Stocks Settle Mainly Higher Ahead of Friday’s US Payroll Report

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.36%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.54%.  March E-mini S&P futures (ESH25) rose by +0.20%, and March E-mini Nasdaq futures (NQH25) rose by +0.36%. 

Stocks settled mainly higher on Thursday due to positive earnings results.  Tapestry rose more than +12% after reporting stronger-than-expected Q2 adjusted EPS and raising its full-year adjusted EPS forecast.  Also, YUM!  Brands closed up more than +9% after reporting Q4 worldwide comparable sales above consensus.  In addition, Hershey Co. closed up more than +4% after reporting better-than-expected Q4 net sales.

On the negative side, Qualcomm, the world’s biggest seller of smartphone processors, closed down more than -3% due to concern that demand for mobile phones will stall in the coming year.  Also, Ford Motor Company closed down more than -7% after warning that its profit may decline.  In addition, Skyworks Solutions sank more than -24% after saying competition in the semiconductor industry is intensifying. 

US economic news Thursday was mixed for stocks after weekly jobless claims rose more than expected, but Q4 productivity rose as expected.

US weekly initial unemployment claims rose +11,000 to 219,000, showing a weaker labor market than expectations of 213,000.

US Q4 nonfarm productivity rose +1.2%, right on expectations.  Q4 unit labor costs rose +3.0%, weaker than expectations of +3.4%.

Comments from Treasury Secretary Bessent supported stocks when he said the Trump administration is focusing on bringing down the Treasury 10-year yield by expanding the energy supply, which will bring down inflation.

Hawkish comments from Chicago Fed President Goolsbee weighed on stocks and bonds when he said he expects some Fed interest rate cuts over the next 18 months, but fiscal policy uncertainty may lead to fewer rate cuts.

The markets are awaiting direction from Friday’s monthly US payroll report.  Expectations are for Jan nonfarm payrolls to climb +170,000 and the Jan unemployment rate to remain stable at 4.1%.  Also, Jan average hourly earnings are expected to ease to +3.8% y/y from 3.9% y/y in Dec.

Earnings season is in full swing as companies report Q4 earnings results.  Amazon.com will release its quarterly results after Thursday’s close. 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 16% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets on Thursday settled higher.  The Euro Stoxx 50 rose to a 24-year high and closed up +1.62%.  China’s Shanghai Composite Index closed up +1.27%.  Japan’s Nikkei Stock 225 closed up +0.61%.

Interest Rates

March 10-year T-notes (ZNH25) Thursday closed down by -5.5 ticks.  The 10-year T-note yield rose by +1.8 bp to 4.436%.  March T-notes Thursday settled moderately lower.  Hawkish comments Thursday from Chicago Fed President Goolsbee weighed on T-notes when he said fiscal policy uncertainty may lead to fewer Fed interest rate cuts.  However, losses in T-notes were limited by Thursday’s US economic news that showed weekly US jobless claims rose more than expected, and Q4 unit labor costs rose less than expected, dovish factors for Fed policy. 

European government bond yields on Thursday finished higher.  The 10-year German bund yield rose +1.3 bp to 2.379%.  The 10-year UK gilt yield rebounded from a 1-3/4 month low of 4.375% and finished up +4.8 bp to 4.485%.

Eurozone Dec retail sales fell -0.2% m/m, weaker than expectations of -0.1% m/m.

German Dec factory orders rose +6.9% m/m, stronger than expectations of +2.0% m/m.

The German Jan S&P construction PMI rose +4.7 to a 1-1/2 year high of 42.5.

ECB Executive Board member Cipollone said, “We all agree there is still room for the ECB to adjust interest rates downward as the convergence with the inflation target is coherent with a declining interest rate path.”

As expected, the Bank of England (BOE) cut the official bank rate today by -25 bp to 4.50% from 4.75% but warned that inflation would rise “quite sharply” to peak at +3.7% later this year, up from +2.8% in its previous forecast.  The BOE also cut its UK 2025 GDP forecast to 0.75% from a November forecast of 1.50% and raised its 2025 CPI forecast to 3.50% from a November forecast of 2.75%.

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

Tapestry (TPR) closed up more than +12% to lead gainers in the S&P 500 after reporting Q2 adjusted EPS of $2.00, stronger than the consensus of $1.75, and raised its full-year adjusted EPS forecast to $4.85-$4.90, from a previous forecast of $4.50-$4.55. 

Philip Morris International (PM) closed up more than +10% after reporting Q4 adjusted EPS of $1.55, stronger than the consensus of $1.49, and forecast full-year adjusted EPS of $7.04-$7.17, above the consensus of $7.02. 

YUM!  Brands (YUM) closed up more than +9% after reporting Q4 worldwide comparable sales rose +1.00%, stronger than the consensus of +0.68%.

Ralph Lauren (RL) closed up more than +9% after raising its full-year revenue in constant currency forecast to up +6% to +7% from a previous estimate of +3% to +4%, stronger than the consensus of +4.27%.

Hershey Co (HSY) closed up more than +4% after reporting Q4 net sales of $2.89 billion, stronger than the consensus of $2.84 billion.

Intercontinental Exchange (ICE) closed up more than +4% after reporting Q4 EPS of $1.52, better than the consensus of $1.49. 

Coherent (COHR) closed up more than +10% after reporting Q2 revenue of $1.43 billion, stronger than the consensus of $1.37 billion, and forecast Q3 revenue of $1.39 billion-$1.48 billion, above the consensus of $1.40 billion. 

TTM Technologies (TTMI) closed up more than +7% after reporting Q4 net sales of $651.0 million, better than the consensus of $630.3 million, and forecast Q1 revenue of $600 million-$640 million, the midpoint above the consensus of $603.7 million. 

CarMax (KMX) closed up more than +3% after Evercore ISI upgraded the stock to outperform from in line with a price target of $110. 

Skyworks Solutions (SWKS) closed down more than -24% to lead losers in the S&P 500 after saying in an earnings call that ”the competitive landscape has intensified and our content position is expected to be down 20% to 25%” and “this decline will start impacting our revenue inQ4 of fiscal 25 and throughout fiscal 26.” 

Ford Motor (F) closed down more than -7% after CFO House warned that profit might fall by $2 billion or more this year due to an expected drop in vehicle prices and costly new-model launches. 

Hologic Inc (HOLX) closed down more than -10% after cutting its full-year revenue forecast to $4.05 billion-$4.10 billion from a previous forecast of $4.15 billion-$4.20 billion.

Molina Healthcare (MOH) closed down more than -10% after reporting Q4 adjusted EPS of $5.05, well below the consensus of $5.84, and forecast full-year adjusted EPS of at least $24.50, weaker than the consensus of $25.63.

Honeywell International (HON) closed down more than -5% to lead losers in the Dow Jones Industrials and Nasdaq 100 after forecasting 2025 sales of $39.6 billion-$40.6 billion, weaker than the consensus of $41.24 billion. 

Qualcomm (QCOM) closed down more than -3% after forecasting Q2 total licensing revenue of $1.25 billion-$1.45 billion, the midpoint below the consensus of $1.40 billion.

ARM Holdings Plc (ARM) closed down more than -3% after forecasting Q4 adjusted EPS of 48 cents-56 cents, the midpoint below the consensus of 53 cents. 

Symbotic Inc (SYM) closed down more than -15% after reporting Q1 total revenue of $486.7 million, below the consensus of $489.7 million, and forecast Q2 revenue of $510 million-$530 million, weaker than the consensus of $533.2 million.

Bristol Myers Squibb (BMY) closed down more than -3% after forecasting 2025 adjusted EPS of $6.55-$5.85, below the consensus of $6.92. 

Earnings Reports (2/7/2025)

Cboe Global Markets Inc (CBOE), FirstEnergy Corp (FE), Fortive Corp (FTV), Kimco Realty Corp (KIM).