S&P 500 and Nasdaq 100 Climb to Record Highs on U.S. Economic Optimism

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.69%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.03%.

Stock indexes this morning are moderately higher, with the S&P 500 and Nasdaq 100 posting new record highs.  Stocks are climbing on optimism that a solid U.S. economy will continue to fuel corporate earnings.  Stellar earnings results are boosting market sentiment today, with Emerson Electric up more than +9% after reporting better-than-expected Q1 net sales and boosting its full-year adjusted EPS forecast.   Also, cybersecurity stocks are climbing after Fortinet reported Q4 billings above consensus.  In addition, Chipotle Mexican Grill is up more than +8% after reporting Q4 revenue above consensus.

On the negative side, VF Corp is down more than -11% after reporting Q3 revenue below consensus.   Also, Snap plunged more than -32% after reporting weaker-than-expected Q4 revenue.

This morning's comments from Minneapolis Fed President Kashkari were slightly hawkish when he said, "We can take time to assess data before cutting interest rates," and he sees two to three 25 bp rate cuts this year as appropriate right now.

The U.S. Dec trade deficit widened to -$62.2 billion, a larger deficit than expectations of -$62.0 billion and a negative factor for Q4 GDP.

The markets are discounting the chances for a -25 bp rate cut at 24% at the March 19-20 FOMC meeting and 88% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields today are mixed.  The 10-year T-note is down -1.4 bp at 4.087%.  The 10-year German bund yield is up +0.2 bp at 2.294%.  The 10-year UK gilt yield is up +2.2 bp at 3.972%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.03%.  China’s Shanghai Composite Index closed up +1.44%.  Japan’s Nikkei Stock Index closed down -0.11%.

Today’s stock movers…

Emerson Electric (EMR) is up more than +9% after reporting Q1 net sales of $4.12 billion, better than the consensus of $3.91 billion, and boosting its full-year adjusted EPS forecast to $5.30-$5.45 from a previous forecast of $5.15-$5.35.  

Chipotle Mexican Grill (CMG) is up more than +8% after reporting Q4 revenue of $2.52 billion, above the consensus of $2.49 billion.

Cybersecurity stocks are climbing today after Fortinet reported Q4 billings of $1.86 billion, better than the consensus of $1.62 billion.  As a result, Palo Alto Networks (PANW) is up more than +5% to lead gainers in the Nasdaq100. Also, Crowdstrike Holdings (CRWD) is up more than +4%, and Fortinet (FTNT) is up more than +2%.  In addition, Zscaler (ZS) and SentinelOne (S) are up more than +1%.   

Veralto (VLTO) is up more than +5% after reporting Q4 adjusted EPS of 87 cents, stronger than the consensus of 80 cents, and forecast Q1 adjusted EPS of 73 cents-78 cents, the midpoint above the consensus of 74 cents. 

Assurant (AIZ) is up more than +4% after reporting Q4 net premiums earned of $2.42 billion, above the consensus of $2.35 billion. 

CDW Corp (CDW) is up more than +5% after reporting Q4 adjusted EPS of $2.57, better than the consensus of $2.55. 

Prudential Financial (PRU) is up more than +3% after reporting Q4 operational income pre-tax of $1.25 billion, stronger than the consensus of $1.23 billion. 

Ford Motor (F) is up more than +2% after reporting Q4 adjusted Ebitda of $1.10 billion, stronger than the consensus of $997.4 million, and forecast 2024 adjusted Ebitda of $10 billion-$12 billion, above the consensus of $9.24 billion.  

VF Corp (VFC) is down more than -11% to lead losers in the S&P 500 after reporting Q3 revenue of $2.96 billion, weaker than the consensus of $3.24 billion. 

Dayforce (DAY) is down more than -7% after forecasting 2024 revenue of $1.72 billion-$1.73 billion, below the consensus of $1.74 billion.

Gilead Sciences (GILD) is down more than -3% to lead losers in the Nasdaq 100 after forecasting 2024 adjusted EPS of $6.85-$7.25, the midpoint below the consensus of $7.20.

Amgen (AMGN) is down more than -4% to lead losers in the Dow Jones Industrials after forecasting 2024 adjusted EPS of $18.90-$20.30, the midpoint weaker than the consensus of $19.83

Aptiv Plc (APTV) is down more than -3% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $74.

Snap (SNAP) is down more than -32% after reporting Q4 revenue of $1.36 billion, below the consensus of $1.38 billion.

Essex Property Trust (ESS) is down more than -2% after forecasting 2024 core FFO/share of $14.76-$15.30, the midpoint weaker than the consensus of $15.27.

Bristol-Myers Squibb (BMY) is down more than -1% after Redburn Atlantic downgraded the stock to neutral from buy.

Across the markets…

March 10-year T-notes (ZNH24) this morning are up by 3 ticks, and the 10-year T-note yield is down -1.4 bp at 4.087%.  Mar T-note prices this morning recovered from early losses and are slightly higher. Safe-haven demand for T-notes is pushing prices higher on concerns about regional bank stocks after shares of New York Community Bancorp sank to a 27-year low after Moody’s Investors Service cut its credit rating to junk. 

This morning, T-notes initially moved lower on hawkish comments from Minneapolis Fed President Kashkari, who said, "We can take time to assess data before cutting interest rates."  Also, supply pressures are weighing on T-notes as the Treasury will auction a record $42 billion of 10-year T-notes later today as part of this week’s $121 auctions of T-notes and T-bonds for the February quarterly refunding. 

The dollar index (DXY00) this morning is down -0.19%.  The dollar today is moderately lower.  Strength in stocks today has curbed liquidity demand for the dollar.  Also, today’s report that showed a wider than-expected U.S. Dec trade deficit was bearish for the dollar.  Losses in the dollar are limited by hawkish comments from Minneapolis Fed President Kashkari, who said the Fed can take its time before cutting interest rates.

EUR/USD (^EURUSD) this morning is up by +0.14%.  A weaker dollar today and hawkish ECB comments are supporting moderate gains in the euro.   ECB Executive Board member Schnabel today warned against the ECB cutting interest rates too soon.  Gains in the euro are limited after German Dec industrial production fell more than expected by the most in 9 months.

ECB Executive Board member Schnabel said that because of sticky services inflation, a resilient labor market, a notable loosening of financial conditions, and tensions in the Red Sea, "this cautions against adjusting the policy stance too soon."

German Dec industrial production fell -1.6% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 9 months.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 13% for its next meeting on March 7 and at 66% for the following meeting on April 11.

USD/JPY (^USDJPY) this morning is up by +0.14%.  Higher T-note yields today are undercutting the yen.  The yen is also under pressure due to weaker interest rate differentials as the Fed, ECB, and BOE have all raised interest rates while the BOJ maintains its negative interest rate policy.   Better-than-expected Japanese economic news is limiting losses in the yen after the Dec leading index CI rose more than expected to a 14-month high.

The Japan Dec leading index CI rose +1.9 to a 14-month high of 110.0, stronger than expectations of 109.3.

Swaps are pricing in the chances for a +10 bp BOJ rate hike at 20% for its next meeting on March 19 and at 76% for the following meeting on April 26.

April gold (GCJ24) this morning is up +3.7 (+0.18%), and Mar silver (SIH24) is down -0.018 (-0.08%).  Gold and silver prices this morning are mixed.  Hawkish central bank comments today are weighing on precious metals after Minneapolis Fed President Kashkari said the Fed could take its time before cutting interest rates, and ECB Executive Board member Schnabel warned against cutting rates too soon.  Silver is under pressure after German Dec industrial production fell more than expected by the most in 9 months, a bearish factor for industrial metals demand. Gold remains under pressure from the ongoing long liquidation of gold by funds after long gold holdings in ETFs fell to a 4-year low Tuesday. 

A weaker dollar today is limiting losses in metals.  Also, gold has garnered some safe-haven demand on concern about the health of U.S. regional bank stocks after Moody’s Investors Service cut the credit rating of New York Community Bancorp to junk.

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