Markets Today: Stocks Mixed as Bond Yields Climb

Morning Markets

The S&P 500 Index ($SPX) (SPY) is down -0.04%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.1%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.16%.

Stocks are mixed as they consolidate below Wednesday’s record highs. Bond yields ticked higher after weekly U.S. jobless claims fell more than expected, a hawkish factor for Fed policy.

Corporate earnings results are mixed.  PayPal Holdings is down more than -9% trading after reporting fewer than expected Q4 active customer accounts and forecasting full-year adjusted EPS below consensus.  Also, BorgWarner is down more than -5% after reporting weaker-than-expected Q4 net sales.

On the positive side, Walt Disney is up more than +9% after reporting stronger-than-expected Q1 adjusted EPS and forecasting full-year adjusted EPS above consensus.  Also, Apollo Global Management is up more than +1% after reporting Q4 adjusted EPS above consensus.

U.S. weekly initial unemployment claims fell -9,000 to 218,000, showing a stronger labor market than expectations of 220,000.  Also, weekly continuing claims fell -23,000 to 1,871 million, showing a stronger labor market than expectations of 1.875 million.

Richmond Fed President Barkin said the Fed doesn't have to be in a hurry to cut interest rates, and he would like to see disinflation for a few more months before cutting rates.

The markets are discounting the chances for a -25 bp rate cut at 21% at the March 19-20 FOMC meeting and 78% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields today are higher.  The 10-year T-note is up +2.1 bp at 4.142%.  The 10-year German bund yield rose to a 2-week high of 2.347% and is up +2.7 bp at 2.343%.  The 10-year UK gilt yield is up +3.6 bp at 4.024%.  

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.68%.  China’s Shanghai Composite Index closed up +1.28%.  Japan’s Nikkei Stock Index closed up +2.06%.

The Euro Stoxx 50 today rose to a new 23-year high and is moderately higher.  Favorable corporate earnings results are supporting stock gains today.  Consumer staple stocks are climbing, with Unilever up more than +2% after reporting stronger-than-expected Q4 revenue, and that volume growth returned for the first time since 2021.   Also, Adyen NV surged nearly +20% after reporting first-half revenue well above consensus.  On the negative side, shipping stocks retreated, led by a -14% fall in A.P. Moller-Maersk A/S after it provided a 2024 financial outlook that missed estimates and said it expects a challenging year due to attacks on shipping routes in the Red Sea. 

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 11% for its next meeting on March 7 and at 63% at the following meeting on April 11.

China’s Shanghai Composite Index today rallied for a third day and posted a 1-week high.  Chinese stocks were supported by positive carryover from government measures to boost market sentiment.  On Wednesday, President Xi Jinping replaced the Chairman and head securities regulator of the China Securities Regulatory Commission, and on Tuesday, Central Huijin Investment, whose subsidiaries include Chinese state-owned banks, announced that it would expand its purchases of stock index funds.  Stocks fell back from their best levels after today’s report showed Chinese consumer prices in January fell by the most in 14 years, signaling deepening deflationary pressures.  Chinese markets will be closed for the next week for the Lunar New Year holidays. 

Foreign buying of Chinese stocks has supported this week’s gains in the market. Foreign investors bought 16.1 billion yuan ($2.2 billion) of mainland stocks via Hong Kong trading links on a net basis this week.

 China Jan CPI fell -0.8% y/y, weaker than expectations of -0.5% y/y and the steepest pace of decline in 14 years.  Jan PPI fell 2.5%y/y, a smaller decline than expectations of -2.6% y/y.

Japan’s Nikkei Stock Index today rallied to a 2-week high and settled sharply higher. Strength in Japanese technology stocks led the overall market higher today on positive carryover from Wednesday’s rally in the Nasdaq 100 to a record high.  Some positive economic news also supported stocks after the Japan Jan eco watchers outlook survey rose more than expected to a 6-month high. Exporter stocks gained after the yen tumbled to a 2-1/4 month low against the dollar, boosting the earnings prospects of exporters.  The yen retreated today on dovish comments from BOJ Deputy Governor Uchida, who said it’s hard to see the BOJ rapidly raising interest rates even after negative interest rates have ended. 

The Japan Jan eco watchers outlook survey rose +2.1 to a 6-month high of 52.5, stronger than expectations of 49.3.

BOJ Deputy Governor Uchida said, "Even if the BOJ were to terminate the negative interest rate policy, it is hard to imagine a path in which it would then keep raising interest rates rapidly."

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 19% for its next meeting on March 19 and at 80% for the following meeting on April 26.

Pre-market U.S. Stock Movers

PayPal Holdings (PYPL) tumbled more than -8% in pre-market trading after reporting Q4 active customer accounts of 426 million, below the consensus of 427.98 million, and forecast full-year adjusted EPS of $5.10, weaker than the consensus of $5.49. 

Kenvue (KVUE) dropped more than -2% in pre-market trading after forecasting full-year adjusted EPS of $1.10-$1.20 weaker than the consensus of $1.25. 

Axcelis Technologies (ACLS) fell more than -8% in pre-market trading after forecasting Q1 revenue of $242 million, well below the consensus of $284.9 million. 

Rapid7 (RPD) tumbled more than -6% in pre-market trading after forecasting full-year revenue of $848 million-$856 million, weaker than the consensus of $870.2 million. 

Philip Morris International (PM) slid more than -1% in pre-market trading after forecasting 2024 adjusted EPS of $6.32-$644, below the consensus of $6.55. 

S&P Global (SPGI) fell more than -4% in pre-market trading after forecasting 2024 pro forma adjusted EPS of $13.75-$14.00, weaker than the consensus of $14.45. 

BorgWarner (BWA) dropped more than -5% in pre-market trading after reporting Q4 net sales of $3.52 billion, weaker than the consensus of $3.63 billion. 

Paycom Software (PAYC) tumbled more than -5% in pre-market trading after forecasting full-year adjusted Ebitda of $720 million-$730 million, well below the consensus of $770.8 million. 

Walt Disney (DIS) jumped more than +7% in pre-market trading after reporting Q1 adjusted EPS of $1.22, better than the consensus of 99 cents, and forecast full-year adjusted EPS of about $4.60, stronger than the consensus of $4.27.

Confluent (CFLT) surged more than +20% in pre-market trading after reporting Q4 revenue of $213.2 million, better than the consensus of $205.5 million, and forecast full-year revenue of about $950 million, stronger than the consensus of $936.1 million. 

Apollo Global Management (APO) rose more than +3% in pre-market trading after reporting Q4 adjusted EPS of $1.91, stronger than the consensus of $1.72. 

Arm Holdings Plc (ARM) surged more than +25% in pre-market trading after raising its full-year revenue forecast to $3.16 billion-$3.21 billion for a previous forecast of $2.96 billion-$3.08 billion. 

Warner Music Group (WMG) jumped more than +42% in pre-market trading after reporting Q1 revenue of $1.75 billion, stronger than the consensus of $1.67 billion. 

Monolithic Power Systems (MPWR) climbed more than +7% in pre-market trading after reporting Q4 revenue of $454 million, above the consensus of $452.5 million, and forecast Q1 revenue of $437 million-$457 million, stronger than the consensus of $436.6 million. 

Earnings Reports (2/8/2024)

Baxter International Inc (BAX), BorgWarner Inc (BWA), ConocoPhillips (COP), Dexcom Inc (DXCM), DTE Energy Co (DTE), Duke Energy Corp (DUK), Expedia Group Inc (EXPE), FirstEnergy Corp (FE), Healthpeak Properties Inc (PEAK), Hershey Co/The (HSY), Illumina Inc (ILMN), Intercontinental Exchange Inc (ICE), Interpublic Group of Cos Inc/The (IPG), Kellanova (K), Kenvue Inc (KVUE), Kimco Realty Corp (KIM), Masco Corp (MAS), Mettler-Toledo International Inc (MTD), Mohawk Industries Inc (MHK), Molina Healthcare Inc (MOH), Motorola Solutions Inc (MSI), Philip Morris International In (PM), Ralph Lauren Corp (RL), Regency Centers Corp (REG), S&P Global Inc (SPGI), Snap-on Inc (SNA), T Rowe Price Group Inc (TROW), Take-Two Interactive Software (TTWO), Tapestry Inc (TPR), TransDigm Group Inc (TDG), VeriSign Inc (VRSN), Zimmer Biomet Holdings Inc (ZBH).

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