Stocks Close Higher as Inflation Concerns Ease

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.52%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.95%.

Stock indexes on Thursday posted moderate gains on signs that inflation pressures are continuing to ease.  The Fed's preferred inflation gauge, the Jan core personal consumption expenditures, rose 2.8% in January, right on expectations and the slowest pace of increase in 2-3/4 years.  Also, other Fed-friendly reports Thursday on weekly jobless claims, the Jan MNI Chicago PMI, and Jan pending homes sales knocked bond yields lower and supported stock gains.  Chip stocks also rallied Thursday after Citigroup said it was “wildly bullish” on the sector.   

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 U.S. Feb MNI Chicago PMI unexpectedly fell -2.0 to 44.0, weaker than expectations of an increase to 48.0 and the steepest pace of contraction in 7 months.

U.S. Jan pending home sales unexpectedly fell -4.9% m/m, weaker than expectations of an increase of 1.5% m/m and the biggest decline in 5 months.

San Francisco Fed President Daly said the Fed is "ready" to cut interest rates when "data demands us to do," but "there is no imminent risk to the economy faltering." 

Atlanta Fed President Bostic said that if inflation continues to fall as he expects, it will probably be appropriate for the Fed to start easing this summer.

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 on Thursday settled mixed.  The Euro Stoxx 50 closed down -0.12%.  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) on Thursday closed up +3.5 ticks, and the 10-year T-note yield fell -1.4 bp to 4.250%.  T-notes shook off early losses Thursday and moved 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.  T-notes jumped to their highs after the Jan MNI Chicago PMI unexpectedly contracted by the most in seven months, and after Jan pending home sales unexpectedly fell by the most in five months, dovish factors for Fed policy. 

T-notes fell back from their bet levels Thursday after San Francisco Fed President Daly and Atlanta Fed President Bostic pushed back on the need for interest rate cuts in the near term. Also, strength in stocks Thursday curbed safe-haven demand for T-notes.

European government bond yields on Thursday moved lower.  The 10-year German bund yield fell back from a 3-month high of 2.512% and finished down -4.7 bp at 2.411%.  The 10-year UK gilt yield retreated from a 3-month high of 4.265% and finished down -6.1 bp to 4.124%.

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) closed up more than +15% 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. 

Chip stocks rallied Thursday after Citigroup said it is still “wildly bullish on semiconductor stocks given stable demand in PCs/Handsets/Servers,“ while “the AI market continues to grow” with all kinds of businesses and organizations buying AI chips.  As a result, Advanced Micro Devices (AMD) closed up more than +9% to lead gainers in the Nasdaq 100.  Also, Marvell Technology (MRVL) closed up more than +5%, and GlobalFoundries (GFS) and ON Semiconductor (ON) closed up more than +3%.  In addition, Nvidia (NVDA), Applied Materials (AMAT), Microchip Technology (MCHP), Texas Instruments (TXN), NXP Semiconductors NV (NXPI), and Intel (INTC) closed up more than +2%. 

Monster Beverage (MNST) closed up more than +5% after reporting Q4 gross margins of 54.2%, above the consensus of 53.3%. 

Salesforce (CRM) closed up more than +3% to lead gainers in the Dow Jones Industrials after Raymond James raised its price target on the stock to $380 from $300. 

Caesars Entertainment (CZR) closed up more than +4% after the State of Nevada Gaming Control Board reported Las Vegas Strip revenue rose +6.78% for fiscal year 2023. 

Newmont Corp (NEM) closed up more than +4% after Jeffries upgraded the stock to buy from hold with a price target of $38.

Okta (OKTA) closed up more than +22% 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) closed up more than +25% after reporting Q4 adjusted EPS of 50 cents, stronger than the consensus of 44 cents. 

Best Buy (BBY) closed up more than +1% 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%.   

Xcel Energy (XEL) closed down more than -8% to lead losers in the S&P 500 after it disclosed that a law firm representing property owners affected by the Smokehouse Creek wildfire in the Texas panhandle said the origin of the fire may have started near the service territory of its subsidiary Southwestern Public Service Company, which could lead to lawsuits against it for potential damages from the fire.

Bath & Body Works (BBWI) closed down more than -5% after forecasting Q1 EPS of 28 cents-33 cents, below the consensus of 38 cents.   

Snowflake (SNOW) closed down more than -18% after forecasting 2025 product revenue of $3.25 billion, weaker than the consensus of $3.46 billion. 

Chemours (CC) closed down more than -31% after announcing management changes and delaying its earnings report.

Macy’s (M) closed down more than -5% after TD Cowen downgraded the stock to market perform from outperform. 

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

HP Inc (HPQ) closed down more than -1% after reporting Q1 net revenue of $13.19 billion, weaker than the consensus of $13.58 billion.

Boeing (BA) closed down more than -1% after Bloomberg reported the U.S. Justice Department is looking into the midair blowout last month of a door plug on an Alaska Air flight, which could expose the company to criminal prosecution.

Earnings Reports (3/1/2024)

ACELYRIN Inc (SLRN), Allovir Inc (ALVR), Amneal Pharmaceuticals Inc (AMRX), AnaptysBio Inc (ANAB), Cardlytics Inc (CDLX), Cartesian Therapeutics Inc (RNAC), ClearPoint Neuro Inc (CLPT), Desktop Metal Inc (DM), Disc Medicine Inc (IRON), Dyne Therapeutics Inc (DYN), Eagle Bulk Shipping Inc (EGLE), EchoStar Corp (SATS), Enviva Inc (EVA), EyePoint Pharmaceuticals Inc (EYPT), Forum Energy Technologies Inc (FET), fuboTV Inc (FUBO), ImmunityBio Inc (IBRX), inTEST Corp (INTT), Lexicon Pharmaceuticals Inc (LXRX), Lightwave Logic Inc (LWLG), Longboard Pharmaceuticals Inc (LBPH), Mammoth Energy Services Inc (TUSK), Neumora Therapeutics Inc (NMRA), Omega Therapeutics Inc (OMGA), Plug Power Inc (PLUG), PMV Pharmaceuticals Inc (PMVP), Preformed Line Products Co (PLPC), RadNet Inc (RDNT), Saul Centers Inc (BFS), SIGA Technologies Inc (SIGA), Silvercrest Asset Management G (SAMG), Velo3D Inc (VLD), Vuzix Corp (VUZI), Workhorse Group Inc (WKHS).

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