Stocks Settle Mixed Ahead of Wednesday’s CPI Report

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.03%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.29%.  March E-mini S&P futures (ESH25) are up by +0.05%, and March E-mini Nasdaq futures (NQH25) are down by -0.28%. 

Stock indexes Tuesday recovered from early losses and settled mixed. Strength in chip stocks gave the broader market a boost.  Stocks on Tuesday initially moved lower 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 were also under pressure Tuesday as the increase in tariffs pushed bond yields higher on the concern that rising tariffs may boost inflation and limit the Fed’s ability to cut interest rates.  Also, hawkish comments Tuesday from Fed Chair Powell and Clevland Fed Preside Hammack weighed on stocks and bonds when they said the Fed should keep interest rates on hold.  The 10-year T-note yield Tuesday rose +3.8 bp.

Fed Chair Powell said, “With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.”

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 on Tuesday are mixed.  On the positive side, DuPont de Nemours rose more than +6% after reporting stronger-than-expected Q4 adjusted EPS. Also, Ecolab closed up more than +6% after reporting better-than-expected Q4 net sales.  On the bearish side, Fidelity National Information Services closed down more than -11% after reporting Q4 adjusted EPS below consensus.  Also, Marriott International closed down more than -5% after forecasting 2025 adjusted EPS below consensus.  

The markets this week will focus on Wednesday’s US Jan CPI report that 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, 326 stocks in the S&P 500 have reported earnings, with 77.6% beating earnings estimates, just below the 3-year average of 78.4%. 

The markets are discounting the chances at 6% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 rallied to a 24-year high and closed up +0.61%.  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) Tuesday closed down -8.5 ticks.  The 10-year T-note yield rose +3.8 bp to 4.535%.  March T-notes Tuesday posted moderate losses.  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 Tuesday from Fed Chair Powell and Cleveland Fed President Hammack weighed on T-notes when they said the Fed should keep interest rates on hold. In addition, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate rose to a 1-week high Tuesday of 2.465%. 

T-notes recovered from their worst levels Tuesday on strong demand seen for the Treasury’s $58 billion auction of 3-year T-notes.  The auction had a bid-to-cover ratio of 2.79, well above the 10-acution average of 2.57 and the highest in 1-1/2 years.   

European government bond yields on Tuesday moved higher.  The 10-year German bund yield climbed to a 1-week high of 2.438% and finished up +6.8 bp to 2.430%.  The 10-year UK gilt yield rose +5.1 bp to 4.508%.

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

DuPont de Nemours (DD) closed up more than +6% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $1.13, stronger than the consensus of 98 cents. 

Chip stocks rallied on Tuesday and were supportive of the overall market.  Intel (INTC) closed up more than +6% to lead gainers in the Nasdaq 100.  Also, GlobalFoundries (GFS) closed up more than +5%.  In addition, ON Semiconductor (ON), Microchip Technology (MCHP), and ASML Holding NV (ASML) closed up more than +1%. 

Ecolab (ECL) closed 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. 

Coca-Cola (KO) closed up more than +4% 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. 

S&P Global (SPGI) closed up more than +4% after reporting Q4 adjusted EPS of $3.77, better than the consensus of $3.47.

Apple (AAPL) closed up more than +2% after releasing its Powerbeats Pro 2 earbuds that add noise cancellation, a heart-rate monitor, and a revamped design.

Lattice Semiconductor (LSCC) closed up more than +7% after forecasting Q1 revenue of $115 million-$125 million, the midpoint above the consensus of $118.8 million.

Phillips 66 (PSX) closed 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.

Cincinnati Financial (CINF) closed up more than +2% after reporting Q4 net premiums written of $2.24 billion, above the consensus of $2.17 billion.

Fidelity National Information Services (FIS) closed down more than -11% to lead losers in the S&P 500 after reporting Q4 adjusted EPS of $1.43, below the consensus of $1.50.   

Tesla (TSLA) closed down more than -6% to lead losers in the Nasdaq 100.  Technical selling weighed on Tesla after falling below its 100-day moving average.  Also, valuation concerns have sparked long liquidation in Tesla with shares currently trading at 110 times projected earnings, compared with an average of 22 times for the S&P 500. 

Marriott International (MAR) closed down more than -5% after forecasting 2025 adjusted EPS of $9.82-$10.19, well below the consensus of $10.63.

Humana (HUM) closed down more than -3% after forecasting 2025 adjusted EPS of $15.88, weaker than the consensus of $16.09. 

Leidos Holdings (LDOS) closed down more than -3% after forecasting 2025 adjusted EPS of $10.35-$10.75, the midpoint below the consensus of $10.56. 

Amkor Technology (AMKR) closed down more than -11% 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. 

Regeneron Pharmaceuticals (REGN) closed down more than -3% after Guggenheim Securities cut its price target on the stock to $950 from $1,200.

Arch Capital Group Ltd (ACGL) closed down more than -2% after reporting a Q4 book value of $53.11 a share, below the consensus of $54.44.

Carrier Global (CARR) closed down more than -1% after reporting Q4 sales of $5.15 billion, weaker than the consensus of $5.30 billion. 

Earnings Reports (2/12/2025)

Albemarle Corp (ALB), Biogen Inc (BIIB), Cisco Systems Inc (CSCO), CME Group Inc (CME), CVS Health Corp (CVS), Dominion Energy Inc (D), Equinix Inc (EQIX), Exelon Corp (EXC), Generac Holdings Inc (GNRC), Interpublic Group of Cos Inc/T (IPG), Kraft Heinz Co/The (KHC), Martin Marietta Materials Inc (MLM), MGM Resorts International (MGM), NiSource Inc (NI), Paycom Software Inc (PAYC), Rollins Inc (ROL), Smurfit WestRock PLC (SW), Tyler Technologies Inc (TYL), Ventas Inc (VTR), Waters Corp (WAT), Westinghouse Air Brake Technol (WAB), Williams Cos Inc/The (WMB).