Stocks Rebound as Comments from Fed’s Goolsbee Knock Bond Yields Lower

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.46%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.60%.

Stock indexes this morning are moderately higher, recovering some of Tuesday’s sharp losses.  Dovish comments today from Chicago Fed President Goolsbee knocked bond yields lower and boosted stocks when he said slightly higher inflation data for a few months would still be consistent with a path back to the Fed’s 2% target. 

On the positive side for stocks, Uber Technologies is up more than +12% after unveiling a stock buyback plan totaling as much as $7 billion in shares.  Also, Davita is up more than +6% after reporting Q4 total revenue above consensus. CME Group is up more than +4% after reporting better-than-expected Q4 adjusted EPS.

On the negative side, MGM Resorts International is down more than -7% after reporting Q4 regional operations net revenue below consensus.  Also, Akamai Technologies is down more than -6% after reporting weaker-than-expected Q4 revenue and forecasting Q1 revenue below consensus.  In addition, Kraft Heinz is down more than -5% after reporting weaker-than-expected Q4 net sales.

The weekly U.S. MBA mortgage applications index fell -2.3% in the week ended February 9.  The home-purchase sub-index fell -2.5% to a 5-week low, and the refinancing sub-index fell -2.1%.  The average 30-year fixed rate mortgage rate rose +7 bp to a 2-month high of 6.87%.

Chicago Fed President Goolsbee said, "Even if inflation comes in a bit higher for a few months, it would still be consistent with our path back to target."  He added that the Fed's current policy stance is "quite restrictive" and said, "I don't support waiting until inflation on a 12-month basis has already achieved 2% to begin cutting interest rates."

The markets are discounting the chances for a -25 bp rate cut at 11% for the March 19-20 FOMC meeting and 44% for the following meeting on April 30-May 1.

U.S. and European government bond yields today are lower. The 10-year T-note fell back from a 2-1/2 month high of 4.330% and is down -2.6 bp at 4.289%.  The 10-year German bund yield is down -3.4 bp at 2.359%. The 10-year UK gilt yield is down -8.8 bp at 4.062%.   

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.48%.  China’s Shanghai Composite Index was closed for a holiday.  Japan’s Nikkei Stock Index closed down -0.69%.

Today’s stock movers…

Uber Technologies (UBER) is up more than +12% to lead gainers in the S&P 500 after unveiling a stock buyback plan totaling as much as $7 billion in shares.

IQVIA Holdings (IQV) is up more than +8% after reporting Q4 revenue of $3.87 billion, above the consensus of $3.80 billion. 

Charles River Laboratories International (CRL) is up more than +7% after reporting Q4 adjusted EPS of $2.46, better than the consensus of $2.42, and forecasting 2024 adjusted EPS of $10.90-$11.40, stronger than the consensus of $10.87. 

Lyft (LYFT) is up more than +33% after reporting Q4 gross bookings of $3.72 billion, stronger than the consensus of $3.67 billion, and forecasting Q1 gross bookings of about $3.5 billion-$3.6 billion, above the consensus of $3.48 billion. 

Davita (DVA) is up more than +6% after reporting Q4 total revenue of $3.15 billion, stronger than the consensus of $3.01 billion. 

Welltower (WELL) is up more than +5% after reporting Q4 normalized FFO/share of 96 cents, above the consensus of 94 cents, and forecasting 2024 normalized FFO/share of $3.94-$4.10, the midpoint above the consensus of $3.99. 

CME Group (CME) is up more than +4% after reporting Q4 adjusted EPS of $2.37, stronger than the consensus of $2.28. 

Datadog (DDOG) is up more than +3% to lead gainers in the Nasdaq 100 after Bernstein raised its price target on the stock to $152 from $137. 

MGM Resorts International (MGM) is down more than -7% to lead losers in the S&P 500 after reporting Q4 regional operations net revenue of $873.4 million, weaker than the consensus of $875.8 million. 

Akamai Technologies (AKAM) is down more than -6% after reporting Q4 revenue of $995 million, below the consensus of $1 billion, and forecasting Q1 revenue of $980 million-$1.0 billion, the midpoint weaker than the consensus of $993.7 million.

Kraft Heinz (KHC) is down more than -5% to lead losers in the Nasdaq 100 after reporting Q4 net sales of $6.86 billion, below the consensus of $6.98 billion. 

Airbnb (ABNB) is down more than -4% after D.A. Davidson downgraded the stock to neutral from buy.

Generac Holdings (GNRC) is down more than -3% after reporting Q4 net sales of $1.06 billion, weaker than the consensus of $1.09 billion. 

Maplebear (CART) is down more than -7% after reporting Q4 total revenue of $803 million, below the consensus of $804.7 million. 

Upstart Holdings (UPST) is down more than -20% after forecasting Q1 revenue of $125 million, well below the consensus of $146.6 million.

William Cos (WMB) is down more than -2% after forecasting full-year adjusted Ebitda of $6.8 billion-$7.1 billion, the midpoint below the consensus of $6.99 billion.. 

Across the markets…

March 10-year T-notes (ZNH24) this morning are up +8 ticks, and the 10-year T-note yield is down -2.6 bp at 4.289%.  Mar T-note prices this morning recovered from a 2-1/2 month low and are slightly higher, and the 10-year T-note yield fell back from a 2-1/2 month high of 4.330%.  Short-covering in T-notes emerged today on dovish comments from Chicago Fed President Goolsbee, who said, "Even if inflation comes in a bit higher for a few months, it would still be consistent with our path back to target."  Limiting gains in T-notes are rising inflation expectations after the 10-year breakeven inflation rate today climbed to a 3-week high of 2.328%.

The dollar index (DXY00) this morning is down by -0.11%.  The dollar today fell back from a 3-month high and turned lower after bond yields fell on dovish comments from Chicago Fed President Goolsbee. Also, today’s rally in stocks has curbed liquidity demand for the dollar. 

EUR/USD (^EURUSD) this morning is up by +0.10%.  The euro today recovered from a 3-month low and turned higher on better-than-expected economic news and hawkish ECB comments.  Eurozone Dec industrial production unexpectedly rose at the fastest pace in 16 months, and ECB Vice President Guindos said it would take time before inflation in the Eurozone returns to its 2% target.

Eurozone Dec industrial production unexpectedly rose +2.6% m/m, stronger than expectations of -0.2% m/m and the biggest increase in 16 months.

ECB Vice President Guindos said, "It will take some time before we have the necessary information to confirm that inflation is sustainably returning to our 2% target."

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 7% for its next meeting on March 7 and at 52% for the following meeting on April 11.

USD/JPY (^USDJPY) this morning is down by -0.16%.  The yen strengthened today after Japanese authorities expressed displeasure with Tuesday ‘s slump in the yen to a 2-3/4 month low against the dollar.  Japan’s top currency chief, Kanda, and finance minister, Suzuki, warned that authorities stand ready to take steps in the forex market if excessive moves in the yen are seen.  Lower T-note yields today are also supportive of the yen. 

Japan’s top currency chief Masato Kanda, vice finance minister for international affairs, said, “Recent moves by the yen have been pretty rapid, and authorities are on call 24 hours a day, 365 days a year, and will take appropriate steps as needed.” 

Swaps are pricing in the chances for a +10 bp BOJ rate hike at 35% for its next meeting on March 19 and at 73% for the following meeting on April 26.

April gold (GCJ24) this morning is down -2.8 (-0.14%), and Mar silver (SIH24) is up +0.091 (+0.41%). Gold and silver prices this morning are mixed, with gold falling to a 2-month low.  Gold prices extended Tuesday’s losses on negative carryover from the stronger-than-expected U.S. Jan CPI report that dampened expectations for Fed rate cuts in the first half of the year.  Gold also 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. 

A weaker dollar today and lower global bond yields are supporting precious metals.  Silver also garnered support today after Eurozone Dec industrial production unexpectedly rose at the fastest pace in 16 months, a positive factor for industrial metals demand.  Gold also has support as an inflation hedge after the U.S. 10-year breakeven inflation rate today rose to a 3-week high. 

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