Stocks Climb on Lower Bond Yields and Strength in Tech Stocks

The S&P 500 Index ($SPX) (SPY) this morning is up +0.43%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.72%.

Stock indexes this morning are moderately higher, with the S&P 500 and Nasdaq 100 posting new record highs. Weaker-than-expected U.S. economic news today on Feb ISM manufacturing and the University of Michigan Feb consumer sentiment knocked bond yields lower and has sparked gains in technology stocks. 

The U.S. Feb ISM manufacturing index unexpectedly fell -1.3 to 47.8, weaker than expectations of an increase to 49.5. 

U.S. Jan construction spending unexpectedly fell -0.2% m/m, weaker than expectations of +0.2% m/m and the biggest decline in 15 months.

The University of Michigan U.S. Feb consumer sentiment index was revised downward by -2.7 to 76.9, weaker than expectations of no change at 79.6.

Fed Governor Waller said he would like to see the Fed's short-term Treasury holdings increase and mortgage-backed securities (MBS) holdings go to zero.

Corporate news today is mixed.  NetApp is up more than +24% after reporting stronger-than-expected Q3 adjusted EPS and boosted its full-year adjusted EPS estimate.  Also, Dell Technologies is up more than +27% after reporting Q4 adjusted EPS well above consensus.  On the negative side, New York Community Bancorp is down more than -23% after identifying “material weaknesses” in how it tracks loan risks.  Also, Zscaler is down more than -8% after reporting Q2 calculated billings below consensus.

U.S. stocks have carryover support from strength in other global bourses after the Euro Stoxx 50 rose to a 23-year high today and the Nikkei Stock Index climbed to a new record high.

The markets are discounting the chances for a -25 bp rate cut at 2% for the March 19-20 FOMC meeting and 25% for the following meeting on April 30-May 1.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.21%.  China’s Shanghai Composite closed up +0.39%.  Japan’s Nikkei Stock Index closed up +1.90%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +12 ticks, and the 10-year T-note yield is down -5.1 bp to 4.199%.  Jun T-notes recovered from early losses today and rallied to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 4.180%.  Today’s weaker-than-expected U.S. economic reports on Feb ISM manufacturing, Jan construction spending, and the University of Michigan Feb consumer sentiment sparked a rally in T-notes. 

On the negative side for T-notes is today’s rally in the S&P 500 to a new record high, which reduces safe-haven demand for T-notes.  Also, an increase in inflation expectations undercut T-notes after the 10-year breakeven inflation rate rose to a 1-week high today at 2.341%.

European government bond yields today are lower.  The 10-year German bund yield is down -0.6 bp at 2.405%.  The 10-year UK gilt yield is down -1.9 bp to 4.104%.

ECB Governing Council member Holzmann warned against cutting interest rates too early after today's news showed Eurozone price growth slowed less than expected in February.

Eurozone Feb CPI eased to +2.6% y/y from +2.8% y/y in Jan, stronger than expectations of +2.5% y/y. Feb core CPI eased to +3.1% y/y from +3.3% y/y in Jan, the slowest pace of increase in almost two years.

The Eurozone Jan unemployment rate fell -0.1 to a record low of 6.4%, right on expectations.

The Eurozone Feb S&P manufacturing PMI was revised upward by +0.4 to 46.5 from the previously reported 46.1.

U.S. Stock Movers

NetApp (NTAP) is up more than +24% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $1.94, stronger than the consensus of $1.68, and boosted its full-year adjusted EPS estimate to $6.40-$6.50 from a previous estimate of $6.05-$6.25.

Dell Technologies (DELL) is up more than +27% after reporting Q4 adjusted EPS of $2.20, well above the consensus of $1.72. 

Cooper Cos (COO) is up more than +8% after reporting Q1 net sales of $931.6 million, better than the consensus of $915.9 million. 

Chip stocks are climbing today on lower bond yields and ongoing euphoria over demand for AI.  As a result, Micron Technology (MU) is up more than +5% to lead gainers in the Nasdaq 100.  Also, Marvell Technology (MRVL) is up more than +5%, and Broadcom (AVGO) is up more than +4%.  In addition.  Nvidia (NVDA), Advanced Micro Devices (AMD), KLA Corp (KLAC), Lam Research (LRCX), and Applied Materials (AMAT) are up more than +2%. 

Eli Lilly (LLY) is up more than +3% after Bank of America raised its price target for the stock to $1,000 from $800, citing upside for its diabetes and obesity programs.   

Everbridge (EVBG) is up more than +24% after Thoma Bravo boosted its acquisition price for the company to $35 a share. 

Caret Holdings (ROOT) is up more than +16% after Jeffries upgraded the stock to buy from hold with a price target of $40.

Autodesk (ADSK) is up more than +2% after reporting Q4 net revenue of $1.47 billion, stronger than the consensus of $1.43 billion. 

Xcel Energy (XEL) is down more than -6% to lead losers in the S&P 500, adding to Thursday’s -8% plunge on concern it may be held liable for damages from the Smokehouse Creek wildfire in Texas after a law firm representing property owners affected by the fore said the origin of the fire may have started near the service territory of its subsidiary Southwestern Public Service Company.

Zscaler (ZS) is down more than -8% to lead losers in the Nasdaq 100 after reporting Q2 calculated billings rose +27% y/y, below the consensus of +30% y/y. 

Casino operators with exposure to Macau are under pressure today after Macau’s Feb casino revenue rose +79.1% y/y, weaker than expectations of +92% y/y.  As a result, Las Vegas Sands (LVS) is down more than -4% to lead losers in the S&P 500.  Also, Wynn Resorts Ltd (WYNN) is down more than -3%, and Caesars Entertainment (CZR) is down more than -1%. 

Keurig Dr Pepper (KDP) is down more than -2% after JAB Holding said it was offering 87 million shares of KDP stock for $29.10-$29.25 each. 

New York City Community Bancorp (NYCB) is down more than -23% after replacing its CEO and saying it identified material weaknesses in its internal controls related to internal loan reviews. 

Allstate (ALL) is down more than -2% on signs of insider selling after an SEC filing showed SVP Controller Pintozzi sold $637,880 of shares on Tuesday and Chief HR officer Toohey sold $274,647 worth of shares.

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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