Stock Indexes Post Record Highs on Robust Earnings and U.S. Labor Market Strength

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Friday closed up +1.078%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.72%.

Stocks on Friday rallied, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting record highs.   Stocks opened higher on stellar earnings reports from big tech companies Amazon.com and Meta Platforms.  Stocks extended their gains after Friday’s stronger-than-expected U.S. Jan payroll report bolstered the outlook for corporate profits.  Also supporting equities was the upward revision to the University of Michigan’s U.S. Jan consumer sentiment to a 2-1/2 year high.

Stocks shook off rising bond yields Friday on the stronger-than-expected U.S. Jan unemployment report that showed payrolls rising by the most in a year and wages climbing more than expected.  The report shows a resilient U.S. labor market and pared market expectations for Fed rate cuts.

U.S. Jan nonfarm payrolls jumped +353,000, much stronger than expectations of +185,000 and the biggest increase in a year.  Also, Dec nonfarm payrolls were revised up sharply to +333,000 from the initially reported +216,000.  The Jan unemployment rate was unchanged at 3.7%, showing a stronger labor market than expectations of an increase to 3.8%.

U.S. Jan average hourly earnings rose +0.6% m/m and +4.5% y/y, stronger than expectations of +0.3% m/m and +4.1% y/y.

U.S. Dec factory orders rose +0.2% m/m, right on expectations.

The University of Michigan U.S. Jan consumer sentiment index was revised upward by +0.2 to a 2-1/2 year high of 79.0, stronger than expectations of 78.9.

The markets are discounting the chances for a -25 bp rate cut at 22% at the March 19-20 FOMC meeting and 91% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields moved higher on Friday. The 10-year T-note rose +15.1 bp to 4.031%.  The 10-year German bund yield rose +9.2 bp to 2.241%.  The 10-year UK gilt yield rose +17.2 bp to 3.918%.   

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 closed up +0.34%.  China’s Shanghai Composite Index closed down -1.46%. Japan’s Nikkei Stock Index closed up +0.41%.

Today’s stock movers…

Meta Platforms (META) closed up more than +20% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 revenue of $40.11 billion, above the consensus of $39.01 billion, and forecast Q1 revenue of $34.5 billion-$37 billion, better than the consensus of $33.64 billion. 

Edwards Lifesciences (EW) closed up more than +9% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $94.

Amazon.com (AMZN) closed up more than +7% after reporting Q4 net sales of $169.96 billion, stronger than the consensus of $166.21 billion.   

WW Grainger (GWW) closed up more than +5% after forecasting 2024 EPS of $38-$40.50, the midpoint above the consensus of $38.61. 

Clorox (CLX) closed up more than +5% after reporting  Q2 adjusted EPS of $2.16, well above the consensus of $1.09, and raised its full-year adjusted EPS estimate to $5.30-$5.50 from a previous estimate of $4.30-$4.80. 

Cigna Group (CI) closed up more than +5% after reporting Q4 adjusted revenue of $51.15 billion, better than the consensus of $48.89 billion, and forecasting full-year adjusted revenue of at least $235.00 billion, above the consensus of $228.24 billion. 

Hartford Financial Services (HIG) closed up more than +4% after reporting Q4 core EPS of $3.06, well above the consensus of $2.40. 

Chevron (CVX) closed up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q4 adjusted EPS of $3.35, stronger than the consensus of $3.22 and raised its quarterly dividend by 7.9% to $1.63 per share from $1.51 per share. 

Charter Communications (CHTR) closed down more than -16% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q4 adjusted Ebitda of $5.60 billion, below the consensus of $5.61 billion, and said it lost 61,000 internet customers in Q4 versus a gain of 105,000 a year earlier. 

Gen Digital (GEN) closed down more than -11% after reporting Q3 adjusted RPS of 49 cents, below the consensus of 50 cents, and forecast full-year adjusted EPS of $1.95-$1.97, weaker than the consensus of $2.00. 

Atlassian (TEAM) closed down more than -14% after reporting Q2 cloud revenue grew 26.5%, below the consensus of 26.6%. 

Skechers USA (SKX) closed down more than -10% after reporting Q4 net sales of $1.96 billion, below the consensus of $2.04 billion, and forecast full-year sales of $8.60 billion-$8.80 billion, weaker than the consensus of $8.93 billion. 

Bio-Techne (TECH) closed down more than -3% after Stifel downgraded the stock to hold from buy. 

Eastman Chemical (EMN) closed down more than -2% after the company, in an earnings call, pointed to an uncertain outlook for growth across most end markets.

Intel (INTC) closed down more than -1% after a Wall Street Journal report said the company is delaying a $20 billion chip facility planned for Ohio, sparking worries over its capital expenditure plans. 

Microchip Technology (MCHP) closed down more than -1% after forecasting Q4 net sales of $1.23 billion-$1.43 billion, below the consensus of $1.67 billion. 

Across the markets…

March 10-year T-notes (ZNH24) on Friday closed down -1-7.5/32 points, and the 10-year T-note yield jumped by +15.1 bp to 4.031%.  Mar T-notes tumbled Friday on the stronger-than-expected U.S. Jan payroll report that showed nonfarm payrolls rose by the most in a year and age growth accelerated as Jan average hourly earnings rose more than expected, hawkish factors for Fed policy.  Losses in T-notes accelerated after the University of Michigan’s U.S. Jan consumer sentiment index was revised upward to a 2-1/2 year high.  Better-than-expected earnings results from Amazon and Meta Platforms also boosted the S&P 500 to a record high Friday and reduced safe-haven demand for T-notes. 

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