Stocks Consolidate Below This Week’s Record Highs

The S&P 500 Index ($SPX) (SPY) this morning is down -0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.45%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.25%. 

Stock indexes this morning are slightly lower as they consolidate below Thursday’s record highs.  On the negative side, Lululemon Athletica is down more than -1418% after warning of a slowdown in visits to stores in the US and forecasting 2025 net revenue below consensus.  Also, Nike is down more than -78% after warning that sales will decline by the low single digits in the first half of the fiscal year.  In addition, Tesla is down more than -32% after Bloomberg reported the company has reduced vehicle production at its plant in China.

On the positive side, a decline in bond yields supports stocks as the 10-year T-note yield today dropped to a 1-week low.  Also, FedEx is up more than +7% after reporting Q3 adjusted EPS above consensus and announcing a $5 billion stock buyback plan.  In addition, Best Buy is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral. 

Stock indexes rallied to record highs earlier this week on the outlook for Fed rate cuts later this year after the FOMC on Wednesday maintained its projections for a total of 75 bp of interest rate cuts this year. 

The markets are discounting the chances for a -25 bp rate cut at 15% for the next FOMC meeting on April 30-May 1 and 80% for the following meeting on June 11-12.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.52%.  China's Shanghai Composite closed down -0.95%.  Japan's Nikkei Stock Index rallied to a new record high and closed up +0.18%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +12 ticks.  The 10-year T-note yield is down -5.53 bp at 4.212214%.  June T-note prices are moderately highertoday matched Thursday’s 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.198%.  T-notes have carryover support from strength in European government bonds.  Also, the weakness in stocks today has boosted some safe-haven demand for T-notes.

European government bond yields today are lower.  The 10-year German bund yield fell to a 1-week low of 2.315% and is down -7.8 bp at 2.327%.  The 10-year UK gilt yield fell to a 1-1/2 week low of 3.904% and is down -7.36.4 bp at 3.922931%.

The German Mar IFO business climate survey rose +2.1 to a 9-month high of 87.8, stronger than expectations of 86.0.

The German Jan import price index was unchanged m/m and fell -5.9% y/y, stronger than expectations of -0.4% m/m and -7.5% y/y.

ECB Governing Council member and Bundesbank President Nagel said the probability is increasing that there'll be a first interest rate cut by the ECB "before the summer break" in August, but investors shouldn't draw the conclusion that the same will happen at every subsequent meeting.

US Stock Movers

Lululemon Athletica (LULU) is down more than -18% to lead losers in the S&P 500 and Nasdaq 100 after warning of a slowdown in visits to stores in the US and forecasting 2025 net revenue of $10.7 billion-$10.8 billion, weaker than the consensus of $10.96 billion. 

Nike (NKE) is down more than -78% to lead losers in the Dow Jones Industrials after warning that sales will decline by the low single digits in the first half of the fiscal year. 

Tesla (TSLA) is down more than -2% after Bloomberg reported the company has reduced vehicle production at its plant in China amid sluggish growth in electric vehicle sales and intense competition.

Dutch Bros (BROS) is down more than -6% after announcing the launch of a secondary public offering of class A common stock. 

Cybersecurity companies are under pressure today and are weighing on technology stocks.  Crowdstrike Holdings (CRWD), Zscaler (ZS), and SentinelOne (S) are down more than -2%. 

Freeport McMoRan (FCX) is down more than -1% after copper and silver prices today fell to a 1-week low.

FedEx (FDX) is up more than +7% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $3.86, stronger than the consensus of $3.46 billion, and announcing a $5 billion stock buyback plan.  United Parcel Service (UPS) also rose more than +1% on the news.

Best Buy (BBY) is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $101. 

Alphabet (GOOGL) is up more than +2% to lead gainers in the Nasdaq 100 after Wedbush added the stock to its Best Ideas List and raised its price target on the stock to $175 from $160.

Boeing (BA) is up more than +2% to lead gainers in the Dow Jones Industrials after the Federal Aviation Administration withdrew proposed directives on some 787 planes.

Nvidia (NVDA) is up more than +1% after UBS raised its price target on the stock to $1,100 from $800, citing its AI potential.

Public Service Enterprise Group (PEG) is up more than +2% after Bank of America Global Research raised its price target on the stock to $73 from $66.

Veralto (VLTO) is up +0.63% after Goldman Sachs initiated coverage of the stock with a recommendation of buy with a price target of $104.

General Mills (GIS) is up more than +1% as analysts raised their price targets on the stock by an average of +5.7% since the company reported earnings on Wednesday.

Earnings Reports (3/22/2024)

American Realty Investors Inc (ARL), ARS Pharmaceuticals Inc (SPRY), Atara Biotherapeutics Inc (ATRA), Eagle Pharmaceuticals Inc/DE (EGRX), Erasca Inc (ERAS), Humacyte Inc (HUMA), inTEST Corp (INTT), Maui Land & Pineapple Co Inc (MLP), Orchestra BioMed Holdings Inc (OBIO), Transcontinental Realty Invest (TCI), Waldencast plc (WALD).

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