Stocks Settle Mixed Ahead of Wednesday’s U.S. Inflation News

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed unchanged, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.67%.

Stock indexes Tuesday settled mixed, with the Dow Jones Industrials posting a 7-week high. Dovish comments Tuesday from New York Fed President Williams and Chicago Fed President Goolsbee gave the overall market a boost.  However, higher bond yields Tuesday undercut technology stocks and weighed 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 closed up more than +9% 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 closed down more than -3% 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 -23% after it forecasted preliminary Q1 revenue that was below consensus.

Dovish Fed comments Tuesday were supportive of stocks.  Chicago Fed President Goolsbee said the Fed should "gather further data and be careful about raising interest rates too aggressively until we see how much work the headwinds from the banking turmoil are doing for us in getting down inflation."

Also, 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 2023 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 Tuesday moved higher.  The 10-year T-note yield rose +1.5 bp at 3.432%.  The 10-year German bund yield rose +12.7 bp to 2.311%, and the 10-year UK gilt yield rose +11.0 bp to 3.542%.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.55%.  China’s Shanghai Composite closed down -0.05%, and Japan’s Nikkei Stock Index closed up +1.05%.

Today’s stock movers…

CarMax (KMX) closed up more than +9% 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) closed up more than +5% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $115. 

Whirlpool (WHR) closed up more than +4% after Goldman Sachs upgraded the stock to buy from neutral. 

Akamai Technologies (AKAM) closed up more than +3% after Piper Sandler upgraded the stock to overweight from neutral.

Carrier Global (CARR) closed up more than +2% after the Wall Street Journal reported the company is working on a plan to sell or spin off its Fire and Security unit.

Freeport-McMoRan (FCX) closed 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.

Northern Trust (NTRS) closed up more than +2% after JPMorgan Chase upgraded the stock Monday to neutral from underweight.

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

Moderna (MRNA) closed down more than -3% 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) closed 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.

ADTRAN Holdings (ADTN) closed down more than -23% after it forecasted preliminary Q1 revenue of $322 million-$326 million, weaker than the consensus of $355 million-$375 million. 

Higher T-note yields Tuesday weighed on semiconductor chip stocks.  Advanced Micro Devices (AMD), Nvidia (NVDA), and KLA Corp (KLAC) closed down more than -1%. Also, Broadcom (AVGO) closed down -0.93%, and Marvel Technology (MRVL) closed down -0.62%.

Ross Stores (ROST) closed down more than -1% on signs of inside selling after an SEC filing showed President Kobayashi sold $1.3 million of shares on April 6.

Across the markets…

June 10-year T-notes (ZNM23) on Tuesday closed down -4.5 ticks, and the 10-year T-note yield rose by +1.5 bp to 3.432%.  June T-notes Tuesday posted modest losses and were weighed down by higher European government bond yields.  Supply pressures also undercut T-notes as the Treasury auctioned $40 billion of 3-year T-notes Tuesday as part of this week’s $90 billion auction package of T-notes and T-bonds. 

T-notes recovered from their worst levels Tuesday on dovish comments from Chicago Fed President Goolsbee and New York Fed President Williams.  Also, decent demand for the Treasury’s $40 billion auction of 3-year T-notes sparked some short covering in T-notes as the auction had a bid-to-cover ratio of 2.59, above the 10-auction average of 2.55.

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