Stocks Settle Mixed as Fed Rate Cut Chances Slip

The S&P 500 Index ($SPX) (SPY) closed unchanged on Wednesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.29%.  March E-mini S&P futures (ESH26) rose +0.01%, and March E-mini Nasdaq futures (NQH26) rose +0.26%.

Stock indexes settled mixed on Wednesday, with the S&P 500 posting a 2-week high and the Nasdaq 100 posting a 1-week high.  Wednesday’s stronger-than-expected US Jan payrolls report pushed bond yields higher and dampened expectations for additional Fed interest rate cuts, weighing on stocks.  The 10-year T-note yield rose +3 bp to 4.17%, and the chance of a Fed rate cut at next month’s FOMC meeting fell to 6% from 23% before Wednesday’s payroll report. 

Stocks were supported by Wednesday’s better-than-expected monthly US jobs report that showed January nonfarm payrolls increased more than expected by the most in 13 months, and the unemployment rate unexpectedly declined, signaling a stable labor market.

Wednesday’s decline in software companies limited gains in the broader market and kept the Dow Jones Industrials in negative territory.  Also, real estate service stocks sank on Wednesday amid concerns that the newest crop of artificial intelligence applications and tools could disrupt the industry. 

US MBA mortgage applications fell -0.3% in the week ended February 6, with the purchase mortgage sub-index down -2.4% and the refinancing mortgage sub-index up +1.2%.  The average 30-year fixed mortgage rate was unchanged from the prior week at 6.21%.

US Jan nonfarm payrolls rose +130,000, stronger than expectations of +65,000 and the most in 13 months.  The Jan unemployment rate unexpectedly fell -0.1 to 4.3%, showing a stronger labor market than expectations of no change at 4.4%.

US Jan average hourly earnings rose +3.7% y/y, right on expectations.

The annual benchmark revision to 2025 US payrolls subtracted -862,000 jobs, a larger revision than the -825,000 expected. 

Comments today from Kansas City Fed President Jeff Schmid were bearish for stocks and bonds when he said, "In my view, further rate cuts risk allowing high inflation to persist even longer," so the Fed should hold rates at a "somewhat restrictive" level.

The markets this week will focus on corporate earnings results and economic news.  On Thursday, initial weekly unemployment claims are expected to fall by -7,000 to 224,000.  Also, Jan existing home sales are expected to decline by -4.3% m/m to 4.16 million.  On Friday, Jan CPI is expected to be up +2.5% y/y, and Jan core CPI is expected to be up +2.5% y/y.

Q4 earnings season is in full swing, as more than half of the S&P 500 companies have reported earnings results.  Earnings have been a positive factor for stocks, with 78% of the 335 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 6% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled mixed on Wednesday.  The Euro Stoxx 50 closed down -0.19%.  China’s Shanghai Composite climbed to a 1.5-week high and closed up +0.09%.  Japan’s Nikkei Stock 225 did not trade as markets in Japan were closed today for the National Foundation Day holiday.

Interest Rates

March 10-year T-notes (ZNH6) on Wednesday closed down by -7.5 ticks.  The 10-year T-note yield rose +3.1 bp to 4.174%.  Mar T-notes fell from a 5-week high on Wednesday, and the 10-year T-note yield rose from a 6-week low of 4.117%.  T-notes erased early gains on Wednesday and retreated on the stronger-than-expected US Jan payroll report, which is hawkish for Fed policy.  Also, hawkish comments from Kansas City Fed President Jeff Schmid undercut T-note prices when he said the Fed should hold rates at a "somewhat restrictive" level.  In addition, weak demand for the Treasury’s $42 billion of 10-year T-notes undercut T-note prices, as the auction had a bid-to-cover ratio of 2.39, below the 10-auction average of 2.54.    

European government bond yields moved lower on Wednesday.  The 10-year German bund yield fell to a 2-month low of 2.791% and finished down -1.6 bp to 2.792%.  The 10-year UK gilt yield dropped to a 2-week low of 4.474% and finished down -3.0 bp to 4.476%.

Swaps are discounting a 3% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.

US Stock Movers

Strength in chip makers and AI-infrastructure stocks is supportive for the broader market.  Micron Technology (MU) closed up more than +10% to lead gainers in the Nasdaq 100, and NXP Semiconductors NV (NXPI) and Microchip Technology (MCHP) closed up more than +5%.  Also, Lam Research (LRCX) and Western Digital (WDC) closed up more than +4%, and KLA Corp (KLAC), Applied Materials (AMAT), and Analog Devices (ADI) closed up more than +3%.  In addition, Seagate Technology Holdings Plc (STX), Texas Instruments (TXN), and Intel (INTC) closed up more than +2%.

Software stocks retreated on Wednesday, weighing on the overall market.  Atlassian (TEAM) closed down more than -6%, and Intuit (INTU) and Workday (WDAY) closed down more than -5%.  Also, Autodesk (ADSK) and Salesforce (CRM) closed down more than -4%.  In addition, Microsoft (MSFT), Adobe (ADBE), and Datadog (DDOG) closed down more than -2%.

Cryptocurrency-exposed stocks fell on Wednesday as Bitcoin (^BTCUSD) dropped by more than -1%.  Coinbase Global (COIN) and Strategy (MSTR) closed down more than -5%, and Galaxy Digital Holdings (GLXY) closed down more than -3%.  Also, MARA Holdings (MARA) closed down more than -1%, and Riot Platforms (RIOT) closed down -0.20%.

Real estate service stocks sank on Wednesday amid concerns that the newest crop of artificial intelligence applications and tools could disrupt the industry.  Cushman & Wakefield Ltd (CWK) closed down more than -13%, and CBRE Group (CBRE) closed down more than -12% to lead losers in the S&P 500.  Also, Jones Lang LaSalle (JLL) closed down more than -12%. 

Teradata (TDC) closed up more than +29% after reporting Q4 adjusted EPS of 74 cents, better than the consensus of 56 cents, and forecasting full-year adjusted EPS of $2.55 to $2.65, stronger than the consensus of $2.50.

Vertiv Holdings (VRT) closed up more than +25% after forecasting full-year net sales of $13.25 billion to $13.75 billion, well above the consensus of $12.43 billion.

Generac Holdings (GNRC) closed up more than +17% to lead gainers in the S&P 500 after forecasting a full-year Ebitda margin of 18% to 19%, the midpoint above the consensus of 18.1%.

GlobalFoundries (GFS) closed up more than +16% after reporting Q4 net revenue of $1.83 billion, above the consensus of $1.80 billion. 

Lattice Semiconductor (LSCC) closed up more than +15% after forecasting Q1 revenue of $158 million to $172 million, well above the consensus of $148.1 million. 

Beta Technologies (BETA) closed up more than +15% after Amazon.com disclosed a 5.1% stake in the company. 

Cloudflare (NET) closed up more than +5% after reporting Q4 revenue of $614.5 million, better than the consensus of $591.4 million, and forecasting full-year revenue of $2.79 billion to $2,80 billion, above the consensus of $2.74 billion. 

Gilead Sciences (GILD) closed up more than +5% after reporting Q4 revenue of $7.93 billion, above the consensus of $7.71 billion.

Rapid7 Inc (RPD) closed down more than -28% after forecasting full-year revenue of $835 million to $843 million, weaker than the consensus of $869.8 million. 

Mattel (MAT) closed down more than -24% after reporting Q4 adjusted EPS of 39 cents, weaker than the consensus of 54 cents, and forecasting full-year adjusted EPS of $1.18 to $1.30, well below the consensus of $1.76. 

Lyft (LYFT) closed down more than -16% after reporting Q4 rides of 243.5 million, well below the consensus of 255.87 million. 

Robinhood Markets (HOOD) closed down more than -8% after reporting Q4 net revenue of $1.28 billion, below the consensus of $1.35 billion.

Moderna (MRNA) closed down more than -3% after US regulators refused to review the company’s mRNA flu vaccine. 

Earnings Reports(2/12/2026)

Airbnb Inc (ABNB), Alnylam Pharmaceuticals Inc (ALNY), American Electric Power Co Inc (AEP), Applied Materials Inc (AMAT), Arista Networks Inc (ANET), Baxter International Inc (BAX), CBRE Group Inc (CBRE), Coinbase Global Inc (COIN), Dexcom Inc (DXCM), Entergy Corp (ETR), Eversource Energy (ES), Exelon Corp (EXC), Expedia Group Inc (EXPE), Federal Realty Investment Trust (FRT), Howmet Aerospace Inc (HWM), Ingersoll Rand Inc (IR), Iron Mountain Inc (IRM), Kimco Realty Corp (KIM), PG&E Corp (PCG), Public Storage (PSA), Tyler Technologies Inc (TYL), Vertex Pharmaceuticals Inc (VRTX), West Pharmaceutical Services Inc (WST), Wynn Resorts Ltd (WYNN), Zebra Technologies Corp (ZBRA), Zoetis Inc (ZTS).