Stocks Fall on US Tariffs and Higher Bond Yields

The S&P 500 Index ($SPX) (SPY) today is down -0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.26%.  March E-mini S&P futures (ESH25) are down by -0.26%, and March E-mini Nasdaq futures (NQH25) are down by -0.29%. 

Stock indexes retreated today after President Trump imposed a 25% tariff on US steel and aluminum imports that will include finished metal products and take effect on March 12.  European Commission President Von der Leyen immediately responded and said, “Unjustified tariffs on the EU will not go unanswered and will trigger firm and proportionate countermeasures.”

Stocks are also under pressure as the increase in tariffs pushes bond yields higher on the concern that rising tariffs may boost inflation and limit the Fed’s ability to cut interest rates.  The 10-year T-note yield today is up +3.9 bp.

Cleveland Fed President Hammack said it’s appropriate for the Fed to keep interest rates steady for “some time” while policymakers await further downward progress on inflation and analyze the economic effects of new government policies.

Corporate earnings results today are mixed.  On the bearish side, Fidelity National Information Services is down more than -17% after reporting Q4 adjusted EPS below consensus. Also, Marriott International is down more than -4% after forecasting 2025 adjusted EPS below consensus.  On the positive side, Ecolab is up more than +6% after reporting better-than-expected Q4 net sales.  Also, Coca-Cola is up more than +3%  after reporting Q4 operating revenue above consensus.

The markets this week will focus on this morning’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 today are mixed.  The Euro Stoxx 50 rallied to a 24-year high and is up +0.38%.  China’s Shanghai Composite Index closed down -0.12%.  Japan’s Nikkei Stock 225 was closed for the National Foundation Day holiday.

Interest Rates

March 10-year T-notes (ZNH25) today are down -8 ticks.  The 10-year T-note yield is up +3.9 bp to 4.535%.  March T-notes today are moderately lower.  T-notes were pressured after President Trump announced 25% tariffs on all steel, aluminum, and finished metal 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.  Also, hawkish comments today from Cleveland Fed President Hammack weighed on T-notes when she said it’s appropriate for the Fed to keep interest rates steady for “some time.” In addition, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate rose to a 1-week high today of 2.454%.  Supply pressures are also undercutting T-note prices as the Treasury will auction $58 billion auction of 3-year T-notes today as part of this week’s auctions of $125 billion of T-notes and T-bonds for the Feb quarterly refunding. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +6.0 bp to 2.422%.  The 10-year UK gilt yield is up +3.6 bp to 4.493%.

The France Q4 ILO mainland unemployment rate unexpectedly fell -0.1 to 7.1%, showing a stronger labor market than expectations of an increase to 7.3%.

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

Fidelity National Information Services (FIS) is down more than -17% to lead losers in the S&P 500 after reporting Q4 adjusted EPS of $1.43, below the consensus of $1.50.   

Leidos Holdings (LDOS) is down more than -5% after forecasting 2025 adjusted EPS of $10.35-$10.75, the midpoint below the consensus of $10.56. 

Marriott International (MAR) is down more than -4% to lead losers in the Nasdaq 100 after forecasting 2025 adjusted EPS of $9.82-$10.19, well below the consensus of $10.63.

Arch Capital Group Ltd (ACGL) is down more than -3% after reporting a Q4 book value of $53.11 a share, below the consensus of $54.44.

Carrier Global (CARR) is down more than -3% after reporting Q4 sales of $5.15 billion, weaker than the consensus of $5.30 billion. 

Amkor Technology (AMKR) is down more than -7% after reporting Q4 net sales of $1.63 billion, below the consensus of $1.66 billion, and forecast Q1 net sales of $1.23 billion-$1.33 billion, weaker than the consensus of $1.44 billion. 

Inspire Medical Systems (INSP) is down more than -2% after saying it received a request for information from the US Department of Justice tied to an investigation concerning allegations of false claims submitted to government payors in connection to the company’s implant. 

Ecolab (ECL) is up more than +6% to lead gainers in the S&P 500 after reporting Q4 net sales of $4.0 billion, stronger than the consensus of $3.99 billion. 

DuPont de Nemours (DD) is up more than +4% after reporting Q4 adjusted EPS of $1.13, stronger than the consensus of 98 cents. 

Phillips 66 (PSX) is up more than +4% after Elliot Investment Management said it had built a more than $2.5 billion stake in the company and plans to push for it to sell or spin off its midstream business.

Coca-Cola (KO) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q4 operating revenue of $11.50 billion, better than the consensus of $10.67 billion. 

Cincinnati Financial (CINF) is up more than +4% after reporting Q4 net premiums written of $2.24 billion, above the consensus of $2.17 billion.

S&P Global (SPGI) is up more than +3% after reporting Q4 adjusted EPS of $3.77, better than the consensus of $3.47.

Lattice Semiconductor (LSCC) is up more than +13% after forecasting Q1 revenue of $115 million-$125 million, the midpoint above the consensus of $118.8 million.

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).