Stocks Gain as U.S. Unemployment Report Bolsters the Outlook for Fed Rate Cuts

The S&P 500 Index ($SPX) (SPY) this morning is up +0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.29%.

Stock indexes this morning are moderately higher, with the S&P 500 and Nasdaq 100 posting new record highs.  Stocks are climbing today as bond yields tumbled after the U.S. Feb payroll report bolstered expectations for the Fed to begin cutting interest rates in June. Although Feb nonfarm payrolls rose more than expected, Jan payrolls were revised sharply lower, and the Feb unemployment rate unexpectedly rose to a 2-year high.  Also, Feb hourly earnings fell slightly and eased wage pressure concerns.

U.S. Feb nonfarm payrolls rose +275,000, stronger than expectations of +200,000.  However, Jan payrolls were revised downward to +229,000 from the previously reported +353,000.  The Feb unemployment rate rose +0.2 to a 2-year high of 3.9%, showing a weaker labor market than expectations of no change at 3.7%.

U.S. Feb average hourly earnings eased to +4.3% y/y from +4.4% y/y in Jan, right in line with expectations.

The markets are discounting the chances for a -25 bp rate cut at 5% for the March 19-20 FOMC meeting and 32% for the following meeting on April 30-May 1.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.09%.  China’s Shanghai Composite closed up +0.61%.  Japan’s Nikkei Stock Index closed up +0.23%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +5 ticks, and the 10-year T-note yield is down -1.9 bp at 4.081%.  June T-notes today whipsawed to a 1-month high Thursday, and the 10-year T-note yield fell to a 5-week low of 4.034%.  T-note prices initially moved lower after U.S. Feb nonfarm payrolls rose more than expected but erased their losses and moved higher after Jan nonfarm payrolls were revised sharply lower and the Feb unemployment rate rose more than expected to a 2-year high.  Also, wage pressures eased and boosted T-notes after Feb average hourly earnings eased slightly.  Today’s rally in the S&P 500 to a new record high has curbed safe-haven demand for government debt and limits the upside in T-notes. 

European government bond yields today are lower.  The 10-year German bund yield fell to a 5-week low of 2.234% and is down -5.1 bp at 2.255%. The 10-year UK gilt yield fell to a 5-week low of 3.934% and is down -4.3 bp to 3.954%.

German Jan industrial production rose +1.0% m/m, stronger than expectations of +0.6% m/m and the biggest increase in 11 months.

German Jan PPI of +0.2% m/m and -4.4% y/y was stronger than expectations of +0.1% m/m and -6.6% y/y.

ECB Governing Council member and Bundesbank President Nagel said, "The probability is increasing that we could see an interest rate cut before the summer break."

ECB Governing Council member Villeroy de Galhau said, "It seems very probable that there will be a first rate cut in the spring."

U.S. Stock Movers

Nvidia (NVDA) is up more than +3% at a record high to lead gainers in the Nasdaq 100 as demand for the company’s AI chips shows no signs of letting up.

General Electric (GE) is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $180.

Biogen (BIIB) is up more than +2% after rival Eli Lilly said the FDA is delaying its decision on its Alzheimer’s disease drug donanemab. Biogen received FDA approval in July for its Leqembi drug, which it partnered with Eisai. 

Samsara (IOT) is up more than +13% after forecasting 2025 total revenue of $1.19 billion-$1.20 billion, better than the consensus of $1.17 billion. 

DocuSign (DOCU) is up more than +5% after reporting Q4 adjusted EPS of 76 cents, stronger than the consensus of 64 cents, and forecast 2025 billings of $2.97 billion-$3.02 billion, above the consensus of $2.96 billion.

The Gap (GPS) is up more than +4% after reporting Q4 net sales of $4.30 billion, stronger than the consensus of $4.21 billion. 

Carvana (CVNA) is up more than +9% after RBC Capital Markets upgraded the stock to sector perform from underperform with a price target of $90. 

Textron (TXT) is up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral.

Costco Wholesale (COST) is down more than -5% to lead losers in the S&P 500 after reporting Q2 revenue of $58.44 billion, weaker than the consensus of $59.04 billion.

Broadcom (AVGO) is down more than -3% after reporting Q1 semiconductor solutions revenue of $7.39 billion, below the consensus of $7.70 billion. 

Marvell Technology (MRVL) is down more than -6% to lead losers in the Nasdaq 100 after forecasting Q1 net revenue of $1.15 billion, below the consensus of $1.37 billion. 

Amylyx Pharmaceuticals (AMLX) is down more than -84% after it said the study of its AMX0035 Phoenix treatment for ALS patients did not meet prespecified primary or secondary endpoints.

Eli Lilly (LLY) is down more than -2% after the U.S. FDA said it plans to hold an advisory panel hearing to evaluate the safety of the company Alzheimer’s disease drug donanemab, further delaying approval of the drug. 

MongoDB (MDB) is down more than -1% after forecasting 2025 adjusted EPS of $2.27-$2.49, well below the consensus of $3.53. 

Vulcan Materials (VMC) is down more than -1% after Wolfe Research downgraded the stock to peer perform from outperform. 

Earnings Reports (3/8/2024)

Aldeyra Therapeutics Inc (ALDX), ALX Oncology Holdings Inc (ALXO), America's Car-Mart Inc/TX (CRMT), Artesian Resources Corp (ARTNA), Atara Biotherapeutics Inc (ATRA), Bristow Group Inc (VTOL), CareMax Inc (CMAX), Caribou Biosciences Inc (CRBU), Comtech Telecommunications Cor (CMTL), Consumer Portfolio Services In (CPSS), Cullinan Oncology Inc (CGEM), Eve Holding Inc (EVEX), Genesco Inc (GCO), HireRight Holdings Corp (HRT), inTEST Corp (INTT), KalVista Pharmaceuticals Inc (KALV), Lazydays Holdings Inc (GORV), Merrimack Pharmaceuticals Inc (MACK), Nano-X Imaging Ltd (NNOX), National Beverage Corp (FIZZ), NI Holdings Inc (NODK), Olema Pharmaceuticals Inc (OLMA), ONE Group Hospitality Inc/The (STKS), OptimizeRx Corp (OPRX), Orchestra BioMed Holdings Inc (OBIO), Poseida Therapeutics Inc (PSTX), Tenaya Therapeutics Inc (TNYA), Valhi Inc (VHI), Waldencast plc (WALD), Willis Lease Finance Corp (WLFC), XOMA Corp (XOMA).

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