Stocks Rebound After Fed Chairman Jerome Powell's Speech

The S&P 500 Index ($SPX) (SPY) has rebounded in afternoon trading and is up +0.74%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.86%.  

In a midday speech on Friday, Federal Reserve Chairman Jerome Powell communicated that the Fed is adopting a cautious, observational stance before committing to additional policy easing.

Stock indexes today gave up early gains and turned lower on weakness in the Magnificent Seven stocks.  Also, economic uncertainty is weighing on stocks due to the Trump administration's trade policies and today's US payroll report that showed an unexpected increase in the unemployment rate.  

Stock indexes found support today after bond yields fell on the Fed-friendly US Feb payroll report that showed nonfarm payrolls and average hourly earnings rose less than expected, and the unemployment rate unexpectedly ticked higher.

US Feb nonfarm payrolls rose +151,000, weaker than expectations of +160,000, and Jan nonfarm payrolls were revised lower to +125,000 from the previously reported +143,000.  The Feb unemployment rate unexpectedly rose +0.1 to 4.1%, showing a weaker labor market than expectations of no change at 4.0%.

US Feb average hourly earnings rose to 4.0% y/y from a revised 3.9% y/y in Jan, weaker than expectations of 4.1% y/y.

Hawkish Fed comments are bearish for stocks.  Thursday evening, Atlanta Fed President Bostic suggested he favors the Fed holding interest rates steady until at least late spring when he said the direction of the economy is "very much up in the air," and it could be several months before there's clarity on how President Trump's policies and other factors will affect the economy.  Also, Fed Governor Bowman said today that the neutral rate, the Fed policy level that neither promotes nor restricts economic activity, has likely risen since the Covid-19 pandemic.

Fears that US tariffs will start a global trade war that weakens economic growth and corporate earnings are a bearish factor for stocks. 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 US automakers a one-month tariff exemption and exempted tariffs for one month on Canada and Mexico for all goods and services compliant with the United States-Mexico-Canada Agreement (USMCA) but reiterated that he would impose reciprocal tariffs on foreign nations on April 2.

Chinese trade data today was weaker than expected, a negative factor for global growth prospects.  China Feb exports year-to-date roe +2.3% y/y, weaker than expectations of +5.9% y/y. China Feb imports year-to-date unexpectedly fell -8.4% y/y, weaker than expectations of +1.0% y/y and the biggest decline in nearly two years.

The markets are discounting the chances at 4% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are lower.  The Euro Stoxx 50 is down -1.10%.  China's Shanghai Composite Index fell from a 2-1/4 month high and closed down -0.25%.  Japan's Nikkei Stock 225 fell to a 5-1/2 month low and closed down sharply by -2.17%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +11 ticks.  The 10-year T-note yield is down -1.9 bp to 4.259%.  June T-notes today are moving higher on a Fed-Friendly US Feb payroll report that showed nonfarm payrolls and Feb average hourly earnings rose less than expected.  Also, a positive carryover from strength in European government bonds today supports T-note prices.  In addition, a decline in inflation expectations supports T-notes after the 10-year breakeven inflation rate fell to a 2-1/4 month low today at 2.313%. 

Limiting gains in T-notes are hawkish comments from Atlanta Fed President Bostic, who said he favors holding interest rates steady until at least late spring, and Fed Governor Bowman, who said the neutral rate has likely risen since the Covid-19 pandemic.

European bond yields today are moving lower.  The 10-year German bund yield is down -1.0 bp to 2.823%.  The 10-year UK gilt yield is down -2.1 bp to 4.639%.

Eurozone Q4 GDP was revised upward to +0.2% q/q and +1.2% y/y from the previously reported +0.1% q/q and +0.9% y/y.

German Jan factory orders fell -7.0% m/m, weaker than expectations of -2.5% m/m and the biggest decline in a year.

ECB Governing Council member Muller said, "The ECB needs to be increasingly cautious about further interest rate cuts as several factors, such as tariffs or the impact of defense spending, could accelerate price increases in the near future."

Swaps are discounting the chances at 65% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The weakness of the Magnificent Seven stocks today is weighing on the broader market.  Meta Platforms (META), Amazon.com (AMZN), and Tesla (TSLA) are down more than -2%.  Also, Microsoft (MSFT) is down more than -1%, and Alphabet (GOOGL) is down -0.38%.

Chip stocks are climbing today, led by a +3% rally in Broadcom (AVGO) after it reported Q1 adjusted net revenue of $14.92 billion, stronger than the consensus of $14.61 billion, and forecast Q2 revenue of $14.90 billion, above the consensus of $14.59 billion.  Also,  Micron Technology (MU) and GlobalFoundries (GFS) are up more than +3%, and ARM Holdings Plc (ARM) and ASML Holding NV (ASML) are up more than +2%.  In addition, Lam Research (LRCX), Qualcomm (QCOM), ON Semiconductor (ON), and NXP Semiconductors NV (NXPI) are up more than +1%. 

Energy stocks are moving higher today, with the price of WTI crude oil going up by more than +2%.  As a result, Schlumberger (SLB) and Halliburton (HAL) are up more than +3%.  Also, Chevron (CVX), Hess Corp (HES), Occidental Petroleum (OXY), and Devon Energy (DVN) are up more than +2%.  In addition, ConocoPhillips (COP), Diamondback Energy (FANG), Phillips 66 (PSX), and Valero Energy (VLO) are up more than +2%.

The Gap (GAP) is up more than +14% after reporting Q4 comparable sales rose +3.00%, stronger than the consensus of +1.88%.

Walgreens Boots Alliance (WBA) is up more than +7% after it agreed to be purchased by Sycamore Partners for $10 billion. 

Sandisk Corp (SNDK) is up more than +6% after Cantor Fitzgerald initiated coverage of the sock with a recommendation of overweight and a price target of $60. 

Zscaler (ZS) is up more than +1% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $240. 

HP Enterprise (HPE) is down more than -15% to lead losers in the S&P 500 after reporting Q1 adjusted gross margin of 29.4%, below the consensus of 31.2% and forecast full-year adjusted EPS of $1.70 to $1.90, weaker than the consensus of $2.12.

Cooper Cos (COO) is down more than -7% after reporting Q1 net sales of $964.7 million, below the consensus of $982.1 million.

Costco Wholesale (COST) is down more than -6% to lead losers in the Nasdaq 100 after reporting Q2 EPS of $4.02, weaker than the consensus of $4.11.

Samsara (IOT) is down more than -13% after forecasting 2026 total revenue of $1.52 billion-$1.53 billion, below the consensus of $1.53 billion. 

Air Lease (AL) is down more than -2% after Bank of America Global Research double-downgraded the stock to underperform from buy.

Intuitive Machines (LUNR) is down more than -20%, adding to Thursday's -20% plunge after it said it believes its second lander may be in the wrong orientation on the moon. 

Earnings Reports (3/7/2025)

Advantage Solutions Inc (ADV), Aemetis Inc (AMTX), Aldeyra Therapeutics Inc (ALDX), Cartesian Therapeutics Inc (RNAC), GCT Semiconductor Holding Inc (GCTS), Gencor Industries Inc (GENC), Genesco Inc (GCO), IGM Biosciences Inc (IGMS), Immersion Corp (IMMR), Mammoth Energy Services Inc (TUSK), National Beverage Corp (FIZZ), Ovid Therapeutics Inc (OVID), Preformed Line Products Co (PLPC), Savara Inc (SVRA), Silvercrest Asset Management G (SAMG), Valhi Inc (VHI), Werewolf Therapeutics Inc (HOWL), XOMA Royalty Corp (XOMA).