S&P 500 and Nasdaq 100 Post Record Highs on Resilient U.S. Economy

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.82%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.40%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.04%.

On Wednesday, stocks posted moderate gains, with the S&P 500 and Nasdaq 100 climbing to new record highs.  Stocks rallied on optimism that a resilient U.S. economy will continue to fuel corporate earnings.  Stellar earnings results boosted market sentiment Wednesday, with Emerson Electric closing up more than +10% after reporting better-than-expected Q1 net sales and boosting its full-year adjusted EPS forecast.   Also, cybersecurity stocks rose after Fortinet reported Q4 billings above consensus.  In addition, Chipotle Mexican Grill closed up more than +7% after reporting Q4 revenue above consensus.

Stocks shrugged off hawkish comments from several Fed members that suggested they are in no hurry to cut interest rates.   Also, Wednesday’s U.S. economic reports on the Dec trade deficit and Dec consumer credit were negative for stocks.

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.

U.S. Dec consumer credit increased by +$1.561 billion, weaker than expectations of +$16.000 billion and the smallest increase in 4 months.

Richmond Fed President Barkin said he is "very supportive" of the Fed's patient stance toward determining when to begin easing monetary policy.

Boston Fed President Collins said she's looking for more evidence that inflation is on a sustainable path toward the Fed's 2% target before cutting interest rates "later this year."

Minneapolis Fed President Kashkari 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 markets are discounting the chances for a -25 bp rate cut at 21% at the March 19-20 FOMC meeting and 82% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields on Wednesday moved higher.  The 10-year T-note rose +0.4 bp to 4.104%.  The 10-year German bund yield rose +2.5 bp to 2.316%.  The 10-year UK gilt yield rose +3.8 bp to 3.988%.   

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.

Overseas stock markets on Wednesday settled mixed.  The Euro Stoxx 50 closed down -0.26%. 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) closed up more than +10% 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) closed up more than +7% 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) closed up more than +6% to lead gainers in the Nasdaq100.  Also, Crowdstrike Holdings (CRWD) closed up more than +5%, and Zscaler (ZS) closed up more than +4%.  In addition, Fortinet (FTNT) closed up more than +3%, and SentinelOne (S) closed up more than +2%.   

Generac Holdings (GNRC) closed up more than +6% after CFRA upgraded the stock to strong buy from hold with a price target of $145.

Prudential Financial (PRU) closed up more than +5% after reporting Q4 operational income pre-tax of $1.25 billion, stronger than the consensus of $1.23 billion. 

Ford Motor (F) closed up more than +5% 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. 

Veralto (VLTO) closed 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) closed up more than +3% after reporting Q4 net premiums earned of $2.42 billion, above the consensus of $2.35 billion. 

VF Corp (VFC) closed down more than -9% to lead losers in the S&P 500 after reporting Q3 revenue of $2.96 billion, weaker than the consensus of $3.24 billion. 

Amgen (AMGN) closed down more than -6% to lead losers in the Dow Jones Industrials and Nasdaq 100 after forecasting 2024 adjusted EPS of $18.90-$20.30, the midpoint weaker than the consensus of $19.83 

Gilead Sciences (GILD) closed down more than -4% after forecasting 2024 adjusted EPS of $6.85-$7.25, the midpoint below the consensus of $7.20.

Omnicron Group (OMC) closed down more than -3% after reporting Q4 operating margin of 15.9%, below the consensus of 16.2%. 

Dayforce (DAY) closed down more than -2% after forecasting 2024 revenue of $1.72 billion-$1.73 billion, below the consensus of $1.74 billion.

Aptiv Plc (APTV) closed down more than -2% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $74.

Snap (SNAP) closed down more than -34% after reporting Q4 revenue of $1.36 billion, below the consensus of $1.38 billion.

Gartner (IT) closed down more than -2% after CFRA downgraded the stock to sell from hold with a price target of $383. 

Across the markets…

March 10-year T-notes (ZNH24) on Wednesday closed down -3 ticks, and the 10-year T-note yield rose by +0.4 bp to 4.104%.  Mar T-notes Wednesday closed slightly lower. Hawkish comments from several Fed members weighed on T-note prices when they all suggested they are in no hurry to cut interest rates.  Also, Wednesday’s rally in the S&P 500 to a record high curbed safe-haven demand for T-notes. 

T-notes found support Wednesday on some safe-haven demand on concerns about regional banks after Moody’s Investors Service cut the credit rating of New York Community Bancorp to junk. Also, strong demand for the Treasury’s $42 billion 10-year T-note supported T-notes as the auction was awarded at 4.093%, below the 4.105% when-issued yield at the 1 pm EST bidding deadline and a sign of solid demand.

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