Stocks Give Up Early Gains and Close Lower as Chip Stocks Retreat

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.65%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.18% and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.53%.

Stock indexes on Friday gave up early gains and closed moderately lower.  Stocks on Friday initially rallied, with the S&P 500 and Nasdaq 100 posting new record highs.  However, profit-taking and long liquidation in chip stocks weighed on the overall market, and prices turned lower. 

Stocks rallied early Friday as bond yields tumbled after the U.S. Feb unemployment 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.

Comments on Friday from Chicago Fed President Goolsbee were dovish and supportive of stocks when he said, "As inflation comes down, the Fed will be moving toward less restrictiveness over the course of the year."

The markets are discounting the chances for a -25 bp rate cut at 2% for the March 19-20 FOMC meeting and 27% for the following meeting on April 30-May 1.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 closed down -0.26%.  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) on Friday closed up +2.5 ticks, and the 10-year T-note yield rose +0.4 bp to 4.087%.  June T-notes today whipsawed to a 1-month high Friday, 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. 

T-notes fell back from their best levels due to supply pressures.  The Treasury will auction $118 billion of T-notes and T-bonds next week, prompting bond dealers to short T-notes as a hedge against the upcoming supply. 

European government bond yields Friday moved lower.  The 10-year German bund yield fell to a 5-week low of 2.234% and finished down -3.9 bp at 2.267%.  The 10-year UK gilt yield fell to a 5-week low of 3.934% and finished down -2.2 bp at 3.976%.

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

Costco Wholesale (COST) closed down more than -7% to lead losers in the S&P 500 after reporting Q2 revenue of $58.44 billion, weaker than the consensus of $59.04 billion.

Marvell Technology (MRVL) closed down more than -11% to lead losers in the Nasdaq 100 after forecasting Q1 net revenue of $1.15 billion, below the consensus of $1.37 billion. 

Broadcom (AVGO) closed down more than -6% after reporting Q1 semiconductor solutions revenue of $7.39 billion, below the consensus of $7.70 billion. 

MongoDB (MDB) closed down more than -6% after forecasting 2025 adjusted EPS of $2.27-$2.49, well below the consensus of $3.53. 

Nvidia (NVDA) gave up a 3% advance to a record high and closed down more than -5% to drag chip stocks lower as profit-taking set in after the stock surged by more than +17% over the past six sessions.  Other chip stocks also retreated, with Intel (INTC) closing down more than -4% to lead losers in the Dow Jones Industrials.  Also, ON Semiconductor (ON), ASML Holding NV (ASML), and Microchip Technology (MCHP) closed down more than -4%.  In addition, Lam Research (LRCX), Applied Materials (AMAT), and KLA Corp (KLAC) closed down more than -3%.

Amylyx Pharmaceuticals (AMLX) closed down more than -82% after it said the study of its AMX0035 Phoenix treatment for ALS patients did not meet prespecified primary or secondary endpoints.

Boeing (BA) closed down more than -2% after the FAA said it is investigating a Boeing 737 Max 8 jet that rolled off the runway into a grassy area after arriving in Houston with 160 passengers aboard.

Eli Lilly (LLY) closed 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. 

Cruise line operators rallied Friday after Stifel touted Carnival’s “healthy” booking patterns and said it expects the company to boost its full-year guidance when it reports earnings later this month.  As a result, Carnival (CCL) closed up more than +4%.  Also, Royal Caribbean Cruises Ltd (RCL) closed up more than +2%, and Norwegian Cruise Line Holdings (NCLH) closed up more than +1%.

The Gap (GPS) closed up more than +8% after reporting Q4 net sales of $4.30 billion, stronger than the consensus of $4.21 billion. 

Carvana (CVNA) closed up more than +7% after RBC Capital Markets upgraded the stock to sector perform from underperform with a price target of $90. 

Samsara (IOT) closed up more than +14% after forecasting 2025 total revenue of $1.19 billion-$1.20 billion, better than the consensus of $1.17 billion. 

DocuSign (DOCU) closed up more than +4% 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.

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

Biogen (BIIB) closed up more than +1% 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. 

General Electric (GE) closed up nearly +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $180.

Earnings Reports (3/11/2024)

Casey's General Stores Inc (CASY), Fortrea Holdings Inc (FTRE), Liberty Media Corp-Liberty Live (LLYVA), Oracle Corp (ORCL), Vail Resorts Inc (MTN).

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