Stocks Close Mildly Lower on Caution Ahead of Tuesday’s U.S. CPI Report

The S&P 500 Index ($SPX) (SPY) on Monday closed down -0.11%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed -0.37%.

Stocks Monday traded mildly lower on a +2.3 bp rise in the 10-year T-note yield and on caution ahead of Tuesday’s CPI report.  A stronger-than-expected CPI report would dampen hopes of a rate cut by the Fed over the near term.  The consensus is for Tuesday’s Feb U.S. CPI to be unchanged from Jan at +3.1% y/y, which would be 0.1 point above the 2-3/4 year low of +3.0% posted in June 2023. The Feb core CPI is expected to ease to a new 2-3/4 year low of +3.7% y/y from Jan’s current 2-3/4 year low of +3.9% y/y. 

Stocks on Monday also saw weakness on some long liquidation pressure after the S&P 500 and Nasdaq 100 last Friday posted new record highs on the net-dovish Feb U.S. unemployment report.  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.

Stocks also saw support last week after Fed Chair Powell said in Senate testimony that the Fed is “not far” from being confident enough to start cutting interest rates.  The markets were also encouraged after ECB President Lagarde last week said that the ECB could start cutting rates as soon as June.

The markets are discounting the chances for a -25 bp rate cut at 4% for next week’s March 19-20 FOMC meeting, 25% for the following meeting on April 30-May 1, and 86% for the meeting after that on June 11-12.

Overseas stock markets Monday closed mixed.  The Euro Stoxx 50 closed down -0.62%.  China’s Shanghai Composite closed up +0.74%.  Japan’s Nikkei Stock Index closed down -2.19%.

Interest Rates

June 10-year T-notes (ZNM24) on Monday fell -4.5 ticks.  The 10-year T-note yield rose +2.3 bp to 4.098%, up from last Friday’s 5-week ow of 4.034%.  T-note prices Monday were undercut by supply overhang amidst this week’s Treasury coupon auctions and a continued raft of corporate bond issuance.  The Treasury sold $54 billion of 3-year T-notes on Monday. The Treasury will sell $42 billion of 10-year T-notes on Tuesday and $25 billion of 30-year T-bonds on Wednesday.

European government bond yields Monday were mixed.  The 10-year German bund yield Monday rose by +3.6 bp to 2.303%, up from last Friday’s 5-week low of 2.234%.  The 10-year UK gilt yield Monday fell by -0.5 bp to 3.971%, mildly above last Friday’s 5-week low of 3.934%.

U.S. Stock Movers

Nvidia (NVDA) Monday fell by -1.98%, adding to last Friday’s sell-off of -5.47%.  Nvidia last Friday was hit by profit taking after it initially posted a record high and surged by more than +17% over the previous six sessions. 

Chip stocks Monday were among the largest losers in the Nasdaq 100 Index.  Advanced Micro Devices (AMD) fell -4.34%, Marvell Technology (MRVL) fell -4.06%, Micron Technology (MU) fell -3.19%, and Lam Research (LRCX) fell -2.66%. 

Meta Platforms (META) was the largest loser in the Nasdaq 100, with a loss of more than -4.42%.   Meta’s decline was attributed to former President Trump’s comment in a CNBC interview that he is against banning TikTok because it would aid Facebook.  He said, “I consider Facebook to be the enemy of the people along with a lot of media.”

Boeing (BA) fell -3.00% after news that the U.S. Justice Department has opened a criminal investigation regarding the recent midair blowout of a door on an Alaskan Airlines flight.

Moderna (MRNA) Monday was the best-performing Nasdaq 100 stock, with a gain of +8.69%.  The biotech company rallied after news that Moderna, in collaboration with Merck, is starting a mid-stage study to test its experimental cancer vaccine in patients with a form of skin cancer.  Merck (MRK) on Monday fell -0.57%.

Bitcoin (^BTCUSD) on Monday rallied more than +4% to post a new record high, adding to last week’s rally of +9.3%. Cryptocurrencies continue to rally on the SEC’s recent move to allow spot bitcoin ETFs. 

However, Coinbase (COIN) on Monday fell by -0.93%, giving up an early rally of more than +4%.  Marathon Digital (MARA) plunged -12.08%, Riot Platforms (RIOT) fell -4.59%, and Bit Digital (BTBT) fell -4.84%. 

Tesla (TSLA) rallied +1.41% on a mild rebound after recent losses.

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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