Stocks Gain on Relief That Price Pressures are Abating

The S&P 500 Index ($SPX) (SPY) this morning is up +0.41%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.67%.

Stock indexes this morning are moving higher on signs that inflation pressures are continuing to ease after the Jan core personal consumption expenditures, the Fed’s preferred inflation gauge, rose 2.8% in January, right on expectations and the slowest pace of increase in 2-3/4 years.  Also, a decline in bond yields supports stocks as yields fell on the favorable inflation news and after weekly jobless claims rose more than expected, a dovish factor for Fed policy.  Other economic news today was mixed for stocks after Jan personal spending rose as expected and Jan personal income exceeded expectations. 

U.S. weekly initial unemployment claims rose +13,000 to 215,000, showing a weaker labor market than expectations of 210,000.

U.S. Jan personal spending rose +0.2% m/m, right on expectations.  Jan personal income rose +1.0% m/m, stronger than expectations of +0.4% m/m and the biggest increase in a year.

The U.S. Jan PCE core deflator eased to 2.8% y/y from 2.9% y/y in Dec, right on expectations and the slowest pace of increase in 2-3/4 years.

The markets are discounting the chances for a -25 bp rate cut at 3% for the March 19-20 FOMC meeting and 21% for the following meeting on April 30-May 1.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.05%.  China’s Shanghai Composite closed up +1.94%.  Japan’s Nikkei Stock Index closed down -0.11%.

Interest Rates

March 10-year T-notes (ZNH24) this morning are up by +7 ticks, and the 10-year T-note yield is down -3.3 bp at 4.231%.  T-notes shook off early losses today and are slightly higher on some Fed-friendly economic news.  The Jan core PCE deflator rose at the slowest pace in 2-3/4 years, a sign of easing price pressures, and weekly jobless claims rose more than expected, a sign of labor market weakness.  Gains in T-notes were limited after Jan personal income rose more than expected by the most in a year, a sign of wage pressures that may prompt the Fed to delay cutting interest rates.

European government bond yields today are lower.  The 10-year German bund yield fell back from a 3-month high of 2.512% and is down -3.4 bp at 2.425%.  The 10-year UK gilt yield rose to a 3-month high of 4.265% and is down -4.8 bp to 4.137%.

ECB Governing Council member Holzmann said he doesn't see any significant talks on lowering borrowing costs before the ECB's policy meeting in June. 

German Jan retail sales unexpectedly fell -0.4% m/m, weaker than expectations of +0.5% m/m.

German Feb unemployment change rose +11,000, showing a weaker labor market than expectations of +5,000.  The Feb unemployment rate was unchanged at a 2-1/2 year high of 5.9%, weaker than expectations of 5.8%.

German Feb CPI (EU harmonized) eased to 2.7% y/y from 3.1% y/y in Jan, right on expectations.

U.S. Stock Movers

Hormel Foods (HRL) is up more than +12% to lead gainers in the S&P 500 after reporting Q1 net sales of $3.00 billion, stronger than the consensus of $2.91 billion. 

Monster Beverage (MNST) is up more than +6% to lead gainers in the Nasdaq 100 after reporting Q4 gross margins of 54.2%, above the consensus of 53.3%. 

Best Buy (BBY) is up more than +6% after reporting Q4 revenue of $14.65 billion, above the consensus of $14.55 billion, and forecasting Q1 comparable sales up 5%, stronger than the consensus of -2.35%.   

Paramount Global (PARA) is up more than +6% after reporting Q4 direct-to-consumer revenue, a gauge of demand for streaming services, rose $1.87 billion, stronger than the consensus of $1.84 billion. 

Newmont Corp (NEM) is up more than +3% after Jeffries upgraded the stock to buy from hold with a price target of $38.

Okta (OKTA) is up more than +26% after reporting Q4 adjusted EPS of 63 cents, higher than the consensus of 51 cents, and forecast 2025 adjusted EPS of $2.24-$2.29, well above the consensus of $1.98. 

Pure Storage (PSTG) is up more than +17% after reporting Q4 adjusted EPS of 50 cents, stronger than the consensus of 44 cents. 

Intel (INTC) is up more than +1% to lead gainers in the Dow Jones Industrials after signing a pact with Vietell to develop products and solutions for AI, 5G, and data centers.

Bath & Body Works (BBWI) is down more than -5% to lead losers in the S&P 500 after forecasting Q1 EPS of 28 cents-33 cents, below the consensus of 38 cents.   

HP Inc (HPQ) is down more than -2% after reporting Q1 net revenue of $13.19 billion, weaker than the consensus of $13.58 billion.

Salesforce (CRM) is down more than -1% to lead losers in the Dow Jones Industrials after forecasting 2025 revenue of $37.7 billion-$38.0 billion, below the consensus of $38.62 billion. 

Snowflake (SNOW) is down more than -19% after forecasting 2025 product revenue of $3.25 billion, weaker than the consensus of $3.46 billion. 

Regeneron Pharmaceuticals (REGN) is down more than -1% on signs of insider selling after an SEC filing showed EVP Larosa sold $990,000 of shares on Monday. 

Macy’s (M) is down more than -1% after TD Cowen downgraded the stock to market perform from outperform. 

Chemours (CC) is down more than -45% after announcing management changes and delaying its earnings report.

Republic Services (RSG) is down more than -1% after UBS downgraded the stock to neutral from buy.

Earnings Reports (2/29/2024)

Autodesk Inc (ADSK), Bath & Body Works Inc (BBWI), Best Buy Co Inc (BBY), Cooper Cos Inc/The (COO), DENTSPLY SIRONA Inc (XRAY), Evergy Inc (EVRG), Hewlett Packard Enterprise Co (HPE), Hormel Foods Corp (HRL), NetApp Inc (NTAP).

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