Markets Today: Stocks Tumble as Bond Yields Spike on a Hot U.S. CPI Report

Morning Markets

March E-Mini S&P 500 futures (ESH24) are down -1.14%, and March Nasdaq 100 E-Mini futures (NQH24) are down -1.67%. 

Stock index futures this morning are moderately lower as prices consolidate recent gains.  The S&P 500, Dow Jones Industrials, and the Nasdaq 100 posted all-time highs Monday on optimism about the U.S. economy and a better-than-expected corporate earnings season.  However, losses in stock index futures accelerated as bond yields spiked higher after U.S. Jan CPI rose more than expected, dampening expectations of Fed rate cuts. 

U.S. Jan CPI eased to +3.1% y/y from +3.4% y/y in Dec, stronger than expectations of +2.9% y/y. The Jan CPI report of +3.1% was 0.1 point above the 2-3/4 year low of +3.0% posted in June 2023.  Meanwhile, the Jan core CPI (ex-food and energy) of +3.9% y/y was unchanged from December’s 2-1/2 year low and was stronger than expectations of +3.7% y/y.

The markets are discounting the chances for a -25 bp rate cut at 7% for the March 19-20 FOMC meeting and 51% for the following meeting on April 30-May 1.

U.S. and European government bond yields today are higher.  The 10-year T-note jumped to a 2-1/4 month high of 4.291% and is up +8.8 bp at 4.267%. The 10-year German bund yield rose to a 2-1/4 month high of 2.419% and is up +4.0 bp at 2.401%.  The 10-year UK gilt yield rose to a 2-1/4 month high of 4.167% and is up +7.6 bp at 4.133%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.84%.  China’s Shanghai Composite Index was closed for a holiday.  Japan’s Nikkei Stock Index closed up +2.89%.

The Euro Stoxx 50 today fell back from a 23-year high and is moderately lower.  Weakness in European chip stocks is leading the overall market lower, following weakness today in U.S. equity markets.  Also, airline stocks are on the defensive after they were downgraded at Redburn Atlantic.  On the positive side was today’s report showing German investor optimism in the Feb ZEW survey rose more than expected to a 1-year high.  Also, Michelin rose more than +4% after reporting better-than-expected full-year operating income and announcing a 1 billion euro stock buyback plan.

The German Feb ZEW survey expectations of economic growth index rose +4.7 to a 1-year high of 19.9, stronger than expectations of 17.3.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 9% for its next meeting on March 7 and 65% at the following meeting on April 11.

China’s Shanghai Composite Index today was closed for the week-long Lunar New Year holiday.  Chinese markets will reopen on Monday, February 19. 

Japan’s Nikkei Stock Index today rallied to a 34-year high and closed sharply higher. Japanese stocks surged today as trading resumed following Monday’s holiday.  Tokyo Electron soared more than +13% to a record high to lead technology stocks higher after reporting stronger-than-expected operating income and raising its full-year guidance on the strength of sales to China.  Also, Softbank climbed more than +10% on the explosive rally of its Arm Holdings Plc.  Exporter stocks rallied after the yen dropped to a 2-1/2 month low against the dollar. In addition, insurance stocks gained after a report said the Japan Financial Service Agency asked property-and-casualty insurers to accelerate their disposal of cross-shareholdings.

Japan's Jan PPI rose +0.2% y/y, stronger than expectations of +0.1% y/y.

Japan Jan machine tool orders fell -14.1% y/y, the thirteenth consecutive month orders have declined.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 33% for its next meeting on March 19 and at 65% for the following meeting on April 26.

Pre-market U.S. Stock Movers

Arista Networks (ANET) tumbled more than -7% in pre-market trading after forecasting Q1 adjusted operating margin of 42%, below the consensus of 42.1%.

Datadog (DDOG) tumbled more than -7% in pre-market trading after forecasting full-year revenue of $2.56 billion-$2.58 billion, weaker than the consensus of $2.59 billion. 

Cadence Design Systems (CDNS) dropped more than -6% in pre-market trading after forecasting Q1 revenue of $990 million to $1.01 billion, below the consensus of $1.11 billion. 

Shopify (SHOP) fell more than -8% in pre-market trading after forecasting Q1 free cash flow of high-single digits, weaker than the consensus of 13.6%. 

Hasbro (HAS) sank more than -12% in pre-market trading after reporting Q4 adjusted EPS of 38 cents, well below the consensus of 64 cents.

GlobalFoundries (GFS) tumbled more than -5% after forecasting Q1 net revenue of $1.50 billion-$1.54 billion, weaker than the consensus of $1.76 billion. 

Children’s Place (PLCE) dropped more than -11% in pre-market trading after B. Riley Securities downgraded the stock to sell from neutral with a price target of $4.

Lattice Semiconductor (LSCC) dropped more than -7% in pre-market trading after reporting Q4 adjusted gross margin of 70.4%, below the consensus of 70.5%, and forecasting Q1 adjusted gross margin of 68%-70%, weaker than the consensus of 70.3%. 

Teradata (TDC) slumped more than -13% in pre-market trading after forecasting full-year adjusted EPS of $2.15-$2.31, weaker than the consensus of $2.37. 

TripAdvisor (TRIP) rallied more than +11% in pre-market trading after announcing the formation of a special committee to evaluate any proposals that may be brought forward for a potential deal for the company. 

Beamr Imaging (BMR) soared more than +13% in pre-market trading to add Monday’s +370% surge after it announced that it teamed up with Nvidia on a project to speed up the adoption of the AOMedia Video 1 (AV1) video format. 

ZoomInfo Technologies (ZI) jumped more than +20% in pre-market trading after reporting Q4 revenue of $316.4 million, better than the consensus of $310.4 million, and forecasting Q1 revenue of $207 million-$310 million, the midpoint above the consensus of $308.4 million. 

Waste Management (WM) climbed more than +3% in pre-market trading after reporting Q4 adjusted operating Ebitda of $1.56 billion, stronger than the consensus of $1.50 billion, and forecast full-year adjusted operating Ebitda of $6.28 billion-$6.43 billion, the midpoint above the consensus of $6.32 billion. 

Molson Coors (TAP) rose more than +3% in pre-market trading after reporting Q4 net sales of $2.79 billion, stronger than the consensus of $2.78 billion.

Equifax (EFX) gained nearly +1% in pre-market trading after Evercore ISI upgraded the stock to outperform from in line with a price target of $310.

Earnings Reports (2/13/2024)

Airbnb Inc (ABNB), Akamai Technologies Inc (AKAM), American International Group Inc (AIG), Biogen Inc (BIIB), Coca-Cola Co/The (KO), DaVita Inc (DVA), Ecolab Inc (ECL), EQT Corp (EQT), Hasbro Inc (HAS), Howmet Aerospace Inc (HWM), Incyte Corp (INCY), Invitation Homes Inc (INVH), Leidos Holdings Inc (LDOS), Marriott International Inc/MD (MAR), MGM Resorts International (MGM), Molson Coors Beverage Co (TAP), Moody's Corp (MCO), Welltower Inc (WELL), Zoetis Inc (ZTS).

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