Markets Today: Stocks Rally as Concern Eases About Aggressive Fed

Morning Markets

March S&P 500 futures (ESH23) this morning are up +0.37%, and March Nasdaq 100 E-Mini futures (NQH23) are up +0.75%.

U.S. stock index futures this morning erased overnight losses and are moderately higher after the U.S. Feb unemployment report showed an unexpected increase in the unemployment rate and weaker-than-expected hourly earnings, although payrolls showed a larger-than-expected increase.  The payroll report dampened speculation that the Fed will accelerate its pace of interest rate hikes. 

The turmoil in the U.S. banking sector has fueled safe-haven demand for government debt and knocked bond yields lower.  Bond yields fell further after this morning’s U.S. Feb payroll report showed a smaller-than-expected increase in wages.  The 10-year T-note yield dropped to a 3-week low of 3.747%.  Also, expectations for a 50 bp rate hike at the Mar 21-22 FOMC meeting dropped to under 50%.

U.S. Feb nonfarm payrolls rose +311,000, stronger than expectations of +225,000.  The Feb unemployment rate unexpectedly rose +0.2 to 3.6% versus expectations of no change at 3.4% as the Feb participation rate climbed to 62.5% from 62.4% in Jan.

U.S. Feb average hourly earnings rose +0.2% m/m and 4.6% y/y, slightly weaker than expectations of +0.3% m/m and +4.7% y/y.

Bank stocks are weaker in pre-market trading on liquidity concerns and the potential fallout from the plunge in SVB Financial after the bank took steps to shore up its capital on Thursday.  SVB Financial is down more than -67% this morning, adding to Thursday’s -60% plunge after Peter Thiel’s Founders Fund and other prominent fund managers advised businesses to withdraw their money from the bank.

Bitcoin (^BTCUSD) fell to a 1-3/4 month low today on negative carryover from Thursday when Silvergate Capital said it plans to wind down operations and liquidate its bank.  An escalating U.S. regulatory crackdown on crypto is also hurting market sentiment, with the U.S. Securities and Exchange Commission (SEC) contending that many crypto coins are securities, a designation that would potentially make them harder to trade.  Bitcoin recovered most of its losses after stocks rallied on today’s U.S. Feb payroll report.

Negative corporate news today is also weighing on the overall market.  DocuSign slumped more than -12% in pre-market trading after forecasting weaker-than-expected Q1 billings.  Also, Oracle tumbled more than -4% after reporting Q3 cloud license and on-premise license revenue than was below consensus.  In addition, the Gap fell more than -7% after reporting Q4 net sales that were below expectations.

On the positive side, Stratasys is up more than +12% after Nano Dimension offered to buy the rest of Stratasys stock that it doesn’t already own for $18 per share in cash, a 28% premium to Thursday’s close.  Also, Charles Schwab, United Airlines Holdings, and  Roblox are up +1% or more after being upgraded.

Overseas stock markets are lower.  The Euro Stoxx 50 today is down -1.05%.  China’s Shanghai Composite stock index closed down -1.40%, and Japan’s Nikkei Stock Index closed down -1.67%. 

The Euro Stoxx 50 index fell to a 1-week low and is moderately lower.  A selloff in bank stocks is dragging the overall market lower today.  Concern about contagion from the plunge in SVB Financial weighed on European bank stocks after SVB Financial after it took steps to shore up its capital, stoking fears that soaring interest rates are eroding balance sheets across the financial industry.  The slump in stocks has sparked safe-haven demand for government debt and knocked European bond yields lower, with the 10-year German bund yield falling to 2.476% and the 10-year UK gilt yield falling to 3.634%, both at 2-week lows. 

China’s Shanghai Composite today tumbled to a 2-1/2 week low and closed moderately lower.  Chinese stocks were under pressure today on uncertainty over the economic outlook and a lack of fresh catalysts from the ongoing National People’s Congress.  Chinese bank stocks tumbled as they tracked Thursday’s rout in U.S. bank stocks following the troubles at SVB Financial and the collapse of Silvergate Capital. Chinese electric vehicle makers also fell amid growing concerns of a price war after BMW became the latest vehicle maker to cut electric-car prices. 

Stronger-than-expected credit growth in China supported stocks after today’s news showed China Feb aggregate financing, the broadest measure of credit growth, rose +3.16 trillion yuan, stronger than expectations of +2.30 trillion yuan.  Also, Feb new yuan loans rose +1.81 trillion yuan, stronger than expectations of +1.50 trillion yuan.

Japan’s Nikkei Stock Index today closed moderately lower.  Weakness in Japanese bank stocks led the overall market lower today after the BOJ maintained its easy-money policy and on concerns about contagion from Thursday’s selloff in U.S. bank stocks.  Also, comments from BOJ Governor Kuroda weighed on stocks when he said uncertainties are “extremely high” for Japan’s economy. 

Japan’s economic news today was mixed for stocks.  On the negative side, Japan Jan household spending fell -0.3% y/y, weaker than expectations of -0.1% y/y.  Conversely, Feb PPI eased to +8.2% y/y from +9.5% y/y in Jan, weaker than expectations of +8.4% y/y and the smallest pace of increase in 16 months.

The BOJ voted 9-0 to keep its policy balance rate at -0.1% and to maintain its 10-year JGB yield target at about 0%. 

BOJ Governor Kuroda said, "it's still too early to discuss an exit" from its monetary policy easing.

Pre-Market U.S. Stock Movers

SVB Financial (SIVB) sank more than -67% in pre-market trading, adding to Thursday’s -60% plunge, amid growing concern over the company’s financial health as several prominent fund managers recommended that companies withdraw their money from the bank. 

Bank stocks are weaker in pre-market trading on growing concern about SVB Financial and Silvergate Capital.  Bank of America (BAC), Comerica (CMA), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) are down 1% or more.

Oracle (ORCL) tumbled more than -4% in pre-market trading after reporting Q3 cloud license and on-premise license revenue of $1.29 billion, weaker than the consensus of $1.38 billion. 

DocuSign (DOCU) slumped more than -12% in pre-market trading after forecasting Q1 billings of $615 million to $625 million, below the consensus of $625.1 million. 

Caterpillar (CAT) dropped more than -2% in pre-market trading after UBS downgraded the stock to sell from neutral, saying its growth momentum is not good enough to justify its valuation.

Crypto-related stocks fell in pre-market trading, with the price of Bitcoin down more than -1% at a 1-3/4 month low on fears of an escalating U.S. regulatory crackdown after the SEC said that many crypto coins are securities, a designation that would potentially make then harder to trade.  Marathon Digital (MARA), Riot Platforms (RIOT), and Coinbase Global (COIN) are down -2% or more.

The Gap (GPS) fell more than -7% in pre-market trading after reporting Q4 net sales of $4.24 billion, below the consensus of $4.36 billion. 

Stratasys (SSYS) rallied more than +12% in pre-market trading after Nano Dimension offered to buy the rest of Stratasys stock that it doesn’t already own for $18 per share in cash, a 28% premium to Thursday’s close.   

Charles Schwab (SCHW) rose more than +1% in pre-market trading after Piper Sandler said that Thursday’s -12% plunge in the stock represents a buying opportunity for investors. 

United Airlines Holdings (UAL) gained more than +1% in pre-market trading after Barclays upgraded the stock to overweight from equal weight. 

Roblox (RBLX) climbed more than +3% in pre-market trading after Jeffries upgraded the stock to buy from hold.

Today’s U.S. Earnings Reports (3/10/2023)

AirSculpt Technologies Inc (AIRS), Akero Therapeutics Inc (AKRO), ATI Physical Therapy Inc (ATIP), Bioventus Inc (BVS), Bird Global Inc (BRDS), Buckle Inc/The (BKE), Century Casinos Inc (CNTY), Design Therapeutics Inc (DSGN), Eiger BioPharmaceuticals Inc (EIGR), Geron Corp (GERN), Kronos Bio Inc (KRON), Latch Inc (LTCH), MarketWise Inc (MKTW), MeiraGTx Holdings plc (MGTX), National Beverage Corp (FIZZ), National Energy Services Reuni (NESR), One Liberty Properties Inc (OLP), OppFi Inc (OPFI), RAPT Therapeutics Inc (RAPT), Target Hospitality Corp (TH), TuSimple Holdings Inc (TSP), Urstadt Biddle Properties Inc (UBA), Valhi Inc (VHI), Y-mAbs Therapeutics Inc (YMAB).

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