -0.06%, and Japan’s Nikkei Stock Index closed up +0.48%. 

Today’s stock movers…

Molson Coors Beverage (TAP) is up more than +4% to lead gainers in the S&P 500 after Gordon Haskett said the company may have received a takeover approach based on language in its 10-K. 

A decline in bond yields today is boosting chip stocks.  Advanced Micro Devices (AMD) is up more than +2% to lead gainers in the Nasdaq 100.  Also, ON Semiconductor (ON), Nvidia (NVDA), NXP Semiconductors NV (NXPI) are up more than +2%.  In addition, Qualcomm (QCOM), Microchip Technology (MCHP), Lam Research (LRCX), Applied Materials (AMAT), and Texas Instruments (TXN) are up more than +1%. 

Occidental Petroleum (OXY) is up more than +1% after a regulatory filing showed Berkshire Hathaway bought 5.8 million shares of the stock between March 3 and March 7. 

CrowdStrike Holdings (CRWD) is up more than +1% after reporting Q4 revenue of $637.4 million, above the consensus of $624.8 million, and forecast 2024 revenue of $2.96 billion-$3.0 1billion, stronger than the consensus of $2.96 billion.

Campbell Soup (CPB) is up more than +1% after reporting Q2 organic net sales rose +13%, stronger than the consensus of +9.79%. 

Caterpillar (CAT) is up more than +1% after the company’s CFO said North American construction demand remains very strong.

Brown-Forman (BF/B) is down more than -4% after reporting Q4 EPS of 21 cents, well below the consensus of 47 cents.

United Natural Foods (UNFI) is down more than -27% 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.  US Foods Holding (USFD) also fell -3%, and Sysco (SYY) fell -1% on the news.

Tesla (TSLA) is down more than -3% after Berenberg downgraded the stock to hold from outperform.

Edwards Lifesciences (EW) is down more than -3% after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Centene Corp (CNC) is down more than -1% after Deutsche Bank downgraded the stock to hold from buy on concern for 2024 EPS estimates.

Across the markets…

June 10-year T-notes (ZNM23) today are up +12 ticks, and the 10-year T-note yield is down -6.1 bp at 3.903%.  June 10-year T-notes this morning are moderately higher on carryover support from a rally in German bunds.   The 10-year German bund yield fell to a 1-week low of 2.627%.  T-notes also found support on comments today from Fed Chair Powell, who said no decision had been made yet about the size of rate hikes at the March FOMC meeting.  In addition, T-notes garnered support from a decline in inflation expectations as the 10-year breakeven inflation rate today dropped to 3-week low at 2.344%.  Gains in T-notes are limited on today’s stronger-than-expected Feb ADP employment report and from supply pressures as the Treasury will auction $32 billion of reopened 10-year T-notes later today as part of this week’s $90 billion offering of T-note and T-bonds.

The dollar index (DXY00) today is down by -0.12%.  The dollar this morning fell back from a 3-1/4 month high and is moderately lower.  A decline in T-note yields today is undercutting the dollar.  Also, the strength in stocks has reduced the liquidity demand for the dollar.  The dollar today initially rose to a 3-1/4 month high on signs of strength in the U.S. labor market on the better-than-expected reports on Feb ADP employment change, and Jan JOLTS job openings, which are hawkish for Fed policy.  

EUR/USD (^EURUSD) today is up by +0.09%.  EUR/USD today recovered from a 2-month low and is slightly higher as a weaker dollar sparked short-covering in the euro.  EUR/USD also found support after German Jan industrial production posted its biggest increase in 2-1/2 years.  The euro today initially moved lower after Eurozone Q$ GDP was revised lower.  Also, dovish comments from ECB Governing Council member Visco weighed on the euro.

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.

USD/JPY (^USDJPY) today is down by -0.33%.  The yen today recovered from a 2-3/4 month low against the dollar and is moderately higher.  A decline in T-note yields today sparked some short covering in the yen.  Also, today’s rally in the Nikkei Stock Index to a 3-1/2 month high reduced safe-haven demand for the yen. 

Japan’s economic news today was mixed for the yen.  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.

April gold (GCJ3) this morning is up +6.9 (+0.38%), and May silver (SIK23) is up +0.081 (+0.40%).  Precious metals prices this morning recovered from early losses and are moderately higher. A weak dollar today is giving metals prices a boost.  Also, lower global bond yields are supportive of metals.  Precious metals today initially moved lower, with gold posting a 1-week low today’s stronger-than-expected U.S. economic reports on Feb ADP employment and Jan JOLTS job openings signaled labor market strength that is hawkish for Fed policy.  The continued liquidation of long gold positions in ETFs also weighed on gold prices after holdings of gold in ETFs fell to a new 2-3/4 year low Tuesday 

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