Stocks Pressured by Higher Bond Yields and a Slide in Chip Stocks

The S&P 500 Index ($SPX) (SPY) today is down -0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.03%.  March E-mini S&P futures (ESH25) are down -0.73%, and March E-mini Nasdaq futures (NQH25) are down -1.11%. 

Stock indexes are sliding 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 -16% fall in Marvell Technology after its revenue forecast failed to meet investors’ lofty expectations. 

Tariff concerns are also weighing on stocks as 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.

Hawkish comments today from Philadelphia Fed President Harker were negative for stocks when he said he’s concerned that the decline in price growth may not reach the Fed’s 2% target, citing “a lot of pressures building” that could prevent it from happening.  He also said, “Business and consumer confidence is starting to wane; that’s not a good sign.”

Stock indexes recovered from their worst levels when US Commerce Secretary Lutnick said President Trump is likely to defer tariffs on Canada and Mexico for all goods and services compliant with the United States-Mexico-Canada Agreement (USMCA).

Stocks also 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 7% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.59%.  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 -13 ticks.  The 10-year T-note yield is up +5.8 bp to 4.336%.  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.  Hawkish comments today from Philadelphia Fed President Harker knocked T-note prices to their lows when he said rising inflation pressures threaten the Fed’s progress on inflation. 

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.  In addition, a decline in inflation expectations is supportive of T-notes after the 10-year breakeven inflation rate fell to a 2-month low today at 2.323%.

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 +9.0 bp to 2.883%.  The 10-year UK gilt yield rose to a 7-week high of 4.789% and is up +3.6 bp to 4.718%.

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 78% 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 -16% 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 -4%, and Broadcom (AVGO) is down more than -3%.  In addition, Micron Technology (MU), ARM Holdings Plc (ARM), ASML Holding NV (ASML), KLA Corp (KLAC), Analog Devices (ADI), Lam Research (LRCX), and Texas Instruments (TXN) are down more than -1%. 

Weakness in the Magnificent Seven stocks today is weighing on the broader market.  Tesla (TSLA) is down more than -3% and Nvidia (NVDA) is down more than -2% to lead losers in the Dow Jones Industrials.  Also, Amazon.com (AMZN) and Meta Platforms (META) are down more than -1%, and Microsoft (MSFT) is down -0.08%.

MongoDB (MDB) is down more than -21% 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.  

Palantir Technologies (PLTR) is down more than -4% to lead losers in the S&P 500 on signs of insider selling after an SEC filing showed director Moore sold $1.74 million of shares on Monday.

Victoria’s Secret (VSCO) is down more than -4% 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 -4% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $32.

Macy’s (M) is down more than -1% 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 +6% after reporting Q4 revenue of $720.9 million, better than the consensus of $699 million. 

Zscaler (ZS) is up more than +7% 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.

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 +11% after reporting Q4 revenue of $3.28 billion, stronger than the consensus of $3.24 billion.

Kroger (KR) is up more than +2% after reporting Q4 adjusted EPS of $1.14, better than the consensus of $1.11. 

Salesforce (CRM) is up more than +1% to lead gainers in the Dow Jones Industrials after Accountability Research upgraded the stock to buy from hold with a price target of $350.  

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).