Stocks Settle Mixed Ahead of Tuesday’s U.S. CPI Report

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday closed down -0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.44%.

Stocks on Monday gave up early gains and settled mixed, with the Dow Jones Industrials posting a new all-time high.  Long liquidation pressure weighed on stocks ahead of Tuesday’s monthly U.S. consumer price report.

Hawkish comments Tuesday from Fed Governor Bowman also weighed on stocks when she said that current interest rates are in a good place to keep downward pressure on inflation and that she doesn't see Fed rate cuts as appropriate "in the immediate future." 

M&A activity supported stocks Monday after Diamond Back Energy agreed to acquire Endeavor Energy for about $26 billion.  Aldo, Gilead Sciences agreed to buy CymaBay Therapeutics for about $4.3 billion. 

The markets are awaiting Tuesday’s U.S. Jan CPI report for direction.  The consensus is for Jan consumer prices to ease to +2.9% y/y from +3.4% y/y in December. A decline in the headline CPI to the expected level of +2.9% would take out the current 2-3/4 year low of +3.0% posted in June 2023.  Also, Jan CPI ex-food and energy is expected to ease to +3.7% y/y from +3.9% y/y in Dec, which would be a new 2-1/2 year low.

The markets are discounting the chances for a -25 bp rate cut at 18% for the March 19-20 FOMC meeting and 71% for the following meeting on April 30-May 1.

U.S. and European government bond yields on Monday moved lower. The 10-year T-note yield fell back from a 3-week high of 4.195% and dropped -0.7 bp to 4.168%.  The 10-year German bund yield fell -2.0 bp to 2.362%. The 10-year UK gilt yield fell -3.0 bp to 4.057%.   

Overseas stock markets on Monday settled higher.  The Euro Stoxx 50 closed up +0.65%.  China’s Shanghai Composite Index and Japan’s Nikkei Stock Index were closed for holidays.

Today’s stock movers…

Tesla (TSLA) closed down more than -2% to lead losers in the Nasdaq 100 after RBC Capital Markets said the slowdown in electric vehicle sales has not shown any evidence of bottoming. 

Monolithic Power Systems (MPWR) closed down more than -2% on signs of insider selling after an SEC filing showed CEO Hsing sold $1.9 million of shares last Thursday.

Monday.com (MNDY) closed down more than -10% as analysts were unimpressed with the company’s Q4 results, even though Q4 revenue of $202.6 million was better than the consensus of $197.6 million. 

Rivian Automotive (RIVN) closed down more than -2% after Barclays downgraded the stock to equal weight from overweight. 

Salesforce (CRM) closed down more than -1% to lead losers in the Dow Jones Industrials on signs of insider selling after an SEC filing showed CEO Benioff sold $4.37 million of shares last Thursday. 

AstraZeneca (AZN) closed down by more than -1% after Barclays cut its 2024 EPS estimate for the company by -2% following last Thursday’s weaker-than-expected earnings report. 

Eaton Corp (ETN) closed down more than -1% on signs of insider selling after an SEC filing showed Executive VP Marshall sold $1.59 million of shares last Wednesday.

VeriSign (VRSN) closed down more than -1% after CFRA downgraded the stock to sell from hold.

VF Corp (VFC) closed up more than +13% to lead gainers in the S&P 500 after the company's founding family said it backs replacing two directors on the company’s board with members of Engaged Capital. 

Diamondback Energy (FANG) closed up more than +9% to lead gainers in the Nasdaq 100 after agreeing to buy Endeavor Energy for about $26 billion.

Mohawk Industries (MHK) closed up more than +6% after Deutsche Bank upgraded the stock to buy from hold with a price target of $152. 

Trimble (TRMB) closed up more than +4% after reporting Q4 revenue of $932.4 million, stronger than the consensus of $910.3 million. 

Lowe’s (LOW) closed up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $265 and added the stock to its Analyst Focus List as a value-stock idea. 

Franklin Resources (BEN) closed up more than +3% after reporting January assets under management rose +9.5% from December to $1.60 trillion.   

Corteva (CTVA) closed up more than +2% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $65. 

Expedia Group (EXPE) closed up more than +1% after Susquehanna Financial raised its price target on the stock to $145 from $120. 

Across the markets…

March 10-year T-notes (ZNH24) on Monday closed up +4.5 ticks, and the 10-year T-note yield fell by -0.7 bp to 4.168%.  Mar T-note prices on Monday posted modest gains on positive carryover from a rally in 10-year German bunds.  Also, short-covering boosted T-notes ahead of Tuesday’s monthly U.S. CPI report for January, which is expected to be Fed-friendly. 

T-notes fell back from their best levels Monday on hawkish comments from Fed Governor Bowman, who said it was too soon for the Fed to consider interest rate cuts.  Corporate supply pressures also weighed on -notes, with as many as ten debt offerings in the pipeline this week totaling nearly $30 billion, prompting bond dealers to short T-note futures as a hedge against the new supply. 

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