Stocks Struggle as Bond Yields Rise on Strong JOLTS Job Openings Report

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.31%.

Stock indexes this morning are mildly lower after bond yields rose on the labor market strength seen in the Dec JOLTS job openings report. The markets are awaiting the results of the 2-day FOMC meeting that begins today and earnings reports this week from Apple, Alphabet, Amazon.com, and Microsoft.

There is mixed corporate news today on stocks.   United Parcel Service is down more than -8% after forecasting 2024 revenue below consensus.  Also, Whirlpool is down more than -5% after forecasting full-year revenue below consensus.   On the positive side, General Motors is up more than +7% after reporting stronger-than-expected Q4 adjusted EPS and forecasting 2024 above-consensus adjusted EPS. Also, homebuilders are moving higher today after PulteGroup reported stronger-than-expected Q4 adjusted EPS.

The Federal Reserve is expected to hold monetary policy steady at the 2-day FOMC meeting that begins today.  However, investors will scour Fed Chair Powell's post-FOMC meeting comments on Wednesday for clues on the Fed’s policy outlook. 

The markets are discounting the chances for a -25 bp rate cut at 2% at this week’s FOMC meeting and 38% for that same -25 bp rate cut for the following meeting on March 19-20.

The International Monetary Fund (IMF) raised its 2024 global GDP forecast to 3.1% from a 2.9% projection in October.

The U.S. Nov S&P CoreLogic composite-20 home price index rose +5.4% y/y, the largest increase in a year.

The Conference Board U.S. Jan consumer confidence index rose +6.8 to a 2-year high of 114.8, right on expectations.

U.S. Dec JOLTS job openings unexpectedly rose +101,000 to 9.026 million, showing a stronger labor market than expectations of a decline to 8.750 million.

U.S. and European government bond yields today are higher. The 10-year T-note yield fell to a 2-week low of 4.034% but turned higher and is up +2.3 bp at 4.097%.  The 10-year German bund yield fell to a 2-week low of 2.199% but rebounded and is up +5.3 bp at 2.287%.  The 10-year UK gilt yield fell to a 2-week low of 3.849% but rebounded and is up +2.7 bp at 3.902%.   

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.40%.  China’s Shanghai Composite Index closed down -1.83%.  Japan’s Nikkei Stock Index closed up +0.11%.

Today’s stock movers…

United Parcel Service (UPS) is down more than -8% to lead losers in the S&P 500 after forecasting 2024 revenue of $92.0 billion-$94.5 billion, below the consensus of $95.66 billion. 

Oil drilling service stocks are under pressure today after Saudi Aramco, the world’s largest oil company, abandoned plans to boost its output capacity.  As a result, Schlumberger (SLB) is down more than -8%.  Also, Baker Hughes (BKR) is down more than -4% to lead losers in the Nasdaq 100.  In addition, Halliburton (HAL) is down more than -3%. 

Whirlpool (WHR) is down more than -5% after forecasting full-year revenue of $16.90 billion, below the consensus of $17.68 billion. 

A O Smith (AOS) is down more than -2% after reporting Q4 EPS of 92 cents, below the consensus of 95 cents, and forecast 2024 EPS of $3.90-$4.15, the midpoint below the consensus of $4.04. 

Johnson Controls International (JCI) is down more than -2% after cutting its full-year adjusted EPS forecast to $3.60-$3.75 from a prior estimate of $3.65-$3.80. 

Calix Inc (CALX) is down more than -26% after reporting a Q4 net loss of -$4.14 million versus the consensus of a profit of $12 million and forecasting Q1 adjusted EPS of 17 cents-23 cents, well below the consensus of 38 cents.   

Boeing (BA) is down more than -2% to lead losers in the Dow Jones Industrials after it withdrew a request for a safety exemption that would have helped speed approval of its new 737 Max 7 aircraft. 

Target (TGT) and Dollar Tree (DLTR) are down more than -1% after Bank of America said the companies may face “material” headwinds from Red Sea shipping disruptions. 

MSCI Inc (MSCI) is up more than +9% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $3.68, above the consensus of $3.29. 

Corning (GLW) is up more than +8% after reporting Q4 core sales of $3.27 billion, better than the consensus of $3.26 billion.

General Motors (GM) is up more than +7% after reporting Q4 adjusted EPS of $1.24, better than the consensus of $1.16, and forecast 2024 adjusted EPS of $8.50-$9.50, well above the consensus of $7.70. 

Super Micro Computer (SMCI) is up more than +5% after reporting Q2 net sales of $3.66 billion, stronger than the consensus of $3.42 billion, and raised its full-year revenue forecast to $14.3 billion-$14.7 billion from a previous forecast of $10 billion-$11 billion.

HCA Healthcare (HCA) is up more than +4% after reporting Q4 EPS of $5.93, well above the consensus of $5.01, and forecast 2024 EPS of $19.70-$21.20, stronger than the consensus of $19.52. 

Nucor (NUE) is up more than +3% after reporting Q4 EPS of $3.16, better than the consensus of $2.88. 

Sysco Corp (SYY) is up more than +3% after reporting Q2 adjusted EPS of 89 cents, above the consensus of 88 cents. 

Homebuilders are moving higher today, led by a +2% gain in PulteGroup (PHM) after it reported Q4 adjusted EPS of $3.28, above the consensus of $3.22.  Also, Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) are up more than +1%.

Across the markets…

March 10-year T-notes (ZNH24) this morning are down -3 ticks, and the 10-year T-note yield is up +2.3 bp at 4.097%.  Mar T-note prices this morning fell back from a 1-1/2 week high and turned lower, and the 10-year T-note yield rebounded from a 2-week low and moved higher on stronger-than-expected U.S. economic news on Dec JOLTS job openings, a hawkish factor for Fed policy. 

T-notes this morning initially moved higher on carryover support from Monday when the Treasury unexpectedly cut its Q1 borrowing estimate to $760 billion from an $816 billion estimate in October, which eased supply concerns as the lower borrowing estimate may prompt the Treasury to reduce the sizes of its monthly debt auctions.

The dollar index (DXY00) today is down by -0.06%.  The dollar today is slightly lower on strength in the euro, which rose on stronger-than-expected Eurozone economic news.  However, the dollar recovered most of its losses as T-note yields climbed after U.S Dec JOLTS job openings unexpectedly rose, a hawkish factor for Fed policy.

EUR/USD (^EURUSD) is up by +0.02%.  The euro is posting modest gains on the heels of stronger-than-expected Eurozone economic news on Q4 GDP and Spain's Dec CPI, which may prompt the ECB to delay cutting interest rates.  However, the euro gave up most of its advance after the dollar recovered on stronger-than-expected U.S. economic reports. 

Eurozone Q4 GDP was revised upward to unchanged q/q and +0.1% y/y from the previously reported -0.1% q/q and +0.1% y/y.

The Eurozone Dec economic confidence indicator fell -0.1 to 96.2, slightly stronger than expectations of 96.1.

Spain's Jan CPI (EU harmonized) unexpectedly strengthened to +3.5% y/y from +3.3% y/y in Dec, stronger than expectations of an easing to +3.0% y/y.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 21% for its next meeting on March 7 and 91% for the following meeting on April 11.

USD/JPY (^USDJPY) is up by +0.20%.  The yen today gave up an early advance and turned lower as T-note yields rose on stronger-than-expected U.S. economic reports on Jan consumer confidence and Dec JOLTS jo openings.  Today, the yen initially moved higher on signs of strength in Japan’s economy after Japan’s Dec jobless rate unexpectedly fell to an 11-month low. 

The Japan Dec jobless rate unexpectedly fell -0.1 to an 11-month low of 2.4%, showing a stronger labor market than expectations of no change at 2.5%.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 27% for its next meeting on March 19 and at 75% for the following meeting on April 26.

February gold (GCG24) this morning is up +2.7 (+0.13%), and Mar silver (SIH24) is down -0.141 (-0.11%).  Gold and silver prices this morning are mixed, with gold posting a 2-week high.  A weaker dollar today is supportive of precious metals.  Geopolitical risks have also boosted safe-haven demand for precious metals on concern about the escalation of conflict in the Middle East after three U.S. servicemen were killed in a drone attack over the weekend on a base near the Syrian border.  Silver has support after the IMF raised its 2024 global GDP forecast, a supportive factor for industrial metals demand.

On the negative side for precious metals are higher global bond yields.  Also, gold is under pressure from the ongoing long liquidation of gold by funds after long gold holdings in ETFs fell to a 4-year low Monday. 

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