Stocks Settle Mixed with Big Tech Earnings and FOMC Meeting on Tap

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.68%.

Stocks on Tuesday settled mixed, with the Dow Jones Industrials posting a new record high but the S&P 500 and Nasdaq 100 indexes closing lower.  Tuesday’s U.S economic reports showed strength in the economy that bolstered optimism the Federal Reserve can engineer a soft landing.  The markets are awaiting the results of the 2-day FOMC meeting on Wednesday and earnings reports this week from Apple, Alphabet, Amazon.com, and Microsoft.

Corporate news Tuesday was mixed.  United Parcel Service closed down more than -7% after forecasting 2024 revenue below consensus.  Also, Whirlpool closed down more than -6% after forecasting full-year revenue below consensus.   On the positive side, MSCI closed up more than +9% after reporting Q4 adjusted EPS above consensus.  Also, General Motors closed up more than +7% after reporting stronger-than-expected Q4 adjusted EPS and forecasting 2024 above-consensus adjusted EPS. 

The Federal Reserve is expected to hold monetary policy steady at Wednesday's conclusion of the 2-day FOMC meeting.  However, investors will scour Fed Chair Powell's post-FOMC meeting comments 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 43% for that same -25 bp rate cut at 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 on Tuesday were mixed. The 10-year T-note yield fell to a 2-week low of 4.034% but turned higher and finished down -1.5 bp at 4.059%. The 10-year German bund yield fell to a 2-week low of 2.199% but rebounded and finished up +3.3 bp at 2.268%. The 10-year UK gilt yield fell to a 2-week low of 3.849% but rebounded and finished up +2.5 bp at 3.901%.   

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. 

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%.

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.50%.  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) closed down more than -7% 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) closed down more than -7%.  Also, Baker Hughes (BKR) closed down more than -2% and Halliburton (HAL) closed down more than -1%. 

Whirlpool (WHR) closed down more than -6% after forecasting full-year revenue of $16.90 billion, below the consensus of $17.68 billion. 

Alexandria Real Estate Equities (ARE) closed down more than -4% after reporting Q4 AFFO/share of $2.28, below the consensus of $2.29. 

Johnson Controls International (JCI) closed down more than -3% after cutting its full-year adjusted EPS forecast to $3.60-$3.75 from a prior estimate of $3.65-$3.80. 

Warner Bros Discovery (WBD) closed down more than -3% after Huber Research Partners initiated coverage on the stock with an underweight rating and a price target of $9.50. 

Advanced Micro Devices (AMD) closed down more than -3% after Raymond James downgraded the stock to outperform from strong buy due to valuation concerns. 

Boeing (BA) closed 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. 

MSCI Inc (MSCI) closed 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. 

General Motors (GM) closed 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. 

Sysco Corp (SYY) closed up more than +7% after reporting Q2 adjusted EPS of 89 cents, above the consensus of 88 cents. 

Nucor (NUE) closed up more than +6% after reporting Q4 EPS of $3.16, better than the consensus of $2.88. 

Corning (GLW) closed up more than +6% after reporting Q4 core sales of $3.27 billion, better than the consensus of $3.26 billion.

HCA Healthcare (HCA) closed up more than +5% 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. 

Danaher (DHR) closed up more than +4% after reporting Q4 sales of $6.40 billion, stronger than the consensus of $6.02 billion.

Super Micro Computer (SMCI) closed up more than +3% 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.

Across the markets…

March 10-year T-notes (ZNH24) on Tuesday closed up +3.5 ticks, and the 10-year T-note yield fell by -1.5 bp to 4.059%.  Mar T-notes on Tuesday climbed to a 1-1/2 week high, and the 10-year T-note yield fell to a 2-week low of 4.034%.  T-notes moved higher Tuesday 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.  Also, a decline in inflation expectations was bullish for T-notes after the 10-year breakeven inflation rate fell to a 2-week low Tuesday at 2.256%.

T-note prices gave up their gains mid-morning and turned lower briefly on strength in U.S. economic reports after Dec JOLTS job openings unexpectedly increased and after the Conference Board’s Jan consumer confidence index rose to a 2-year high.

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