Stocks Settle Higher and Brush Aside Tariff Concerns

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.67%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.24%.  March E-mini S&P futures (ESH25) rose by +0.59%, and March E-mini Nasdaq futures (NQH25) rose by +1.12%. 

Stock indexes Monday settled moderately higher, led by gains in US metals makers and mining stocks after President Trump imposed a 25% tariff on US steel and aluminum imports.  The tariff increases also boosted gold prices to a record high and copper prices to a 4-month high.  Strength in chip stocks also supported gains in the broader market.

M&A activity also supported stocks after Hyatt Hotels on Monday agreed to purchase Playa Hotels & Resorts NV for $13.50 per share, or about $2.6 billion.

Corporate earnings results on Monday were mixed for stocks. On the positive side, Rockwell Automation closed up more than +12% after reporting stronger-than-expected Q1 adjusted EPS.  Also, McDonald’s closed up more than +4% after reporting an unexpected increase in Q4 comparable sales.  On the negative side, ON Semiconductor closed down more than -8% after forecasting Q4 revenue below consensus.  Also, Incyte Corp closed down more than -7% after reporting Q4 adjusted EPS below consensus.  Also, 

The markets this week will focus on Tuesday’s semiannual monetary policy testimony by Fed Chair Powell to the Senate Banking Committee.  On Wednesday, US Jan CPI will be released and is expected to remain unchanged from Dec at 2.9% y/y, while Jan core CPI is expected to ease to 3.1% y/y from 3.2% in Dec.  Also on Wednesday, Fed Chair Powell testifies on the economy and monetary policy before the House Financial Services panel.  On Friday, Jan retail sales are expected to fall -0.1% m/m and Jan manufacturing production is expected to climb +0.1% m/m.

Earnings season is in full swing as companies report Q4 earnings results.  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 7% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets on Monday settled higher.  The Euro Stoxx 50 closed up +0.62%.  China’s Shanghai Composite Index rallied to a 5-week high and closed up +0.56%.  Japan’s Nikkei Stock 225 closed up +0.04%.

Interest Rates

March 10-year T-notes (ZNH25) Monday closed down by -0.5 of a tick.  The 10-year T-note yield rose +0.2 bp to 4.497%.  March T-notes Monday settled slightly lower.  T-notes were pressured after President Trump revealed plans to impose 25% tariffs on all steel and aluminum imports into the US, raising concern that rising tariffs may boost inflation and limit the Fed’s ability to cut interest rates.  US importers pay the import tariffs and pass through as much of the tariff as they can to US buyers and consumers.  Supply pressures are also undercutting T-note prices as the Treasury will auction $125 billion of T-notes and T-bonds this week for the Feb quarterly refunding, beginning with Tuesday’s $58 billion auction of 3-year T-notes. 

Losses in T-notes were limited due to Monday’s rally in European government bonds.  T-note prices also found support on some short covering ahead of Tuesday’s semiannual monetary policy testimony by Fed Chair Powell to the Senate Banking Committee.

European government bond yields Monday moved lower.  The 10-year German bund yield fell -1.0 bp to 2.362%. The 10-year UK gilt yield fell -1.9 bp to 4.457%.

The Eurozone Feb Sentix investor confidence index rose +5.0 to a 7-month high of -12.7, stronger than expectations of -16.5.

ECB Vice President Guindos warned that implementation of tariffs by the US would create a “supply shock” that “fundamentally” affects world economic expansion.

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

Aluminum and steel company stocks rallied Monday after President Trump announced plans to impose 25% tariffs on steel and aluminum imports into the US, which would limit competition for US producers.  As a result, Cleveland-Cliffs (CLF) and Century Aluminum (CENX) closed up more than +10%.  Also, Nucor Corp (NUE) and Steel Dynamic (STLD) closed up more than +5%.  In addition, Alcoa (AA), Commercial Metals (CMC), and US Steel (X) closed up more than +2%.   

Chip stocks rose Monday and provided support to the broader market. Broadcom (AVGO) closed up more than +4%, and Nvidia (NVDA), Intel (INTC), and Micron Technology (MU) closed up more than +3%.  Also, Advanced Micro Devices (AMD), Applied Materials (AMAT), Marvell Technology (MRVL), and ASML Holding NV (ASML) closed up more than +2%.  In addition, Qualcomm (QCOM) and Lam Research (LRCX) closed up more than +1%. 

Axsome Therapeutics (AXSM) closed up more than +20% after announcing it has entered into a settlement agreement with Teva Pharmaceuticals to resolve patent litigation. 

Rockwell Automation (ROK) closed up more than +12% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $1.83, stronger than the consensus of $1.56. 

Monday.com (MNDY) closed up more than +26% after reporting Q4 EPS of 43 cents, well above the consensus of 15 cents. 

Uber Technologies (UBER) closed up more than +5%, adding to last Friday’s +6% rally after Pershing Square Capital Management said it had amassed a 30.3 million share stake in the company. 

McDonald’s (MCD) closed up more than +4% to lead gainers in the Dow Jones Industrials after reporting an unexpected increase in Q4 comparable sales of +0.5%, better than the consensus of a -0.93% decline. 

Shopify (SHOP) closed up more than +1% after Benchmark upgraded the stock to buy from hold with a price target of $150.

ON Semiconductor (ON) closed down more than -8% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q4 revenue of $1.72 billion, weaker than the consensus of $1.76 billion. 

Incyte Corp (INCY) closed down more than -7% after reporting Q4 adjusted EPS of $1.43, weaker than the consensus of $1.50.

Bio-Techne (TECH) closed down more than -3% to lead makers of lab-tool equipment lower after the National Institutes of Health said it plans to cut billions of dollars in reimbursements to medical researchers by lowering the maximum “indirect cost rate” that research institutions can charge the government.

Semtech (SMTC) closed down more than -30% after saying that 2026 net sales of its CopperEdge products are expected to be lower than the company’s floor case estimate of $50 million due to rack architecture changes. 

Illumina (ILMN) closed down more than -5% after Barclays downgraded the stock to underweight from equal weight with a price target of $100. 

American Express (AXP) closed down more than -2% to lead losers in the Dow Jones Industrials after CFO Le Caillec said Q1 revenue growth will be lower than Q4. 

Charles Schwab (SCHW) closed down more than -2% after TD Bank Group said it plans to sell its entire equity investment in Schwab through a secondary stock offering. 

Kraft Heinz (KHC) closed down more than -1% after Mizuho Securities downgraded the stock to neutral from outperform. 

Earnings Reports (2/11/2025)

American International Group Inc (AIG), Assurant Inc (AIZ), Carrier Global Corp (CARR), Coca-Cola Co/The (KO), DuPont de Nemours Inc (DD), Ecolab Inc (ECL), Edwards Lifesciences Corp (EW), Eversource Energy (ES), Fidelity National Information (FIS), Gilead Sciences Inc (GILD), Humana Inc (HUM), Leidos Holdings Inc (LDOS), Marriott International Inc/MD (MAR), Masco Corp (MAS), S&P Global Inc (SPGI), Welltower Inc (WELL).