Stocks Stabilize and Close Higher as Chip Stocks Rally

The S&P 500 Index ($SPX) (SPY) Wednesday closed up +1.12%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.36%.  March E-mini S&P futures (ESH25) are up +1.01%, and March E-mini Nasdaq futures (NQH25) are up +1.03%. 

Stock indexes recovered mid-day losses and settled moderately higher after President Trump delayed tariffs for a month on US imports of autos and parts from Canada and Mexico that were covered by the US-Mexico-Canada trade agreement (USMCA).  Also, chip stocks erased early losses and moved higher to boost the broader market. Energy stocks were a drag on the overall market on Wednesday after the price of WTI crude oil fell to a 1-3/4 year low.

Stocks found support Wednesday in hopes of a tariff compromise. US Commerce Secretary Lutnick said late Tuesday that the US could announce a pathway for tariff relief on Canadian and Mexican goods covered by North America’s free trade agreement. However, any tariff relief may be limited after President Trump reiterated on Tuesday evening that he will impose reciprocal tariffs on foreign nations on April 2.

Signs of a slowdown in the US labor market are negative for stocks after Feb ADP employment rose +77,000, well below expectations of +140,000 and the smallest increase in 7 months. 

Other US economic news today supported stocks after Jan factory orders posted their largest increase in 6 months, and the Feb ISM services index expanded more than expected.

US Jan factory orders rose +1.7% m/m, right on expectations and the largest increase in 6 months.

The US Feb ISM services index unexpectedly rose +0.7 to 53.5, stronger than expectations of a decline to 52.5.  The Feb ISM services prices paid sub-index rose +2.2 to 62.6, stronger than expectations of no change at 60.4.

The Fed Beige Book stated US economic activity rose “slightly” and prices climbed “moderately” since mid-January in most areas, with firms across the country “expecting potential tariffs on inputs that would lead them to raise prices.”

US MBA mortgage applications rose +20.4% in the week ended February 28, with the purchase mortgage sub-index up +9.1% and the refinancing sub-index up +37.0%.  The average 30-year fixed rate mortgage fell -15 bp to a 3-month low of 6.73% from 6.88% the prior week.

Market attention for the rest of this week will focus on Friday’s Feb payroll report, which is expected to show nonfarm payrolls climbing by +160,000, and the Feb unemployment rate expected to remain unchanged at 4.0%.  Meanwhile, Feb average hourly earnings are expected to remain unchanged from Jan at +4.1% y/y.  Also, on Friday, Fed Chair Powell will give the keynote speech on the economic outlook at Chicago Booth’s 2025 US Monetary Policy Forum. 

The markets are discounting the chances at 9% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets on Wednesday settled higher.  The Euro Stoxx 50 closed up by +1.89%.  China’s Shanghai Composite Index closed up +0.53%.  Japan’s Nikkei Stock 225 closed up +0.23%.

Interest Rates

June 10-year T-notes (ZNM25) Wednesday closed down -12 ticks.  The 10-year T-note yield rose +2.9 bp to 4.273%.  June T-notes Wednesday were under pressure on negative carryover from a selloff in 10-year German bunds to a 16-month low.  Also, Wednesday’s stronger-than-expected US Feb ISM services report and hawkish Fed Beige Book weighed on T-notes.

T-notes recovered early losses and moved higher briefly Wednesday after the US Feb ADP employment change showed companies added fewer than expected jobs, a dovish factor for Fed policy.  Also, Wednesday’s plunge in crude oil prices to a 5-3/4 month low has reduced inflation expectations, a supportive factor for T-note prices.

European bond yields on Wednesday moved sharply higher.  The 10-year German bund yield jumped to a 16-month high of 2.800% and finished up +29.8 bp to 2.793%.  The 10-year UK gilt yield climbed to a 5-week high of 4.705% and finished up +14.9 bp to 4.682%.

Eurozone Jan PPI rose +0.8% m/m and +1.8% y/y, stronger than expectations of +0.3% m/m and +1.3% y/y.

German Chancellor-in-waiting Merz said Germany would amend its constitution to exempt defense and security outlays from limits on fiscal spending and do “whatever it takes” to defend the country.

Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Chip stocks erased early losses Wednesday and turned higher, lifting the broader market, after several US lawmakers said President Trump lacked Congressional support to end the $52 billion Chips Act subsidy program. As a result, ON Semiconductor Corp (ON) and ASML Holding NV (ASML) closed up more than +4%, and Micron Technology (MU) and Lam Research (LRCX) closed up more than +3%.  Also, Qualcomm (QCOM), KLA Corp (KLAC), NXP Semiconductors NV (NXPI), Marvell Technology (MRVL), and Microchip Technology (MCHP) closed up more than +2%.

Energy producers sold off Wednesday, with the price of WTI crude falling to a 1-3/4 year low.  Marathon Petroleum (MPC) closed down more than -5%, and Valero Energy (VLO) closed down more than -4%.  Also, Phillips 66 (PSX) and Occidental Petroleum (OXY) closed down more than -2%.  In addition, ConocoPhillips (COP), Devon Energy (DVN), Exxon Mobil (XOM), Baker Hughes (BKR), and Diamondback Energy (FANG) closed down more than -1%.

Copper mining stocks rose Wednesday as copper prices jumped more than +5% to a 2-1/2 week high after President Trump suggested Tuesday night that US copper imports may be subject to a 25% tariff.  As a result, Freeport McMoRan (FCX) closed up more than +9%, and Southern Copper (SCCO) closed up more than +4%.

Automakers rallied Wednesday after the Trump administration exempted them from new tariffs on Canada and Mexico for one month.  General Motors (GM) and Stellantis NV (STLA) closed up more than +7%, and Ford Motor (F) closed up more than +5%. 

Moderna (MRNA) closed up more than +15% to lead gainers in the S&P 500 after saying it expects to launch a personalized cancer vaccine by 2027, which could be a “quite large” revenue opportunity. 

Brown-Forman (BF.A) closed up more than +10% after reporting Q3 EPS of 57 cents, stronger than the consensus of 46 cents.

PDD Holdings (PDD) closed up +6% to lead US-listed Chinese stocks higher after the Chinese government said it would sell special bonds to fund public spending on infrastructure and other areas and prioritize boosting domestic consumption. 

Carrier Global (CARR) closed up more than +4% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $78. 

Albertsons Cos (ACI) closed up more than +4% after S&P Dow Jones Indices said the stock will replace Aspen Technology in the S&P MidCap 400 before the opening of trading on Tuesday, March 11. 

Crowdstrike (CRWD) closed down more than -6% to lead losers in the S&P 500 and Nasdaq 100 after forecasting 2026 adjusted EPS of $3.33-$3.45, well below the consensus of $4.43.

AeroVironment (AVAV) closed down more than -5% after reporting Q3 adjusted EPS of 30 cents, well below the consensus of 61 cents, and cut its full-year adjusted EPS forecast to $2.92 to $3.13 from $3.18 to $3.49, weaker than the consensus of $3.43. 

Box Inc (BOX) closed down more than -3% after forecasting 2026 adjusted EPS of $1.13 to $1.17, well below the consensus of $1.87.

The Campbell’s Company (CPB) closed down more than -2% after reporting Q2 net sales of $2.68 billion, weaker than the consensus of $2.74 billion.

AppLovin (APP) closed down more than -2% after Arete downgraded the stock to sell from neutral with a price target of $200.

Earnings Reports (3/6/2025)

BJ’s Wholesale Club Holdings Inc (BJ), Broadcom Inc (AVGO), Burlington Stores Inc (BURL), Cooper Cos Inc/The (COO), Costco Wholesale Corp (COST), Gap Inc/The (GAP), Guidewire Software Inc (GWRE), Hewlett Packard Enterprise Co (HPE), Kroger Co/The (KR), Macy’s Inc (M), Toro Co/The (TTC).