Stocks Mixed as Higher Bond Yields Weigh on Tech

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.03%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.50%.

U.S. stock indexes this morning are mixed, with the Dow Jones Industrials climbing to a 7-week high.  Dovish comments today from New York Fed President Williams gave the overall market a boost when he said if inflation comes down, the Fed will need to lower interest rates.  However, higher bond yields today are undercutting technology stocks and are weighing on the Nasdaq 100. 

The markets are awaiting Wednesday’s March U.S. consumer price report to see if the Fed will need to keep raising interest rates.  The consensus is for Wednesday’s Mar core CPI (ex-food and energy) to edge up to +5.6% y/y from February’s +5.5% y/y gain. 

Stocks are also awaiting Q1 earnings reporting season, which kicks off this Friday with earnings results from big U.S. banks, including Citigroup, JPMorgan Chase, and Wells Fargo.

A large short position in equity futures could add fuel to any short-covering rally. Last Friday’s weekly Commitment of Traders (COT) data showed that large speculators, mostly hedge funds, boosted their net-short positions in S&P 500 E-mini futures by 96,803 to an 11-year high of 321,459 positions in the week ended April 4.

On the positive side for stocks, CarMax is up more than +7% after reporting stronger-than-expected Q4 EPS.  Also, Freeport-McMoRan is up more than +2% after Eight Capital named the stock one of its top picks, saying it expects copper prices to spike and drive a “prosperity phase” for mining companies.

On the negative side, Moderna is down more than -5% after it said a final stage study of its RNA flu shot hadn’t accumulated enough data to determine efficacy. Also, ADTRAN Holdings plunged more than -24% after it forecasted preliminary Q1 revenue that was below consensus.

New York Fed President Williams said monetary policy is in a restrictive stance, and the Fed's median forecast for one more 25 bp rate hike this year followed by a pause is a "reasonable starting place."  He added that if inflation comes down, the Fed will need to lower interest rates. 

The International Monetary Fund cut its 3023 global GDP forecast by -0.1 to 2.8% from a January forecast of 2.9% and cut its 2024 global GDP forecast to 3.0% from 3.1%.

Global bond yields are higher.  The 10-year T-note yield is up +1.7 bp at 3.434%.  The 10-year German bund yield is up +12.0 bp at 2.304%, and the 10-year UK gilt yield is up +10.6 bp at 3.538%.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.61%.  China’s Shanghai Composite closed down -0.05%, and Japan’s Nikkei Stock Index closed up +1.05%. 

Today’s stock movers…

CarMax (KMX) is up more than +7% to lead gainers in the S&P 500 after reporting Q4 EPS of 44 cents, more than double the consensus of 20 cents, and forecast 2024 capex of about $450 million, stronger than the consensus of $380.7 million. 

Mohawk Industries (MHK) is up more than +4% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $115. 

Akamai Technologies (AKAM) is up more than +2% after Piper Sandler upgraded the stock to overweight from neutral.

Welltower (WELL) is up more than +2% after Evercore ISI upgraded the stock to outperform from in line with a price target of $81.

Freeport-McMoRan (FCX) is up more than +2% after Eight Capital named the stock one of its top picks, saying it expects copper prices to spike and drive a “prosperity phase” for mining companies.

Whirlpool (WHR) is up more than +3% after Goldman Sachs upgraded the stock to buy from neutral.

Moderna (MRNA) is down more than -5% to lead losers in the S&P 500 and Nasdaq 100 after it said a final stage study of its RNA flu shot hadn’t accumulated enough data to determine efficacy, and it will advance with another candidate.

Microsoft (MSFT) is down more than -2% to lead losers in the Dow Jones Industrials after UBS cut its growth estimates for Microsoft’s Azure cloud-computing business.

EQT Corp (EQT) is down more than -2% after Truist Securities downgraded the stock to hold from buy with a price target of $28.

ADTRAN Holdings (ADTN) is down more than -24% after it forecasted preliminary Q1 revenue of $322 million-$326 million, weaker than the consensus of $355 million-$375 million. 

Antero Resources (AR) is down more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Across the markets…

June 10-year T-notes (ZNM23) today are down -3 ticks, and the 10-year T-note yield is up +1.7 bp at 3.434%.  Higher European government bond yields today are weighing on T-note prices.  Also, supply pressures are bearish for T-notes as the Treasury will auction $40 billion of 3-year T-notes today as part of this week’s $90 billion auction package of T-notes and T-bonds.  Losses in T-notes were limited by dovish comments from New York Fed President Williams, who said that if inflation comes down, the Fed will need to lower interest rates.

The dollar index (DXY00) today is down by -0.46%.  Strength in the euro weighed on the dollar after a gauge of Eurozone investor confidence rose more than expected.  Also, dovish comments today from New York Fed President Williams undercut the dollar when he said the Fed would need to lower interest rates if inflation comes down.

EUR/USD (^EURUSD) today is up by +0.57%.  Dollar weakness today has sparked short covering in the euro. Also, today’s Eurozone economic news that showed a larger increase in Eurozone Apr Sentix investor confidence gave EUR/USD a boost. 

Eurozone Feb retail sales fell -0.8% m/m, right on expectations. 

Eurozone Apr Sentix investor confidence rose +2.4 to -8.7, stronger than expectations of -10.1.

USD/JPY (^USDJPY) today is down by -0.26%.  The yen is moderately higher today as it recovers modestly from Monday’s 3-1/2 week low.  The yen garnered support today from a weaker dollar following dovish comments from New York Fed President Williams.  However, gains in the yen were contained after today’s Japanese economic news showed Japan Mar machine tool orders posted their biggest decline in 2-1/2 years.

Japan Mar machine tool orders fell -15.2% y/y, the third consecutive monthly drop and the largest decline in 2-1/2 years.

June gold (GCM3) this morning is up +12.7 (+0.63%), and May silver (SIK23) is up +0.188 (+0.75%).  Precious metals prices this morning are moderately higher.  Weakness in the dollar today is supportive of metals prices.  Also, short covering ahead of Wednesday’s U.S. CPI report is pushing metals prices higher.  In addition, gold has support on strong demand from fund buying as gold holdings in exchange-traded funds (ETFs) rose to a 10-week high Monday.  Higher global bond yields today are limiting the upside in precious metals

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