Higher Bond Yields Weigh on Stocks But Chip Stocks Provide Support

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.13%.

Stock indexes this morning are mixed, with the Nasdaq 100 posting a new record high.  Signs of strength in the U.S. labor market have pushed bond yields higher today and are weighing on the overall market after weekly jobless claims fell more than expected, a hawkish factor for Fed policy.  Strength in chip stocks today has pushed the Nasdaq 100 to a new all-time high. 

Corporate earnings results are mixed.  PayPal Holdings is down more than -9% after reporting fewer than expected Q4 active customer accounts and forecasting full-year adjusted EPS below consensus.  Also, FleetCor Technologies is down more than -6% after reporting Q4 revenue well below consensus and forecasting weaker-than-expected 2024 revenue.

On the positive side, Walt Disney is up more than +10% after reporting stronger-than-expected Q1 adjusted EPS and forecasting full-year adjusted EPS above consensus.  Also, Ralph Lauren is up more than +14% after reporting Q3 total comparable sales ex-forex well 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 +3.5 bp at 4.156%.  The 10-year German bund yield rose to a 2-week high of 2.356% and is up +3.4 bp at 2.350%.  The 10-year UK gilt yield is up +4.6 bp at 4.034%.   

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.74%.  China’s Shanghai Composite Index closed up +1.28%.  Japan’s Nikkei Stock Index closed up +2.06%.

Today’s stock movers…

PayPal Holdings (PYPL) is down more than -10% to lead losers in the S&P 500 and Nasdaq 100 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. 

Everest Group Ltd (EG) is down more than -9% after reporting Q4 revenue of $3.66 billion, below the consensus of $3.87 billion.

FleetCor Technologies (FLT) is down more than -6% after reporting Q4 revenue of $937.3 million, well below the consensus of $970.5 million, and forecast 2024 revenue of $4.04 billion-$4.12 billion, weaker than the consensus of $4.14 billion. 

S&P Global (SPGI) is down more than -6% after forecasting 2024 pro forma adjusted EPS of $13.75-$14.00, weaker than the consensus of $14.45. 

BorgWarner (BWA) is down more than -6% after reporting Q4 net sales of $3.52 billion, weaker than the consensus of $3.63 billion. 

AstraZeneca Plc (AZN) is down more than -6% after reporting Q4 core EPS of $1.45, below the consensus of $1.51.

O’Reilly Automotive (ORLY) is down more than -3% after reporting Q4 comparable sales rose +3.4%, weaker than the consensus of +3.74%.

Kenvue (KVUE) is down more than -3% after forecasting full-year adjusted EPS of $1.10-$1.20 weaker than the consensus of $1.25. 

Monolithic Power Systems (MPWR) is up more than +16% to lead gainers in the S&P 500 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. 

Ralph Lauren (RL) is up more than +14% after reporting Q3 total comparable sales ex-forex rose +9%, much stronger than the consensus of +4.69%.

Walt Disney (DIS) is up more than +10% to lead gainers in the Dow Jones Industrials 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.

Tapestry (TPR) is up more than +9% after reporting Q2 net sales of $2.08 billion, stronger than the consensus of $2.06 billion.

News Corp (NWS) is up more than +7% after reporting Q2 revenue of $2.59 billion, above the consensus of $2.57 billion.

Wynn Resorts (WYNN) is up more than +6% after reporting Q4 operating revenue of $1.84 billion, stronger than the consensus of $1.74 billion. 

Strength in chip stocks is supportive of the overall market.  Globalfoundries (GFS) is up more than +4% to lead gainers in the Nasdaq 100. Also, Marvell Technology (MRVL) is up more than +3%.  In addition, Applied Materials (AMAT), On Semiconductor (ON), KLA Corp (KLAC), and Lam Research (LRCX) are up more than +2%.

Masco (MAS) is up more than +6% after reporting Q4 net sales of $1.88 billion, better than the consensus of $1.79 billion.

Intercontinental Exchange (ICE) is up more than +4% after reporting Q4 adjusted EPS of $1.33, better than the consensus of $1.29.

Across the markets…

March 10-year T-notes (ZNH24) this morning are down by -11 ticks, and the 10-year T-note yield is up +3.5 bp at 4.156%.  Mar T-note prices this morning are under pressure on negative carryover from a slide in 10-year German bunds to a 2-week low.  Also, comments from Richmond Fed President Barkin weighed on T-notes when he said the Fed doesn't have to be in a hurry to cut interest rates.  In addition,  

supply pressures are negative for T-notes as the Treasury will auction $25 billion of 30-year T-bonds later today to conclude this week’s $121 auctions of T-notes and T-bonds for the February quarterly refunding. 

The dollar index (DXY00) this morning is up by +0.29%.  The dollar today is moderately higher.  Hawkish comments today from Richmond Fed President Barkin Strength boosted the dollar when he said the Fed is in no hurry to lower interest rates.  Also, today’s weekly U.S. jobless claims report showed that claims fell more than expected, a sign of strength in the labor market and a hawkish factor for Fed policy. 

EUR/USD (^EURUSD) this morning is down by -0.14%.  The euro today gave up early gains and turned lower on dollar strength.  Losses in the euro are contained after ECB Governing Council member Wunsch said he favors waiting for more data before deciding to cut interest rates.

ECB Governing Council member Wunsch said he favors waiting for more data before deciding to cut interest rates as wage growth in the Eurozone is running at a level that's not compatible with the ECB's 2% inflation target.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 10% for its next meeting on March 7 and at 58% for the following meeting on April 11.

USD/JPY (^USDJPY) this morning is up by +0.83%.  The yen today tumbled to a 2-1/4 month low against the dollar 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 yen is also under pressure from higher T-note yields today. 

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 BOJ rate hike at 21% for its next meeting on March 19 and at 83% for the following meeting on April 26.

April gold (GCJ24) this morning is down -5.8 (-0.28%), and Mar silver (SIH24) is up +0.180 (+0.81%). Gold and silver prices this morning are mixed.  A stronger dollar today is bearish for metals.  Also, hawkish central bank comments today are weighing on precious metals after Richmond Fed President Barkin said the Fed doesn't have to be in a hurry to cut interest rates, and ECB Governing Council member Wunsch said he favors waiting for more data before deciding to cut interest rates.  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.  Silver is climbing today after weekly U.S. jobless claims fell more than expected, a sign of strength in the economy that supports industrial metals demand. 

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