Stocks Settle Mixed on Consolidation Below Record Highs

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.10%. 

Stock indexes on Friday settled mixed as they consolidated below Thursday’s record highs.  On the negative side, Lululemon Athletica closed down more than -15% after warning of a slowdown in visits to stores in the US and forecasting 2025 net revenue below consensus.  Also, Nike closed down more than -6% after warning that sales would decline by the low single digits in the first half of the fiscal year.  In addition, Tesla closed down more than -1% after Bloomberg reported that the company had 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 closed up more than +7% after reporting Q3 adjusted EPS above consensus and announcing a $5 billion stock buyback plan.  In addition, Nvidia closed up more than +3% after UBS raised its price target on the stock to $1,100 from $800.

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 17% for the next FOMC meeting on April 30-May 1 and 86% for the following meeting on June 11-12.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 closed down -0.42%.  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) on Friday closed up +11.5 ticks.  The 10-year T-note yield fell -4.59 bp to 4.212218%.  June T-note prices Friare moderately higherday matched Thursday’s 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.198%.  T-notes Friday had carryover support from strength in European government bonds. Also, the weakness in stocks Friday boosted some safe-haven demand for T-notes.

European government bond yields Friday moved lower.  The 10-year German bund yield fell to a 1-week low of 2.315% and finished down -8.2 bp at 2.323%.  The 10-year UK gilt yield fell to a 1-1/2 week low of 3.904% and finished down -7.36.7 bp at 3.922928%.

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) closed down more than -15% 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) closed down more than -76% 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. 

Real estate investment trust stocks with exposure to commercial real estate were under pressure Friday on concerns about defaults in the commercial real estate market.  Boston Properties (BXP) and Kimco Realty (KIM) closed down more than -3%.  Also, Federal Realty Investment Trust (FRT), Simon Property Group (SPG), Alexandria Real Estate Equities (ARE), and Regency Centers (REG) closed down more than -2%.

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

Freeport McMoRan (FCX) closed down more than -2% after copper and silver prices Friday fell to a 1-week low.

Accenture Plc (ACN) closed down more than -2% as analysts have cut their price targets on the stock by an average of -5.3% since it reported earnings on Thursday.

Tesla (TSLA) closed down more than -1% after Bloomberg reported that the company had reduced vehicle production at its plant in China amid sluggish growth in electric vehicle sales and intense competition.

FedEx (FDX) closed 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.

Nvidia (NVDA) closed up more than +3% to lead gainers in the Nasdaq 100 after UBS raised its price target on the stock to $1,100 from $800, citing its AI potential.

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

Best Buy (BBY) closed up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $101. 

Public Service Enterprise Group (PEG) closed up more than +1% after Bank of America Global Research raised its price target on the stock to $73 from $66.

Allstate (ALL) closed up more than +1% after Bloomberg Intelligence said the company’s February catastrophe losses were less than $150 million, which might lead to about 15% upside to Q1 EPS.

Boeing (BA) closed up +0.61% Friday to lead gainers in the Dow Jones Industrials after the Federal Aviation Administration withdrew proposed directives on some 787 planes.

Earnings Reports (3/25/2024)

Bakkt Holdings Inc (BKKT), Boston Omaha Corp (BOC), Dakota Gold Corp (DC), Liberty Media Corp-Liberty Liv (LLYVA), Sanara Medtech Inc (SMTI).

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