Stocks Settle Lower as Walmart’s Weak Forecast Spurs Consumer Demand Concerns

The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.43%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.48%.  March E-mini S&P futures (ESH25) are down -0.49%, and March E-mini Nasdaq futures (NQH25) are down -0.52%. 

Stocks retreated Thursday, with the S&P 500 and Nasdaq 100 falling to 1-week lows and the Dow Jones Industrials falling to a 2-1/2 week low. Thursday’s weak forecast from Walmart has raised concerns about consumer demand and undercut stocks.  After forecasting lower-than-expected full-year profit, Walmart closed down more than -6%, citing an uncertain economic environment. Also, the weakness in bank stocks Thursday weighed on the broader market. 

Lower T-note yields Thursday limited stock losses, as the 10-year T-note yield fell -3.5 bp.  T-note yields fell Thursday after weekly US jobless claims rose more than expected and on carryover support from Wednesday’s minutes of the Jan 28-29 FOMC meeting that indicated that the FOMC might slow or halt its quantitative tightening process until the debt ceiling is raised.

T-note yields also fell Thursday on comments from Treasury Secretary Bessent, who said any move by the Treasury to boost the share of longer-term Treasuries in government debt issuance is a “long way off” due to current hurdles like elevated inflation and the Fed’s quantitative tightening program.

Hawkish comments Thursday from St. Louis Fed President Musalem were negative for stocks and bonds when he said he sees increased risks that inflation progress may stall or even reverse and that Fed policy should remain “modestly restrictive” until inflation is on track to the Fed’s 2% target. 

US weekly initial unemployment claims rose +5,000 to 219,000, showing a weaker labor market than expectations of 215,000. 

The US Feb Philadelphia Fed business outlook survey fell -26.2 to 18.1, stronger than expectations of 14.3.

US Jan leading indicators fell -0.3% m/m, weaker than expectations of -0.1% m/m.

The markets are discounting the chances at 2% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets Thursday settled mixed.  The Euro Stoxx 50 closed unchanged.  China’s Shanghai Composite Index recovered early losses and closed down -0.02% after President Trump said it would be “possible” to reach a new trade deal with China.  Japan’s Nikkei Stock 225 fell to a 2-1/2 week low and closed down -1.24%.

Interest Rates

March 10-year T-notes (ZNH25) Thursday closed up by +7 ticks.  The 10-year T-note yield fell by -3.5 bp to 4.498%.  March T-note prices moved moderately higher Thursday on carryover support from Wednesday when the FOMC minutes indicated that the FOMC might slow or halt its quantitative tightening process until the debt ceiling is raised.  T-note prices also found support from Thursday’s US news, which showed weekly jobless claims rose more than expected, and January leading indicators fell more than expected, dovish factors for Fed policy.  In addition, T-notes garnered support Thursday on comments from Treasury Secretary Bessent, who said any move by the Treasury to boost the share of longer-term Treasuries in government debt issuance is a “long way off.”  T-notes fell back from their best levels after St. Louis Fed President Musalem said Fed policy should remain “modestly restrictive” until inflation is on track to the Fed’s 2% target.

European government bond yields on Thursday moved lower.  The 10-year German bund yield fell from a 3-week high of 2.564% and finished down -2.3 bp to 2.534%.  The 10-year UK gilt yield fell from a 3-1/2 week high of 4.635% and finished down -0.3 bp to 4.607%.

The Eurozone Feb consumer confidence index rose +0.6 to a 4-month high of -13.6, stronger than expectations of -14.0.

German Jan PPI fell -0.1% m/m and rose +0.5% y/y, weaker than expectations of +0.6% m/m and +1.2% y/y.

ECB Governing Council member Simkus said, “he agrees with market expectations” for an ECB interest rate cut in March and two more by the end of the year.

ECB Governing Council member Stournaras said the balance of macroeconomic risks in the Eurozone “has shifted from concerns about high inflation to concerns about low growth,” and the ECB’s key interest rate “could fall to around 2% in the course of 2025.”

Swaps are discounting the chances at 96% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Walmart (WMT) closed down more than -6% to lead losers in the Dow Jones Industrials and retail stocks lower after forecasting net sales growth of 3% to 4% for the upcoming year, lower than the 5% growth seen in the last fiscal year.  Also, Target (TGT) and Costco Wholesale (COST) closed down more than -2% on the news. 

EPAM Systems (EPAM) closed down more than -12% to lead losers in the S&P 500 after forecasting 2025 adjusted EPS of $10.45-$10.7, well below the consensus of $11.42. 

Carvana (CVNA) closed down more than -11% after reporting Q4 wholesale vehicle gross profit per unit of $674.00, weaker than the consensus of $714.21. 

Palantir Technologies (PLTR) closed down more than -5%, adding to Wednesday’s -9% drop on concern about reduced US defense spending after Defense Secretary Hegseth announced plans to reduce US military spending by 8% over the next five years. 

Cruise line operators retreated Thursday after Commerce Secretary Lutnick suggested that cruise operators could start to pay taxes under the External Revenue Service program.  As a result, Royal Caribbean Cruises Ltd (RCL) closed down more than -7%.  Also, Carnival (CCL) closed down more than -5%, and Norwegian Cruise Line Holdings (NCLH) closed down more than -4%.  In addition, Viking Holdings Ltd (VIK) closed down more than -3%.

Bank stocks were under pressure Thursday to weigh on the broader market.  JPMorgan Chase (JPM) and Morgan Stanley (MS) closed down more than -4%.  Also, Goldman Sachs (GS) and Citigroup (C) closed down more than -3%.

Axon Enterprise (AXON) closed down more than -9% to lead losers in the Nasdaq 100 after Craig-Hallum Capital Group LLC downgraded the stock to hold from buy.

Celanese Corp (CE) closed down more than -4% after RBC Capital Markets downgraded the stock to sector perform from outperform. 

International Flavors & Fragrances (IFF) closed down more than -2% after CFRA double-downgraded the stock to sell from buy.

Hasbro (HAS) closed up more than +12% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 46 cents, better than the consensus of 34 cents, and said it is targeting mid-single-digit sales growth through 2027 with savings of about $1 billion.

Baxter International (BAX) closed up more than +8% after reporting Q4 sales continuing operations of $2.75 billion, better than the consensus of $2.67 billion.

LKQ Corp (LKQ) closed up more than +5% after reporting Q4 adjusted EPS from continuing operations of 80 cents, higher than the consensus of 73 cents.

Ormat Technologies (ORA) closed up more than +4% after Jeffries upgraded the stock to buy from hold with a price target of $78.

The retreat in the broader market Thursday boosted defensive food stocks. As a result, JM Smucker (SJM) closed up more than +4%.  Also, Tyson Foods (TSN), Conagra Brands (CAG), PepsiCo (PEP), and General Mills (GIS) closed up more than +2%.

Lam Research (LRCX) closed up more than +1% after Susquehanna Financial upgraded the stock to positive from neutral with a price target of $125.

Ansys Inc (ANSS) closed up more than +1% after reporting Q4 revenue of $882.2 million, stronger than the consensus of $848.1 million.

Earnings Reports (2/21/2025)

AdvanSix Inc (ASIX), AG Mortgage Investment Trust Inc (MITT), Alamo Group Inc (ALG), Altair Engineering Inc (ALTR), Amedisys Inc (AMED), Arbor Realty Trust Inc (ABR), Atmus Filtration Technologies (ATMU), Balchem Corp (BCPC), Boise Cascade Co (BCC), C4 Therapeutics Inc (CCCC), Cross Country Healthcare Inc (CCRN), Edgewise Therapeutics Inc (EWTX), Federal Agricultural Mortgage (AGM), Gencor Industries Inc (GENC), H&E Equipment Services Inc (HEES), Hawaiian Electric Industries Inc (HE), MGE Energy Inc (MGEE), ModivCare Inc (MODV), Oil States International Inc (OIS), Spirit AeroSystems Holdings In (SPR), St Joe Co/The (JOE), Standard Motor Products Inc (SMP), Sunstone Hotel Investors Inc (SHO), Telephone and Data Systems Inc (TDS), TXNM Energy Inc (TXNM), Uniti Group Inc (UNIT).