Stocks Finish Mixed as a Slump in Intel Weighs on the Overall Market

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Friday closed down -0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.55%.

Stocks on Friday settled mixed, with the Dow Jones Industrials climbing to a new record high.  Stocks found support Friday on optimism the Federal Reserve will be able to engineer a soft landing.  Friday’s U.S economic reports on Dec personal spending and Dec pending home sales were better than expected, while price pressures eased after the U.S. Dec PCE core deflator, the Fed's preferred measure of inflation, rose at the slowest pace in 2-3/4 years.

Weakness in chip stocks weighed on the overall market after Intel close down more than -11% after issuing a bleak Q1 earnings forecast. Also, KLA Corporation closed down more than -6% after forecasting weaker-than-expected Q3 adjusted EPS. 

On the positive side, American Express closed up more than +6% after forecasting better-than-expected 2024 EPS.  Also, Capital One Financial closed up more than +4% after reporting Q4 net revenue above consensus.  In addition, makers of laboratory tools are climbing today after Sartorius AG, a major German laboratory equipment supplier, reported a stronger-than-expected book-to-bill ratio in Q4. 

U.S. Dec personal spending rose +0.7% m/m, stronger than expectations of +0.5% m/m, while Nov personal spending was revised higher to up +0.4% m/m from +0.2% m/m. 

The U.S. Dec PCE core deflator, the Fed's preferred measure of inflation, eased to +2.9% y/y from +3.2% y/y in Nov, better than expectations of +3.0% y/y and the slowest pace of increase in 2-3/4 years. 

U.S. Dec pending home sales rose +8.3% m/m, stronger than expectations of +2.0% m/m and the largest increase in 3-1/2 years.

The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 48% for that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields on Friday were mixed. The 10-year T-note yield rose +3.3 bp to 4.151%.  The 10-year German bund yield rebounded from a 1-1/2 week low of 2.239% and rose +0.9 bp to 2.299%.  The 10-year UK gilt yield fell -1.8 bp to 3.964%.   

ECB Governing Council member Kazaks said while interest rates "should start to go down," barring any major shocks, the gravest error the ECB could make would be a premature easing that allows inflation to bounce back.

German Feb GfK consumer confidence unexpectedly fell -4.3 to an 11-month low of -29.7, weaker than expectations of an increase to -24.6.

Tokyo Jan CPI eased to +1.6% y/y from +2.4% y/y in Dec, weaker than expectations of +2.0% y/y and the slowest pace of increase in 22 months.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 closed up +1.16%.  China’s Shanghai Composite Index closed up +0.14%. Japan’s Nikkei Stock Index closed down -1.34%.

Today’s stock movers…

Intel (INTC) closed down more than -11% to lead losers in the S&P 500, Dow Jones Industrials, and Nasdaq 100 after forecasting Q1 adjusted revenue of $12.2 billion-$13.2 billion, well below the consensus of $14.25 billion. 

Fair Isaac Corp (FICO) closed down more than -6% after reporting Q1 adjusted EPS of $4.81, weaker than the consensus of $5.06, and forecast full-year adjusted EPS of $22.45, well below the consensus of $23.97. 

KLA Corporation (KLAC) closed down more than -6% after forecasting Q3 adjusted EPS of $4.66-$5.86, the midpoint below the consensus of $5.83. 

Western Digital (WDC) closed down more than -3% even after reporting better-than-expected Q2 earnings results after Morgan Stanley said it expected more upside. 

Cruise stocks retreated Friday after Carnival cautioned that instability in the Red Sea could negatively impact the company’s operations.  As a result, Carnival (CCL), Royal Caribbean Cruises Ltd (RCL), and Norwegian Cruise Line Holdings (NCLH) closed down more than -3%.  

Arthur J Gallagher (AJG) closed down more than -2% after reporting Q4 brokerage organic revenue rose +7.20%, weaker than the consensus of +7.84%. 

Norfolk Southern (NSC) closed down more than -1% after reporting Q4 adjusted EPS of $2.83, weaker than the consensus of $2.87. 

Visa (V) closed down more than -1% after reporting Q1 total processed transactions of $57.50 billion, below the consensus of $57.77 billion. 

American Express (AXP) closed up more than +7% to lead gainers in the S&P 500 and Dow Jones Industrials after forecasting 2024 EPS of $12.65-$13.15, stronger than the consensus of $12.40.

Capital One Financial (COF) closed up more than +4% after reporting Q4 net revenue of $9.50 billion, better than the consensus of $9.45 billion. 

Makers of laboratory tools moved higher Friday after Sartorius AG, a major German laboratory equipment supplier, reported a stronger-than-expected book-to-bill ratio in Q4.  As a result, Bio-Rad Laboratories (BIO) closed up more than +4%, and Charles River Laboratories (CRL) closed up more than +3%.  Also, Danaher (DHR) closed up more than +2%, and Thermo Fisher Scientific (TMO) and Waters (WAT) closed up more than +1%. 

Booz Allen Hamilton Holding Corp (BAH) closed up more than +13% after reporting Q3 adjusted EPS of $1.41, above the consensus of $1.14, and raised its 2024 adjusted EPS to $5.25-$5.40 from a previous forecast of $4.95-$5.10, stronger than the consensus of $5.05. 

Autoliv (ALV) closed up more than +2% after reporting Q4 sales of $2.75 billion, better than the consensus of $2.73 billion.

L3Harris Technologies (LHX) closed up more than +2% after reporting Q4 adjusted EPS of $4.35, better than the consensus of $3.31. 

ResMed (RMD) closed up more than +2% as analysts have raised their price targets on the stock by an average of +6.5% since the company reported earnings on Wednesday.

Estee Lauder (EL) closed up more than +1% on positive carryover from a +10% jump in LVMH, which reported stronger-than-expected Q4 sales.

Across the markets…

March 10-year T-notes (ZNH24) on Friday closed down -9 ticks, and the 10-year T-note yield rose by +3.3 bp to 4.151%.  Mar T-notes on Friday posted moderate losses on stronger-than-expected U.S. economic reports.  Dec personal spending increased more than expected, and Dec pending home sales posted their largest monthly increase in 3-1/2 years.  Losses in T-notes were limited after the Dec PCE core deflator, the Fed's preferred measure of inflation, rose less than expected at the slowest pace in 2-3/4 years, a dovish factor for Fed policy.

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