Stocks See Support as Trade Worries Ease

The S&P 500 Index ($SPX) (SPY) today is up +0.15%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.54%.  March E-mini S&P futures (ESH25) are up by +0.07%, and March E-mini Nasdaq futures (NQH25) are up by +0.55%. 

Stock indexes today are slightly higher.  Stock index futures rallied in overnight trade after President Trump late Monday agreed to delay 25% tariffs on Canada for a month.  However, stock index futures gave up most of their advance after the US imposed a 10% tariff on Chinese goods.  China retaliated immediately and announced 15% tariffs on US coal and liquified natural gas and 10% levies on US oil and agriculture equipment.  China also declared export control on tungsten-related materials, and the State Administration for Market Regulation said it would launch a probe into Google regarding anti-trust law breaches.  The Chinese tariffs are set to take effect on February 10, potentially leaving room for negotiation.

Hawkish comments Monday evening from Chicago Fed President Goolsbee were bearish for stocks and bonds when he said, "The Fed has got to be a little more careful and more prudent of how fast interest rates can come down because there are risks that inflation is about to start kicking back up again."

Corporate earnings results today are mixed.  Palantir Technologies is up more than +26% after reporting better-than-expected Q4 revenue and forecasting full-year revenue above consensus.  Also, Cummins is up more than +5% after reporting stronger-than-expected Q4 net sales.  On the negative side, Merck is down more than -11% after projecting weaker-than-expected full-year total sales.  Also, Estee Lauder is down more than -11% after forecasting Q3 organic net sales below consensus. 

Earnings season is in full swing as companies report Q4 earnings results.  Megacap technology companies Alphabet and Advanced Micro Devices are set to report earnings after the close today.  Qualcomm will release earnings on Wednesday.  Amazon.com will release its quarterly results on Thursday.  According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.

The markets are discounting the chances at 14% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.55%.  China's Shanghai Composite Index did not trade today and will reopen Wednesday after the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 closed up +0.72%.

Interest Rates

March 10-year T-notes (ZNH25) today are down -6 ticks.  The 10-year T-note yield is up +1.0 bp to 4.565%.  March T-notes today fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 4.594%.  T-notes are under pressure on reduced safe-have demand after President Trump delayed imposing tariffs on Canada and Mexico for a month.  T-note prices are also seeing negative carryover from a rise in European government bond yields today.  In addition, T-notes were undercut by the inflationary implications of the 10% US tariffs on Chinese goods, which are hawkish for Fed policy. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +4.2 bp to 2.427%.  The 10-year UK gilt yield is up +6.1 bp to 4.548%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Palantir Technologies (PLTR) is up more than +26% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 revenue of $827.5 million, stronger than the consensus of $775.9 million, and forecast full-year revenue of $3.74 billion-$3.76 billion, well above the consensus of $3.54 billion. 

Gartner Inc (IT) is up more than +5% after reporting Q4 adjusted EPS of $5.45, well above the consensus of $3.25.

Xylem Inc (XYL) is up more than +5% after reporting Q4 revenue of $1.26 billion, stronger than the consensus of $2.18 billion. 

Cummins (CMI) is up more than +5% after reporting Q4 net sales of $8.45 billion, better than the consensus of $8.12 billion.

Super Micro Computer (SMCI) is up more than +4% after saying it will give a business update on February 11 after being given an extension to file its financial reports for the fiscal year ended June 30 and the quarterly report for the period ended September 30. 

Spotify Technology (SPOT) is up more than +8% after reporting Q4 monthly active users of 675 million, better than the consensus of 664.94 million, and forecast Q1 monthly active users of 678 million, better than the consensus of 667.61 million. 

Pfizer (PFE) is up more than +1% after reporting Q4 sales of $17.8 billion, stronger than expectations of $17.3 billion. 

Aptiv Plc (APTV) is up more than +2% after HSBC upgraded the stock to buy from hold with a price target of $77. 

Merck & Co (MRK) is down more than -11% to lead losers in the S&P 500 and the Dow Jones Industrials after saying it was halting shipments of its cancer-preventing Gardasil vaccine to China to at least through mid-year and projected full-year total sales between $64.1 billion-$65.6 billion, weaker than the consensus of $67.4 billion. 

Estee Lauder (EL) is down more than -11% after forecasting Q3 organic net sales falling -8% to -10%, weaker than the consensus of -5.08%. 

PayPal Holdings (PYPL) is down more than -9% to lead losers in the Nasdaq 100 after reporting Q4 total payment volume in its unbranded payment-processing business rose +2%, well below the +29% growth seen in the same quarter last year.   

Ball Corp (BALL) is down more than -7% after reporting Q4 net sales of $2.88 billion, weaker than the consensus of $2.91 billion.

Centene (CNC) is down more than -5% after reporting Q4 its Q4 profit was aided by a settlement related to payments insured through Obamacare plans.  The settlement boosted 2024 earnings by 29 cents a share, accounting for almost all of its 33 cents-a-share outperformance for 2024 adjusted earnings. 

Illumina (ILMN) is down more than -3%, and PVH Corp (PVH) is down more than -2% after China placed the companies on a blacklist of entities, citing infringement of market transaction principles and damaging actions against Chinese companies. 

Archer-Daniels-Midland (ADM) is down more than -3% after forecasting 2025 adjusted EPS of $4.00 to $4.75, the midpoint below the consensus of $4.66. 

PepsiCo (PEP) is down more than -2% after reporting Q4 net revenue of $27.78 billion, below the consensus of $28.05 billion. 

Earnings Reports (2/4/2025)

Advanced Micro Devices Inc (AMD), Alphabet Inc (GOOGL), Amcor PLC (AMCR), AMETEK Inc (AME), Amgen Inc (AMGN), Apollo Global Management Inc (APO), Archer-Daniels-Midland Co (ADM), Atmos Energy Corp (ATO), Ball Corp (BALL), Centene Corp (CNC), Chipotle Mexican Grill Inc (CMG), Cummins Inc (CMI), Electronic Arts Inc (EA), Enphase Energy Inc (ENPH), Essex Property Trust Inc (ESS), Estee Lauder Cos Inc/The (EL), Fair Isaac Corp (FICO), FMC Corp (FMC), Fox Corp (FOXA), Gartner Inc (IT), Hubbell Inc (HUBB), IDEX Corp (IEX), Jack Henry & Associates Inc (JKHY), Jacobs Solutions Inc (J), Juniper Networks Inc (JNPR), KKR & Co Inc (KKR), Marathon Petroleum Corp (MPC), Match Group Inc (MTCH), Merck & Co Inc (MRK), Mondelez International Inc (MDLZ), Omnicom Group Inc (OMC), PayPal Holdings Inc (PYPL), Pentair PLC (PNR), PepsiCo Inc (PEP), Pfizer Inc (PFE), Prudential Financial Inc (PRU), Regeneron Pharmaceuticals Inc (REGN), Simon Property Group Inc (SPG), TransDigm Group Inc (TDG), Veralto Corp (VLTO), WEC Energy Group Inc (WEC), Willis Towers Watson PLC (WTW), Xylem Inc/NY (XYL).