Stocks Tumble on Higher Bond Yields and Chip Stock Weakness

The S&P 500 Index ($SPX) (SPY) today is down -1.46%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.92%.  March E-mini S&P futures (ESH25) are down -1.41%, and March E-mini Nasdaq futures (NQH25) are down -1.77%. 

Stock indexes are falling today due to higher global bond yields and disappointing tech stock earnings.  Plans announced on Wednesday by Germany to amend its constitution to exempt defense and security outlays from limits on fiscal spending has sent government bond yields soaring, with the 10-year German bund yield climbing to a 16-month high today, while wage demands by Japan’s largest union pushed Japan’s 10-year JGB bond yield up to a 15-year high.  Meanwhile, chip stocks are under pressure today, led by a -19% fall in Marvell Technology after its revenue forecast failed to meet investors’ lofty expectations. 

Tariff concerns are also weighing on stocks after President Trump imposed 25% tariffs on Canadian and Mexican goods on Tuesday and doubled the tariff on Chinese goods to 20% from 10%.  However, Mr. Trump granted automakers a one-month tariff exemption but reiterated that he would impose reciprocal tariffs on foreign nations on April 2.

Stocks found some support from today’s US economic news that showed weekly jobless claims fell more than expected, and Q4 nonfarm productivity was revised higher.

US weekly initial unemployment claims fell -21,000 to 221,000, showing a stronger labor market than expectations of 233,000.

US Q4 nonfarm productivity was revised upward to 1.5% from the previously reported 1.2%.  Q4 unit labor costs were revised lower to 2.2% from the previously reported 3.0%.

The US Jan trade deficit was a record -$131.4 billion, wider than expectations of -$128.8 billion.

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 today are mixed.  The Euro Stoxx 50 is down -0.02%.  China’s Shanghai Composite Index closed up +1.17%.  Japan’s Nikkei Stock 225 closed up +0.77%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -4 ticks.  The 10-year T-note yield is up +0.8 bp to 4.286%.  June T-notes today are under pressure on negative carryover from the ongoing selloff in 10-year German bunds to a 16-month low.  Also, the larger-than-expected decline in weekly US jobless claims is hawkish for Fed policy and weighed on T-notes.  Losses in T-notes are limited as the slump in equities boosts safe-haven demand for government debt.  T-notes also garnered support after the US Q4 nonfarm productivity was revised upward and Q4 unit labor costs were revised lower, a dovish factor for Fed policy.

European bond yields today are moving higher.  The 10-year German bund yield climbed to a 16-month high of 2.933% and is up +9.7 bp to 2.890%.  The 10-year UK gilt yield rose to a 7-week high of 4.789% and is up +1.4 bp to 4.696%.

Eurozone Jan retail sales unexpectedly fell -0.3% m/m, weaker than expectations of a +0.1% m/m increase.

The ECB, as expected, cut the deposit facility rate by 25 bp to 2.50% from 2.75% and said interest rates are “becoming meaningfully less restrictive.” The ECB cut its Eurozone 2025 GDP forecast to 0.9% from 1.1% and its 2025 inflation ex-food and energy forecast to 2.2% from 2.3%.

Swaps are discounting the chances at 79% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Chip stocks are sliding today to drag the overall market lower, led by a -19% fall in Marvell Technology (MRVL) after issuing a Q1 revenue forecast of $1.88 billion, below some estimates of up to $2 billion.  Also,  ON Semiconductor Corp (ON) is down more than -5%, and ARM Holdings Plc is down more than -4%.  In addition, Micron Technology (MU) is down more than -3%, and ASML Holding NV (ASML) and Lam Research (LRCX) are down more than -2%. 

The Magnificent Seven stocks are falling today and weighing on the broader market.  Tesla (TSLA) is down more than -4% and Nvidia (NVDA) is down more than -3% to lead losers in the Dow Jones Industrials.  Also, Amazon.com (AMZN) is down more than -2%, and Microsoft (MSFT) is down more than -1%.  In addition, Alphabet (GOOGL) is down -0.78%, and Apple (AAPL) is down -0.62%.

MongoDB (MDB) is down more than -20% to lead losers in the Nasdaq 100 after forecasting 2026 adjusted EPS of $2.44 to $2.62, well below the consensus of $3.37.  Other cloud database stocks are weaker on the news, with Snowflake (SNOW) and Datadog (DDOG) down more than -2%.

Victoria’s Secret (VSCO) is down more than -9% after forecasting full-year net sales of $6.2 billion-$6.3 billion, weaker than the consensus of $6.34 billion. 

Brown-Forman (BF.A) is down more than -3% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $32.

Macy’s (M) is down more than -2% after forecasting Q1 net sales of $4.4 billion-$4.5 billion, below the consensus of $4.66 billion. 

Veeva Systems (VEEV) is up more than +7% after reporting Q4 revenue of $720.9 million, better than the consensus of $699 million. 

Zscaler (ZS) is up more than +4% to lead gainers in the Nasdaq 100 after reporting Q2 adjusted EPS of 78 cents, better than the consensus of 69 cents, and raising its full-year adjusted EPS forecast to $3.04-$3.09 from a previous forecast of $2.94-$2.99, stronger than the consensus of $2.99.

Kroger (KR) is up more than +4% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $1.14, better than the consensus of $1.11. 

Homebuilding stocks are climbing today after Seaport Global Securities upgraded Lennar, D.R. Horton, and KB Home to buy from neutral.  As a result, Lennar (LEN), D.R. Horton (DHI), and KB Home (KBH) are up more than +2%.

Burlington Stores (BURL) is up more than +10% after reporting Q4 revenue of $3.28 billion, stronger than the consensus of $3.24 billion. 

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).